Denmark's A.P. Moeller-Maersk, France's CMA CGM and Switzerland's MSC Mediterranean Shipping Company — the world's three biggest ocean carriers — announced plans for their so-called P3 Network in June last year.
The aim was to use a combined fleet to cut costs on Asia-Europe, trans-Atlantic and trans-Pacific routes under a plan that was set to go into operation this autumn.
But China's commerce ministry said in a statement it had decided to prohibit the alliance after conducting an anti-trust assessment.
The ministry said the alliance, had it gone ahead, would "have a far-reaching impact on the global shipping industry and cause a high level of concern in all sectors".
It added that the alliance would increase the parties' "combined capacity in container shipping on Asia-Europe routes" and give them a "substantial increase in market concentration".
In response to China's decision, the companies said they were giving up the plan.
"MSC will continue to review all remaining options as to how it can continue to become more cost efficient and improve its service offering in the absence of P3," the Swiss company said in a release.
“We are disappointed by the decision of the Chinese Ministry of Commerce (MOFCOM) but will continue our efforts to operate more efficiently and provide our clients with a comprehensive and excellent service,” Diego Aponte, MSC vice president, said in a statement.
“We could have achieved these efficiencies much faster through P3 but with our investment in more fuel-efficient vessels, further economies of scale will still be achieved over a period of time.”
MSC, founded in 1970, has grown to become the world's second-largest operator of container vessels, with 459 in its fleet at the end of May, according to the company's website.
Maersk for its part said the decision was not expected to impact the group's annual results.
"The decision does come as a surprise to us, of course, as the partners have worked hard to address all the regulators' concerns," chief executive Nils S. Andersen said.
The alliance had already been approved by regulators in Europe and the United States and would have enabled Maersk to reduce costs and carbon emissions.
Andersen said he was "quite confident Maersk Line will accomplish those improvements anyway".
The group's shipping business has outperformed the troubled sector over the past few quarters partly due to cost cuts.