China’s biggest banks are considering rare moves from shipping finance, redistributing how the country manages exposure to the maritime sector. At least two state-owned bank lease units have undergone very high consultation with Beijing’s financial regulators about converting long-term vessel leases into mortgages.
This is defense suggestion Against US tariff movements. In changing the composition of its transport portfolio, the bank wants to protect itself from the sudden US port rates initially charged in mid-October, and perhaps from Chinese shipowners. Industry insiders say timing is important. Some of China’s biggest leasehouses are often trapped in ships visiting American ports, and the background to the entire trade war can only raise tensions.
China’s top banking watchdog, the National Financial Regulation Authority (NFRA), is closely watching the talks. Those familiar with the issue said regulators had not made any decisions and were considering the financial risks that would allow banks to hold mortgages. The industry has traditionally been seen as too risky.
The people in the lecture say it is a very sensitive process. Meanwhile, Beijing wants to protect lenders and shipping companies from Washington’s measures. Meanwhile, regulators are wary of putting banks at new risk if China’s financial system is already under pressure from the soft real estate market and growth is slowing.
The deliberations highlight the scale of China’s footprint in transportation. With nearly $100 billion in long-term leases to Chinese-supported companies already having nearly $100 billion in shipping assets, Chinese banks and leasing companies are leading the global market. Changes to the structure of how these assets are funded could echo across international shipping and could restructure China’s position as the world’s largest maritime lender.
Chinese lenders explore ship mortgage models
The idea arose in August when the leasing company and shipowners met with NFRA officials. In China, lenders have been a major player in transport finance worldwide for over a decade, replacing retreating western banks. Under a standard lease agreement, the owner purchases the vessel and leases it to the operator for more than a decade.
If the lease is a mortgage, your liability and financial liability will be revoked. The owners of the ships own the ships, but the banks fund them. Mortgages are generally short (about five years), and change market slump and default risks from landlords to operators and their lenders.
Crossing that line has made an extraordinary leap for China’s banks. Shipped assets have long been seen as cyclical and volatile values that have been affected by trade, freight rates and declines and flows of global demand. In the case of default, these banks have to spend years in court trying to collect the money.
However, other lenders say the risk is worth it if a mortgage protects its portfolio against US exposure.
Banks carry US penalties
The urgency comes from the US plan announced by President Donald Trump in April. On October 14th, Chinese-made and Chinese-operated vessels calling at US ports will be billed based on cargo volume. The highest fees could be charged on vessels directly owned by Chinese companies.
The US says the job is aimed at energizing the shipbuilding industry and reducing China’s dependence on maritime sources. However, Beijing sees this step as a direct challenge for managing global shipping funds.
As of last year, Chinese leasing companies owned a total of approximately $100 billion worth of shipment assets, according to Clarkson Research Services. Deliveries account for 40% of some lenders’ portfolios, highlighting US policy exposure.
Industry sources said some shipowners are already looking for ways around taxation. Some ideas under consideration include raising charter fees for ships that do not call US ports and overhauling vessel financing. Others are tapping on non-Chinese banks for new money to reduce risk.
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