CHINESE leasing houses, now a major force in global ship finance, are urgently requesting Beijing’s approval to provide mortgage lending in a bid to withstand escalating fallout from US-China tensions.

Lessors are asking regulators to permit the provision of ship loans, allowing the companies to retain business even if Washington charges punitive port fees on ships they would otherwise own, sources familiar with the matter told Lloyd’s List.

“We are in talks with the authorities about this,” said a senior executive at one of China’s top shipping lessors.

Their counterpart at a rival firm added the aim is to get a licence for some transitional products, converting existing lease structures into mortgage loans to cope with the predicament.

In current financial lease set-ups, the vessel’s legal ownership belongs to the leasing company, while the lessee, usually a shipping company, is entitled to the actual operating rights via long-term charter agreements.

That exposes the lessors as nominal owners vulnerable to the US Trade Representative’s revised port fee plan targeting China’s maritime sector, including shipping entities, although such financing is often seen as a quasi-conventional bank loan.

‘Significant’ damage from USTR proposal

These lenders, mostly backed by large Chinese banks or state industrial conglomerates, have risen over the past decade into key players in global ship funding with the retreat of Western capital. But now the Washington policy is eroding their business.

According to statistics from Clarksons, the outstanding value of shipping portfolios held by Chinese leasing companies reached $99.3bn by the end of 2024. This accounts for roughly one-sixth of the global ship financing market.

“The biggest hit we face now is early repayments, especially from chemical and oil tanker clients operating on routes to the US,” said the second leasing executive, without giving details.

“Some container carriers have also been inquiring about ownership structures in their charter contracts — perhaps for future re-routing considerations, or possibly for potential early termination,” he added. “The impact on our existing portfolio is significant.”

Some listed owners have already announced such moves. Last month, Okeanis Eco Tankers said it had exercised the purchase options of three very large crude carriers from a Chinese lessor, passing two to a Greek bank to enhance its “resilience against geopolitical and other risks”.

The named vessels and the owner’s earlier filings link the deal to CMB Financial Leasing, one of China’s largest player in this sector.

One of the ships, the 2022-built Nissos Kea (IMO: 9920758), does not serve US routes, according to Lloyd’s List Intelligence data, suggesting the owner is also considering potential future risks.

A Singaporean tanker owner, who has ships funded by a couple of bank-backed Chinese leasing lenders, said he was concerned about the risks, even though the USTR had yet to clarify if China-leased ships would be deemed China-owned and thus subject to charges.

He said he had been contacting Japanese banks to diversify his finance sources.

Meanwhile, the slowing newbuilding market, especially in China, also spells trouble for the country’s lessors in sourcing new deals.

Global orders in the first four months of 2025 shrank about 48% year-on-year by cgt, Clarksons data shows.

Beyond uncertain demand for vessels, “the USTR’s proposed fees on China-linked ships calling in the US is also impacting newbuild sentiment”, the brokerage said in a report.

Its data also shows China took 54% of global ship orders in January-April by cgt, versus 70% for full-year 2024 and 60% in 2023.

“Some of our new projects, even at contract stage, have been put on hold or cancelled due to the port fee risks,” said the second lessor executive.

Voices raised, but no easy fix

If allowed to provide mortgage financing, ship ownership would stay with original owners instead of lessors, helping the latter avoid the USTR’s definition of “Chinese shipowner”.

But that requires Chinese financial regulators to change rules or make a special case for ship lessors, neither an easy fix.

In addition, most bank-affiliated Chinese leasing companies have, over the past decade, taken over their parent banks’ ship finance business, leveraging the flexibility of leasing structures — such as offering clients higher leverage and off-balance-sheet treatment.

A reverse in the course would mean a change in business model, sacrificing these advantages and competing directly with foreign banks.

Leasing sources from China said focusing on serving compatriot owners and charterers, or those not engaged in US trades with less impacted vessel types such as LNG carriers, are among limited coping strategies now.

Some argue it’s high time for China’s ship leasing sector to ease the cut-throat competition and push up profit margins — with deals reportedly being struck at rates well below the Secured Overnight Financing Rate plus 200 basis points. Yet, more worry that growing pressure from the US, combined with a steady stream of new players crowding into the market, will only turn the competitive heat up even further.

“We hope to reflect the distress to higher government levels via regulators, to find solutions,” the executive said.

There is expectation that the impending US port fees, due for implementation in October, will end up on the negotiating table as Beijing and Washington hash out their latest round of trade talks — and could still be tweaked or delayed. So far, though, neither side has breathed a word about the issue in their official statements.

But some are less hopeful. “China’s ship leasing sector is worth around $100bn, which feels huge to us; but in the grand scheme of global geopolitics, is perhaps not all that big,” said a third leasing executive.