U.S. Blacklists China’s Cosco Shipping

The U.S. government has blacklisted China’s largest shipping company, Cosco Shipping Holdings Co., along with two major shipbuilders, intensifying the ongoing geopolitical tensions between the two nations.

At a Glance

  • U.S. blacklists Cosco Shipping and two Chinese shipbuilders over alleged military ties
  • Blacklist discourages U.S. firms from dealing with these companies but carries no immediate penalties
  • China dominates global shipbuilding, producing over half of the world’s merchant vessels
  • Move signals increased scrutiny of China’s maritime sector amid geopolitical tensions
  • Cosco shares fell by 4.4% in Hong Kong following the announcement

U.S. Targets Chinese Maritime Giants

In a move that adds to growing concerns over China’s dominance in global shipping, the U.S. has added Cosco Shipping Holdings Co., China’s largest shipping line, to its military blacklist. The Pentagon also included two prominent shipbuilders, China State Shipbuilding Corp. and China Shipbuilding Trading Co., citing alleged links to the People’s Liberation Army.

This action, while carrying no specific penalties, sends a clear message to American firms about the risks of engaging with these companies. It comes as part of a broader strategy to scrutinize China’s vast maritime sector, particularly in light of post-Covid-19 supply chain concerns.

China’s Maritime Dominance

The blacklisting highlights the stark contrast between Chinese and American shipbuilding capabilities. China’s shipbuilding industry has flourished in recent years, while the U.S. sector has significantly declined. This disparity is evident in the production of container ships, a crucial component of global trade.

The US builds only one container ship for every 359 such vessels that China constructs, according to Democratic Congress member Raja Krishnamoorthi.

Chinese shipbuilders held nearly 60% of the global orderbook in the first quarter of the last year, demonstrating their dominance in the industry. This overwhelming control of shipbuilding capacity has raised concerns among U.S. policymakers about potential vulnerabilities in the global supply chain and national security.

Broader Implications

The blacklist extends beyond the shipping industry, including other major Chinese companies such as Tencent Holdings Ltd., Contemporary Amperex Technology Co. Ltd., and Chinese oil major Cnooc Ltd.

The market reacted swiftly to the news, with Cosco shares falling by as much as 4.4% in Hong Kong, while Cnooc shares dropped by 1.6%. These fluctuations reflect the immediate economic impact of such geopolitical decisions on targeted companies.

For Cosco and Cnooc, this is not their first encounter with U.S. sanctions. Cosco was previously sanctioned in 2019 for transporting Iranian oil, while Cnooc’s U.S. oil and gas projects may now face increased scrutiny. The rising tensions could potentially lead Cnooc to reconsider its ownership of U.S. assets, further complicating the already strained economic relationship between the two nations.

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