Recovering America’s Control Over Naval Logistics: The Case of ZPMC

For decades, U.S. corporations have offshored manufacturing to take advantage of cheap labor, government subsidies, and lax environmental regulations, enabling them to build global value chains that maximized profits. Concurrently, China—through strategic planning and government support—methodically achieved global supremacy in a wide variety of manufacturing industries of strategic economic and military importance. Today, as the two countries find themselves in a “cold war” relationship, U.S. dependence on China for critical imports has caused alarm in Washington. The collapse of the port crane industry is illustrative of how the U.S. ceded a major strategic industry to China—and now deeply regrets it.

The United States emerged from World War II as the undisputed global manufacturing hegemon, particularly in military equipment and logistics. In the case of shipbuilding and port cranes, the U.S. maintained its dominance through the 1970s. However, in the 1980s, “Reaganomics” and its aversion to government intervention to support “inefficient” U.S. firms took hold. In 1981, President Reagan terminated construction differential subsidies (CDS) for the U.S. shipbuilding industry—measures that had enabled American shipyards to compete with foreign counterparts. The consequences were stark: by the end of the decade, the U.S. commercial shipbuilding sector had virtually collapsed. Heavily subsidized competition from Japan in the 1970s, South Korea in the 1980s, and China starting in the 1990s undermined the economics of shipbuilding in the U.S. Today, these Asian nations collectively dominate the global shipbuilding landscape, accounting for over 90–95% of new commercial vessel construction. In contrast, the U.S. share of the global commercial market hovers around 0.1%. Without the network effects, scale economies, and skill-building capacity provided by a robust commercial shipbuilding base, U.S. military naval shipbuilding capability has also been severely compromised.

A similar decline occurred in the port crane manufacturing sector—a key component of transportation logistics with significant military relevance. U.S. firms dominated port crane technology and markets throughout the postwar decades, but by the early 1980s they were facing strong competitive pressure from Japanese and Korean firms. One by one, American companies either went out of business or were absorbed by foreign competitors, so that by the early 1990s, the industry was controlled by Asian firms.

The Chinese firm Shanghai Zhenhua Heavy Industries Company (ZPMC), established in 1992 with an aggressive international focus, quickly won contracts with major ports including Vancouver, Oakland, Miami, Houston, Long Beach, and Los Angeles. By the mid-2000s, ZPMC had secured over half of the global market for quay ship-to-shore cranes. Over the past twenty years, ZPMC has captured more than 70% of the global market and 80% of the U.S. market. Including other Chinese port crane manufacturers, China’s global market share is estimated at approximately 80%, with the remainder held by Japanese, Korean, and a few highly specialized European firms.

ZPMC is a formidable global competitor and has only grown stronger as it has achieved greater scale and technological expertise. It routinely outbids competitors on price, delivery time, and customization—often pricing at less than half the cost of rivals and offering significantly faster delivery.

ZPMC is a major state-owned enterprise in China, directly overseen by the Assets Supervision and Administration Commission (SASAC). Numerous U.S. officials, intelligence agencies, and congressional committees have expressed serious concerns about ZPMC’s ties to the Chinese military.

The company benefits from extensive state support. In addition to its close collaboration with the Chinese military, it receives substantial tax breaks, subsidies, and access to cheap credit from government funds and state-owned banks.

Despite its commanding market share both globally and within China, ZPMC delivers poor financial performance. Over the past 15 years, revenues have nearly doubled, but earnings have not kept pace. The company has maintained a net profit margin of only around 2%. Its return on equity (ROE), despite a highly leveraged balance sheet, has averaged just 3% over the past nine years—a level of profitability unacceptable to private enterprises in Western markets.

As is common for most state-owned companies listed on Chinese stock exchanges, ZPMC’s stock has languished.

Today, the global port crane industry is dominated by a company that functions as both a ward and an instrument of the Chinese state and is a major beneficiary of comprehensive financial and regulatory support. As the political mood in Washington shifts, the absurdity of this situation has become increasingly apparent. Policymakers are now coming full circle—proposing steep tariffs of up to 100% and financial support for alternative suppliers, similar to those eliminated by Reagan in 1981.