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Sailing into the future China-style

Updated: 2014-01-24 08:55
By Xie Yu ( China Daily Africa)

Sailing into the future China-style 

Yachts berthed at a port in Sanya, Hainan province. Hainan plans to build 25 public yacht marinas by 2030. Provided to China Daily

President says a bright new business is on the horizon for sundiro

What would you buy if you became very rich? A luxurious mansion, a private jet, perhaps a Rolls-Royce?

They are not priorities for motorcycle veteran Zhao Xuhong.

"Yachts are becoming the most popular 'toy' among the Chinese super-rich. And I believe China's yacht industry is on the eve of a great boom," says Zhao, president of Sundiro Holding Co. It started by making motorcycles and now covers businesses as varied as coal mining and real estate.

As the motorcycle market in China started to become saturated, Zhao began to look for new growth opportunities for his company.

Last year, he entered the business of building and selling yachts. His company has become the third in China to buy considerable stakes in the world's top shipyards.

Sundiro has just made a major investment in Italian shipyard Sanlorenzo. Both sides agreed to set up a joint venture, building yachts from 36 to 66 feet (about 10 to 20 meters) in coastal Hainan province. The company will invest as much as 25 million euros ($33.99 million) in this deal.

Compared with other Chinese companies' moves into yacht making, Sundiro seems very cautious. Chinese conglomerate Dalian Wanda Group acquired British yachtmaker Sunseeker International for 320 million ($525 million; 388 million euros) in June last year. In 2012, construction and agriculture machinery giant Shandong Heavy Industry Group bought a controlling stake in debt-laden Italian luxury yachtmaker Ferretti SpA in a deal worth about $500 million.

Based on an agreement, Sundiro will control no less than 21.74 percent of Sanlorenzo after this round of investment - and no more than 49 percent in the future.

"We are not injecting huge capital into Sanlorenzo and we are not targeting a controlling stake because we want to keep the genes of a luxury brand," Zhao says.

Sailing into the future China-style

"Chinese companies are taking stakes in three of the world's top four yacht manufacturers," says Patrick Becker, chief executive officer of Bexuco Investment Consulting, based in Shanghai.

It will certainly have a strong medium- and long-term impact on the structure of China's domestic and overseas yacht markets, Becker says.

"In addition to the change of ownership structure overseas, the Chinese investors are building new yacht manufacturing facilities in China."

"The new yards in China will intensify the current Chinese market development and increase awareness for an entirely new group of customers."

However, Becker says that in coming years a certain range of yachts made in China will be exported to Europe, North America and other countries based on a more competitive cost structure for these highly labor-intensive products. While brands may retain the same overall market share, their manufacturing origin might not, he says.

There is certainly ample room for growth. Figures cited by State media show there are about 1,300 private yachts in China. This compares with 17 million privately owned recreational boats in the United States, the world's biggest yacht market, according to industry publication International Boating Industry.

Although economic growth in China, the world's second-largest economy, is slowing, rich people are getting richer.

Last year, the net assets of the top 100 richest people in China soared 44 percent from a year earlier to $316 billion. And the number of dollar billionaires rose to a record high of 168, making China the country with the second-highest number of billionaires, following the US and ahead of Russia, according to a recent Forbes magazine report.

Meanwhile, it seems interest in ocean sailing is soaring.

"Right now there is a significant and growing demand among wealthy Asian people and, in particular, the Chinese, to properly enjoy yachting," says Olivier Besson, managing director of YPI Asia, an Asian joint venture run by Monaco superyacht firm Yachting Partners International Group. He says almost all of YPI Asia buyers come from the Chinese mainland, he says.

According to a recent survey by Royal Caribbean Cruises Ltd, cruise trips are growing more and more popular with the Chinese. Based on a survey, 77.8 percent of interviewees were "very satisfied" about their cruise experience with Royal Caribbean Cruises. As many as 98.9 percent were "overall satisfied".

"It feels so different spending holidays on boats, whether it is on a big cruise or a private yacht, because we have only been used to onshore entertainment. It broadens Chinese people's horizons. Many people love it," says Zhang Qi, a senior vacation consultant with Shanghai Perfect Vacation.

"Yachts have a bigger market in China, compared with private jets."

A private jet costs about 15 million yuan ($2.47 million) for annual maintenance, while the cost for a 15- to 20-meter yacht will be around 400,000 yuan. Clearly it is more affordable to a bigger group of the new rich, Zhao says.

Meanwhile, because of strict regulations and lengthy approval procedures in aviation, the jet life still seems complicated and inconvenient in China.

Sundiro mainly builds smaller yachts from 22 to 62 meters based on the Sanlorenzo design, under the joint brand of Sanlorenzo and Sundiro or just Sundiro.

"High-end medium-size yachts are currently small in number in the China market. But demand is huge from entrepreneurs, celebrities and other elites," Zhao says. The price for a Sundiro 10-meter yacht will be about 3 million yuan, cheaper than an ordinary flat in Beijing or Shanghai, he says.

"The price makes it possible for several families to buy a yacht together and enjoy beach holidays at different times separately, which is highly likely to prevail in China over the next few years," he adds.

On the other hand, it is not only grassroots passion that is promoting the yacht industry. Hainan province, with its tropical climate and unspoilt, palm-fringed beaches is the most popular beach holiday destination in China, and is making big efforts to promote the yacht industry as a pivotal step toward building an international tourism destination island.

Hainan plans to complete the construction of 25 public yacht marinas, with 14,200 public berths by 2030, according to the latest provincial yacht industry development plan. There are now seven international yacht marinas with a total of 1,170 berths in Hainan,

The 25 public yacht marinas will be built in every county and city in Hainan, as part of the tropical island's development of coastal holidays, yacht tourism and water sports and entertainment.

"Some of the infrastructure is ready and more is underway," Zhao says. A group of technicians from Sanlorenzo will depart from Italy to Hainan, bringing their 50 years of craftsmanship and know-how to Sundiro.


(China Daily Africa Weekly 01/24/2014 page22)

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