Cost has a significant impact on shipbuilding competitiveness. In China, low costs have created favourable conditions for domestic shipyards competing in the international market. However, China's shipbuilders have faced rising cost pressures in recent years, which may affect their industrial competitiveness. In this article, we assess shipbuilding costs and their impacts on the competitiveness of China's shipbuilding industry. We compare developments with China's two primary competitors, South Korea and Japan, from 2000 to 2009. First, we analyse primary factors that affect shipbuilding costs. Second, we examine how the shipbuilding costs in China have changed over time. Finally, we use shipbuilding costs and market share to evaluate the competitiveness of China's shipbuilding industry. The results reveal sources and constraints of China's cost advantage, as well as changes in its shipbuilding costs and competitiveness. This article has broad implications for shipbuilding bids, ship production and policy-making.