Lease Your Ship in China?

Given the relative lack of funding support from the domestic banks, is leasing a viable option for the Chinese small and medium sized shipowners? There are over 1,400 leasing companies in China, according to an unofficial estimate, but very few actually have the capacity to deal with big ticket items like ships. However over the past two years, state-owned banks have established wholly-owned leasing divisions. Industrial and Commercial Bank of China (“ICBC”), China Construction Bank, China Development Bank, China Merchant Bank, Bank of Communications and Min Sheng Bank have all ventured into offering ship leasing services, and many of these specialised leasing units offer leasing services not only to ships but to other asset types such as industrial machinery and construction equipment as well. Bank of China Leasing for example is established in Singapore and offers aircraft leasing services.

There have been varying degrees of success. These state-owned leasing arms prefer to carry out leasing transactions with the first tier shipping companies in China to minimise counterparty risk, but interest has so far been limited, bearing in mind that these top clients have no lack of competitive funding support domestically. Some leasing companies have nonetheless found success with the state-owned power generation enterprises in China who have the need for coal transportation.

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