With China’s shipbuilding industry undergoing a challenging period of transformation and consolidation, the active participation of domestic financial leasing companies has become all the more important in helping shipyards clinch newbuilding deals with credible counterparties and export domestically-built ships, according to Mao Wanyuan, director of non-banking department at China Banking Regulatory Commission (CBRC).
For the part of CBRC, the regulator will assist in guiding the leasing houses to strengthen their risk management, widen their vessel-types portfolio, raise their level of professionalism, broaden their capital supplement channels, and encourage eligible lessee companies to establish locally-based subsidiaries, Mao said at a recently-held industry forum.
“Up until end-March 2017, China boasts 23 institutions involved in ship financial leasing, with their combined portfolio consisting of 989 ships sitting on deals valued at around RMB113.9bn ($16.5bn). Among the total value, 68% are direct financing lease deals, an increase of 58% year-on-year,” she told delegates at the forum.
Financial lease or capital lease, which is on the rise, sees the risks and rewards related to the ownership of asset leased being transferred to the lessee and so assets appear on the balance sheet.
Mao pointed out that Chinese leasing houses also offer operating lease deals to help shipowners who prefer to optimise their fleet structure by reducing their asset-liability ratio, with the asset not showing on the balance sheet.
Qiao Kai, vice-chairman of China Minsheng Financial Leasing, shared that out of the group’s hundreds of billions worth of assets (not just in shipping), the share of financial leasing accounts for up to 75%, leaving the share of operating leasing much lower.
ICBC Financial Leasing is currently the leading Chinese lessor sitting on deals valued at RMB42bn involving 247 ships. The vessel types include containers, bulkers, and tankers, as well as cruise ships and LNG carriers, with clients across 11 countries and regions.
Seatrade Maritime News reported earlier this month that western shipowners are seeing more flexible and competitive terms being offered by Chinese financial leasing institutions compared to traditional bank lendings.
According to estimates, traditional banks have gone from financing around 80% of the shipping industry in 2008 to about 60% in 2016, while Chinese leasing firms have grown their market share to about 20% last year, with part of that share coming from an expanding base of western shipowners.