Financing PRC Vessels

Following the 1980s crash in the shipping market in Hong Kong, several western ship finance banks left the Territory. In recent years, however, an increasing number of these banks have begun to return. There is no doubt that the China market (with its burgeoning maritime transport and shipping companies) has played a significant part in attracting such ship finance banks back to Hong Kong. Although these banks are interested in lending to Chinese shipowners, they appear, for the time being at least, only willing to do so on the basis that the vessels being financed are registered in jurisdictions other than the PRC. Liberia, Panama, Hong Kong, Cyprus, Singapore, the Marshall Islands and St. Vincent & Grenadines have all proved popular alternative jurisdictions.

The recent strong economic growth of the PRC has led to increased demand for trading between its coastal regions. Only PRC registered vessels have been able to participate in this growing market because of the protective provisions of the PRC Maritime Code, which expressly prohibits foreign vessels from engaging in PRC coastal trading and towage operations unless express consent is obtained from the relevant PRC authorities. Western banks, however, are not at present satisfying the growing need of PRC shipowners for competitive international financing to finance the acquisition of PRC registered vessels.

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