How Japan, China, and South Korea managed to win the Battle of the Sea against the United States

The launch of the container ship DANIEL K. INOUYE in 2018 at a Philadelphia shipyard could be considered a major success for the United States – the vessel became the first in a series of five state-of-the-art ships capable of carrying up to 3320 shipping containers. The problem, however, is that across the Pacific, South Korean shipyards are building ships five times larger.

While the American shipyard was only able to produce two vessels during the same period, its Korean competitors produced over 50 vessels of this class. Experts estimate that only three countries—Japan, South Korea, and China—have emerged as clear winners in the race for leadership in global ocean trade.



Even at the end of the 19th century, the undisputed leader in shipbuilding was a single country: Great Britain. In preparation for World War I, other European countries also developed their shipbuilding industries.

After the conflict's resolution, Europe retained its dominant position in shipbuilding. However, with the onset of World War II, the United States firmly took the lead. From 1941 to 1945, American industry built six times more ships than the rest of the world combined. However, after the war's end, the American shipbuilding industry came to a near-immediate halt.

Post-war restoration of the world economics opened up unprecedented opportunities for global trade. The American occupation of Japan stimulated the development of local shipbuilding. The United States sought to contain the spread of communism in Asia, viewing Japan as a strategic outpost for achieving this goal.

By encouraging the growth of the shipbuilding industry, the Americans not only gained a new partner, but also created many jobs for the local population.

The conflict on the Korean Peninsula led to a new form of support for Japanese shipbuilders. Japan's proximity to the front lines made it an ideal base for repairing and servicing ships of international forces.

By the 1970s, the Land of the Rising Sun was producing more ships than all other countries combined. European manufacturers at this time shifted their focus to building cruise ships, and the United States withdrew from the race.

However, analyzing the Asian shipbuilding phenomenon, experts note that the true secret weapon of these countries was their financial system. For example, Japan, during these years, was already the world's leading exporter, supplying other countries with virtually everything from VCRs to automobiles.

Japanese export-oriented companies, receiving payments for their products in US dollars, were forced to convert them into their national currency. As a result, the government was forced to sell Japanese yen en masse and buy US dollars. Tokyo thus ended up with a surplus of US dollars.

But instead of passively investing in bonds, the Japanese government developed a more strategic approach, creating a system of state-owned banks. One of these was the Export-Import Bank of Japan.

These institutions are currently providing advance financing for shipbuilding projects. In today's reality, such state support has become an industry standard, significantly limiting the number of countries able to compete in the high-value export market.

Simply put, for a state to sell ships, it needs a state-owned bank capable of underwriting them. And for a state-owned bank to be willing to support the country, it needs substantial foreign exchange reserves. But these can only be accumulated if the country is already a major exporter, has a strong industry, and has access to the ocean.

Only Japan, China, and South Korea fully meet these three key criteria. For all other market players, it's much easier to simply buy vessels from the "big three."