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Lack of funds hits shipping hub goal

SHANGHAI operates the second-largest dry bulk container port in the world, but the city's potential as a global hub suffers from a lack of capital for shippers and shipbuilders, industry officials said.

"Shanghai is already one of the most important ports in the world, but it still cannot be called a full-fledged shipping center because we don't have the financial service industry to back up shipping companies," said Shen Xiaosu, a vice director of the Committee of Shanghai Urban Construction and Communications.

Last year, China accounted for less than a thousandth of the estimated US$30 billion in global shipping-related loans, Shen said.

"With the globalization of the shipping industry, we expect more financial service providers in Shanghai," he said. "We need to upgrade our facilities."

Shanghai overtook Hong Kong as the No. 2 container port in the world after opening its new Yangshan deep-water port in Hangzhou Bay at the end of 2005. The city also operates a river port at the mouth of the Yangtze River.

Last year, the deep-water port handled 8.2 million TEUs (twenty-foot equivalent units) of containers, while the river port at Waigaoqiao handled 15 million TEUs.

Singapore remains the world's largest container port with an annual throughput of 29.9 million TEUs.

Shippers using the Shanghai port are anxious to get a bigger piece of the lending pie from domestic banks. So far, that hasn't happened.

"State-owned banks seem more willing to lend to the large state-owned enterprises with whom they are familiar, and I'm afraid those enterprises are sucking up the lion's share of the available money, leaving little for shipping services," said Gordon Shen, chief representative of Navi8 Asia Pte Ltd, a shipping firm, in Shanghai.

Long way

As a result, "the services industry for shipping companies in Shanghai is still a long way behind that of Hong Kong and Singapore," he told Shanghai Daily.

Singapore-based Navi8 Asia set up a representative office in Shanghai in April 2008.

Still, there's some progress.

There are now 11 domestic financial leasing firms. The China Banking Regulatory Commission announced updated regulations at the end of 2007 for financial leasing companies and has given approval to five operators partly owned by domestic commercial banks.

The state-owned banks in China can provide financial services only to Chinese ship owners, shutting access to capital for many foreign shippers operating in the country, said Navi8 Asia's Shen.

"It is a crucial moment now for Chinese banks to get involved in shipping finance to support Chinese ship owners so they can survive the world economic crisis," said John Tzoannos, secretary-general of the Greek Ministry of Mercantile Marine, Aegean and Island Policy.

"It's a good opportunity when Western banks are suffering, and China's cash-rich banks can finance projects," he said at a shipping forum in late April.

Chinese bankers say they are aware of the industry's needs, but it's not clear to what extent good intentions are translating into lending.

"We're ready to offer finance products to reliable shipyards and ship owners, and the financial crisis may provide a good opportunity for us to build Shanghai as a financial and shipping center," said Lin Jiaqun, president of Bank of Communications Finance Leasing Co Ltd.

"Most of our clients are state-owned enterprises and we have our own evaluation system to decide whether to buy oil carriers and then lease them back," Niu Jie, manager at the Shipping Financing Department of ICBC Financial Leasing Co Ltd, said.

Inadequate regulations on shipping financing may also be an obstacle.

"Shipping financing deals are subject to both trading tax as well as income tax on financial services, which put huge pressure on cash-strapped ship owners seeking financing channels," a member of the Shanghai's People's Political Consultative Conference, who declined to be named, said last week.

The State Council, China's Cabinet, approved in April for Shanghai to develop as a global financial and shipping hub.

"The city still needs to attract more international shippers and encourage closer ties between domestic and foreign companies," said Vice Director Shen.

"If it's just local companies doing international business, Shanghai cannot be called an international shipping hub.''


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