China's shipbuilders are feeling the pinch of an industry downturn as uncertainties hang over the global shipping markets.

In August, Chinese shipyards received new orders of 4.49 million deadweight tons, diving 60 percent from the previous year, said the China Association of the National Shipbuilding Industry (CANSI). The figure brought the amount in the first eight months to 28.07 million deadweight tons, down 36.9 percent. Moreover, around 40 percent of companies have yet to receive any new orders so far this year.

Chinese ship makers source their orders largely from the United States and Europe. Clouds are gathering over their prospects since demands from developed nations have become lackluster. The Baltic Dry Index, a proxy for shippers' costs and profits, averaged at 1,372 points in the first half of 2011, falling 56.7 percent from a year ago.

Zhang Changtao, a senior researcher with the China Shipbuilding Economy Research Center, said Chinese shipyards are losing their competitive edge as low-cost manufacturers because of domestic cost inflation.

China replaced South Korea to become the world's biggest shipbuilder in the first half of 2007 by winning more orders in terms of deadweight tonnage, but South Korea remained far ahead in manufacturing high-end products, like LNG (liquefied natural gas) ships and large container ships.

The ongoing industry gloom has provided a catalyst for Chinese firms to improve their technologies and solidify their market foothold, said Zhang.