China looks to build first luxury cruise ship with Carnival

SHANGHAI (Reuters) - China, the world's largest shipbuilder, is looking to build its first luxury cruise vessel, with help from cruise operator Carnival Corp (CCL.N) and Italian shipyard Fincantieri SpA (FCT.MI), as the country looks to expand domestic tourism.

Carnival said on Wednesday it has signed a memorandum of understanding with China State Shipbuilding Corporation (CSSC), with the eventual aim of forming a joint venture that would also include Italy's Fincantieri.

China's cruise industry is predicted to become one of the world's largest with 4.5 million passengers by 2020, according to government figures. It has become a top target for firms like Carnival and Royal Caribbean (RCL.N) as its fast-growing middle class eye new holiday options.

Carnival said it would provide ship design and shipbuilding expertise to help create and define the overall specifications for the China-built cruise ship. It said the MoU also included other opportunities, such as the formation of a domestic cruise company.

China's shipbuilding industry, which stormed past South Korea to become the world's largest in 2010, has been hit hard by a prolonged global shipping slump. That has left many of its yards with high debt burdens and a lack of orders.

The government has moved to support the industry, which employs millions of workers, by providing subsidies to encourage shipping lines to order new ships. It has also encouraged yards to venture into building higher-tech vessels, such as offshore equipment.

CSSC, one of China's top two state-owned shipbuilding firms, has shares listed on the Shanghai Stock Exchange through its subsidiary China CSSC Holdings . At 0434 BST, shares in CSSC Holdings were down 3.8 percent, while the benchmark Shanghai Composite Index was up 0.4 percent.

(Reporting by Brenda Goh; Editing by Kenneth Maxwell)