It's full speed ahead for the cruise ship business in China

The US cruise ship industry, which is seeing a booming business from Chinese passengers, will for the first time build ocean liners in China.

Carnival Corp, based in Miami, announced last week at a grand ceremony in Beijing attended by President Xi Jinping, that its cruise joint venture in China - formed with the China State Shipbuilding Corp - will order two new cruise ships, with an option for four more. Fincantieri of Italy is also a participant in the shipbuilding partnership.

In support of China's efforts to prioritize cruise industry growth in its five-year economic development plan, a memorandum of agreement (MOA) was signed at the Great Hall of the People in Beijing, attended by Xi and Italian President Sergio Mattarella.

Carnival will operate and manage all cruise ships owned by the cruise joint venture, which was rolled out in 2015, as part of its plans to launch the first multi-ship cruise brand in China.

The two ships, representing an investment of about $1.5 billion, would be constructed at the Shanghai Waigaoqiao Shipbuilding Co shipyard, a CSSC subsidiary. The first vessel is expected to be completed by 2023.

"We are proud to order the first China-built cruise ships and play a meaningful role in developing cruise shipbuilding capabilities for the first time in China," said Arnold Donald, Carnival CEO, adding that the agreement "demonstrates our commitment to contributing to China become a leading cruise market as part of its five-year economic development plan".

"CSSC is working closely with international partners like Carnival and Fincantieri to build the first cruise ships in China, which will significantly advance the rapid, sustainable and healthy development of the Chinese cruise industry," said Wu Qiang, CSSC president. "Global economic integration is still an irresistible trend. Our close partnership with Carnival and Fincantieri will let more people enjoy the benefits of globalization and live a better life."

Wu said at a cruise industry conference in China last year that 15 new liners a year are needed to keep up with global demand, and that China wanted to help meet it. CSSC's entry into the industry's construction segment is backed by an industrial fund set up last year by five leading Chinese banks, according to The Wall Street Journal.

While the new ships are being built, Carnival will launch a cruise brand in China using ships from Carnival's existing fleet.

Carnival's Princess Cruises brand will deploy the 3,560-passenger Majestic Princess to Shanghai for Asia cruises, beginning in July. The vessel is the newest ship and the first to be built and designed specifically for Chinese travelers.

China was the world's fastest-growing major market for cruise-takers in 2014 and 2015, according to a study last year by the Cruise Lines International Association in Washington.

According to China's Ministry of Transport, the country's cruise market will grow to 4.5 million passengers by 2020 - it was 1 million in 2015.

By 2030, China will be the world's second-largest cruise market after the US, Reuters reported.

A report by AX Investment Research on the seekingalpha.com investment website said "Carnival's largest problem with penetrating the Chinese market by themselves was a cultural difference. Trying to enter the China market as a Western company without enough knowledge of business practices or connections to a strong network in China led nowhere.

"More recently things are starting to turn around. Carnival now has a small share of a much larger pie than a small pie to themselves."

Contact the writer at williamhennelly@chinadailyusa.com