Carnival Corp. formally agreed to a joint venture to create China's first major domestic cruise brand, establishing another platform for growth in that rapidly evolving market.
The plan is for Carnival to operate the line, which has not yet been named. Its venture partners include China State Shipbuilding Corp., a major shipyard concern, and China Investment Corp., the country's sovereign wealth fund, with some $740 billion of assets under management.
Carnival had previously said that it was talking with China State Shipbuilding about a possible joint venture. The Italian shipbuilder Fincantieri was also part of those talks.
The partners timed their announcement to coincide with last week's state visit to London by Chinese President Xi Jinping. He was in the audience along with British Prime Minister David Cameron when the deal was sealed in a signing ceremony.
Carnival's lead executive in China, COO Alan Buckelew, said the venture would stimulate interest in cruising and support China's goal of becoming more deeply involved in the cruise business.
"We are excited about using our scale and decades of experience as the world's largest cruise company to help launch a multiship domestic cruise brand" in China, Buckelew said.
In a conference call after the announcement, Buckelew said the 25-year deal is estimated to involve a $4 billion capital investment in the first 10 years but ultimately could entail billions more.
Carnival will hold a 40% stake in the venture with the Chinese partners controlling 60%.
The partnership doesn't yet have a date in mind to begin operations. Plans call for Carnival to seed the brand with existing ships transferred from its other brands before introducing Chinese-built ships, Buckelew said. Ultimately, the venture will involve ships being built by the Fincantieri-China Shipbuilding partnership, he said.
Carnival wants to do further market research before settling on the proper size for its first class of ship, Buckelew said.
The new ships could be flagged in the U.K. to take advantage of a shipbuilding tax benefit there, said David Dingle, chairman of Carnival U.K., the company's British division.
Buckelew said that the company's China operations are part of the group's U.K.-domiciled holding company, Carnival PLC.
Of the big cruise companies seeking a foothold in the Chinese market, Carnival is the only one to announce a shipbuilding component. Carnival's Costa Cruises brand has been selling in China since 2006, Princess operates there, and Carnival Cruise Line and Aida brands announced earlier this month that they would place tonnage in China by 2017.
A joint venture between a U.S.-based cruise line and a Chinese company isn't unprecedented. Earlier this year, SkySea Cruises began service with a Celebrity Cruises vessel. It is a joint venture between Royal Caribbean Cruises Ltd. and Ctrip, a Chinese online travel seller.
Royal Caribbean also operates in China through its Royal Caribbean International brand. MSC Cruises has plans to base a ship in China. Norwegian Cruise Line said it will put its new ship due in 2017 there.
An edge for the Carnival venture could be the backing of China Investment Corp. It is ranked the third largest sovereign wealth fund in the world, after those in Norway and the United Arab Emirates, according to the Sovereign Wealth Funds Institute.