Newsroom Blog
Positive side to China
By Lloyds List Comment
Thursday 4 February 2010
THE world is abuzz with news of Chinese confidence, mostly painted in a negative light.
Following Google’s stand last month, many foreign companies in China have admitted that they fear industrial espionage is on the rise and some are even contemplating closing shop in China.
The nation’s intensified harsh treatment of its dissidents has also led to speculation that the Communist Party is tightening political control.
In the latest sabre rattling over Taiwan, the Chinese government is threatening to impose sanctions on US businesses involved in a $6.4bn arms deal between the US and the government in Taipei.
But recent confidence shown by Chinese banks in ship financing is hardly worrying. In fact, it is an encouraging sign that cash-rich China is stepping into its natural role as Western banks, still reeling from their past mistakes and under fire from regulators, are too distracted to fund opportunities in shipping. If they continue, the Chinese banks will fill a void in the market.
News of the new Chinese banking initiative emerged last week, when we reported that Chinese banks have quietly lent billions of dollars to blue-chip Western shipowners since the banking crisis broke. Bank of China, Industrial and Commercial Bank of China, China Construction Bank, the Export-Import Bank of China, Bank of Communications and China Development Bank are active in the market.
Pundits in Hong Kong now predict that Chinese banks could become a major force in ship finance in a matter of years, taking significant portions of the business away from London, New York and Hamburg.
While Western financial institutions are hesitant to add shipping risk to their lending portfolios, the Chinese banks mentioned above — all government-owned institutions — have a mandate from the government to lend to the nation’s shipyards.
The government has stated its intention of supporting Chinese shipyards to dominate world shipbuilding by 2015.
This is protection, to be sure. But Chinese banks are supporting shipping companies around the world unable to find financing elsewhere.
Most recently, Torm, the Copenhagen-listed shipowner, secured funding with the Export Import Bank of China for six existing newbuildings it has on order at a Chinese yard to be delivered between 2010 and 2012.
Until Western financial institutions are willing to loosen their purse strings for reasonable bets, the Chinese banks have an open advantage, and are sure to exploit it.
Comments (1)
Comment by
Dr Ivica Tijardovic
- Friday 5 February 2010
Shipowners who accept Chinese loans to build ships in China under irrationally low-priced contracts are destroying the international shipbuilding market. Thanks to such shipowners, European yards lose contracts and their workers jobs. China has to play by international rules. Its exaggerated support for its own shipbuilders will not help the industry. At the end of the day quality must still dominate.
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