Shanghai’s Changxing Island Shipyard, already home to both conventional-submarine and civil production, now appears to be preparing to construct China’s first indigenous aircraft carrier. Internet and satellite photos have emerged of a hull module whose limited dimensions suggest that it represents a cost-controlled demonstration of relevant construction capabilities. Its configuration may foreshadow improvements on China’s first aircraft carrier, the refitted ex-Soviet Liaoning. While this particular module may never be incorporated directly into an initial homegrown flattop, whose construction is unlikely to be rushed, China’s naval shipbuilding has become proficient at modular construction. China’s military shipbuilders already use modular construction techniques at Jiangnan Shipyard for Type 052-series destroyers, at Hudong-Zhonghua Shipyard for the Type 071 amphibious vessel, and in at least four shipyards for the new Type 056 corvette—which itself wasreportedly preceded by a demonstration module at Hudong-Zhonghua. Now these latest photos raise important questions: how capable is China’s military shipbuilding industry, and what can it actually deliver?

This is part of a larger pattern in which outside analysts have repeatedly underestimated the speed and sophistication of China’s military-technological development. China’s political and economic capacity to invest financial and human capital in multiple new programs is unparalleled. While it remains uncertain how rapidly China’s aviation industry and other less-dynamic sectors can transform a growing glut of projects into high-performing finished products, China’s shipbuilding industry already has proven production capabilities. Here China is simultaneously developing and producing seven types of submarines and surface combatants; a number matched only by the United States.

During the 2000-10 global commodity boom—in which China’s booming growth and appetite for iron ore, oil, and other raw materials was a core theme—Chinese shipyards surged to become the world’s largest in terms of raw deadweight tonnage produced per year. The civilian shipbuilding boom did not directly translate into military shipbuilding capability. But it nonetheless contributed to China’s current investments in naval shipbuilding because the country’s growing civilian maritime trade and merchant marine helped create a social and political consensus in China that civilian maritime capacity must be backed by a powerful navy.

In contrast, the United States no longer has a significant civil shipbuilding industry and struggles to produce military ships on time and within budget. Based on these current production trends, on American shipyards’ rapid workforce aging and loss of human capital, and on Beijing’s desire for a fleet that makes it a major naval player in the western Pacific and gradually beyond, it is quite possible that within a decade China may lead the world in warship output.

Shipyards controlled by two enterprises—China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC)—build essentially all of China’s surface combatants and submarines. The fact that CSIC personnel design the ships and CSSC personnel actually build them suggests that the decision Beijing took to split the original CSSC into the modern CSSC and CSIC in July 1999 primarily affected the commercial shipbuilding businesses that each enterprise runs and that the military construction business is, at a fundamental level, one where the company split is largely symbolic. It also strongly suggests that competition in China’s naval shipbuilding business is not so much between the CSSC and CSIC parent companies as it is among the individual shipyards themselves.

Furthermore, the larger CSSC and CSIC yards such as Hudong-Zhonghua, Changxing Island, Huangpu, Dalian, and Huludao could by themselves be considered world-scale shipbuilding enterprises on both the civilian and military sides. Three years ago, calling these yards “world-class civilian shipbuilders” would not have raised eyebrows. Yet today they increasingly deserve the “world-class” moniker for their naval ship construction as well; in terms of ship numbers, and—increasingly—ship quality. As Chinese military shipbuilding personnel continue to gain experience, ship quality is likely to improve. Furthermore, the yards’ physical infrastructure is typically quite good, as today’s Chinese military shipyards enjoy the newest infrastructure of any major shipbuilder. This is especially true for the large, cutting-edge “greenfield” shipyards such as Changxing Island, located near Shanghai, which is the location where the recent carrier demonstration module photos come from.