THE rise of Chinese leasing in the wake of the global financial crisis was something of a godsend for shipping. The retrenchment of Western banking had opened up a dangerous sinkhole underneath shipping’s finances and what the enterprising lessors filled it with has remained in place ever since, transforming the ship finance sector in the process.

The fact that these now dominant lessors are being shaken by the US Trade Representative’s 301 tariffs is more of a problem than most care to admit publicly right now.

As the industry gathered in Oslo for Nor-Shipping on Monday, there was much murmuring about the impact of increasingly fractious US-China trade relations, but the status of Chinese leasing barely featured in the top five concerns.

Rumours of an attempted exodus from spooked owners seeking to exercise the early purchase options, or sounding out Japanese alternatives, have been flying around for weeks. But the official line from the Chinese lessors has been that there is nothing to see here.

A senior figure from one of the big name leasing pioneers was dispatched to assure the gathered crowds that while some enquiries may have been made in light of the current geopolitical tensions, that “very little” had happened and this was, at worst, a case of some owners taking a wait-and-see approach before making any decisions.

“We see the relationship with our clients as a long-term relationship. It’s never been a one deal relationship,” assured the well-rehearsed Sharon Guo, who heads up Europe and US for ICBC Financial Leasing.

Back in Asia, however, leasing executives speaking behind closed doors away from the glare of European executive attention are less optimistic.

The reality is that leasing houses are urgently trying to get Beijing to step in and help them withstand escalating fallout from US-China tensions.

Being able to offer mortgages is at best a temporary workaround, but it opens up wider questions about how they would maintain their competitive edge if they were no longer acting as a lessor.

It’s also not entirely clear that government intervention would help.

The Chinese government’s support for the leasing industry has contributed to the growth of this sector and ensured favourable financing conditions, but it is precisely this association that has attracted the attention of the USTR.

Besides, Beijing has other priorities right now.

As shipping was getting to grips with the finer points of finance, China was accusing the US of “seriously violating” a trade truce between the two powers and vowing to take strong measures to defend its interests as tensions reignited over the supply of critical minerals.

That doesn’t sound like the sort of conversation where an exemption for leasing arrangement might be easily slipped in.

For shipping, the prospect of China’s leasing houses taking serious damage from the US, should now be considered a genuine risk for those who are exposed. ICBC may be proffering the promise of long-term relationships counting in such situations, but there were similar conversations going on in the background when the Western banks were in retreat.

There are, of course, others, who will view this as an opportunity to be grabbed with both hands.

Richard Meade
Editor-in-chief, Lloyd’s List

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