By 2006 the country's global market share increased to 18 percent in 2006 when South Korea had 35 percent, followed by Japan with 25 percent in 2006.

In 2007, the country lifted its market share to 25 percent, according to a report from Morgan Stanly.

The strong growth has made many observers bullish on China's shipbuilding future and they expect it to surpass South Korea to become the global leader.

"Although some have a different prospective about the country's shipbuilding sector, we are positive about its growth in the long run," Hu Song, a researcher with Bank of China International Securities says.

Researchers at Morgan Stanly believe the global shipbuilding industry is relocating from Japan and South Korea to China, and expect the country to surpass Korea and top the global market by 2015.

Success factors

Researchers studying the Japanese and the South Korean shipbuilding industries suggest there are several factors that a growing market leader must have.

The role of the government is very important with subsidies and general support and China's shipbuilding sector has enjoyed strong government support.

In 2006, the State Council approved the long-term blueprint for the industry which set a target for the industry to comprise at least 25 percent of the world's total output by 2010 and 35 percent in 2015. But the development is better-than-expected.

To power the goal, the Chinese government has already implemented several favorable policies to boost the sector's growth, including giving financial support by awarding special loans to shipbuilders and giving them preferential interest rates.

In terms of technology, Chinese shipbuilders are also catching up with the South Korea and Japan.

In 2005, the Hudong Zhonghua shipyard built the first LNG carrier in China. In 2007, China State Shipbuilding Corp delivered the first 8,530 TEU container ship, while Waigaoqiao shipyard delivered a 300,000 deadweight tonnage oil tanker.

Industry observers expect a continuous upgrade of product mix with more high-end vessels being built.

"We believe Chinese shipbuilders will become more competitive," says Hu. China will fully catch up in technology in a few years, he adds.

China's shipbuilders also enjoy cheap labor costs, of course. The cost of shipbuilding in Japan and South Korea is 30-40 per cent higher than that of China, which makes China more competitive in the market.