The city has plenty of core strengths when it comes to providing capital to shipping. The latest installment from our brand new magazine being distributed across Hong Kong Maritime Week.

Hong Kong has a long tradition of providing shipping finance and progress has recently been made to attract new owners, leasing companies and managers to set up business in the territory.

As an international financial hub, the so-called Fragrant Harbour has a significant concentration of banks that provide ship finance to the local sector, as well as foreign shipowners and shipyards. Some of the world’s leading shipping lenders, such as HSH Nordbank, Credit Agricole, Export-Import Bank of China and Societe Generale, have established a presence in Hong Kong.

“Hong Kong’s economic success has its origin in shipping and trade, whose combination initiated its growth as a global financial centre and a gateway where east meets west. Clearly, wider integration of financial services with the maritime industry would help attract more commercial principals to Hong Kong,” says Richard Hext, chairman of Vanmar Shipping.

Hong Kong’s banking infrastructure and diverse funding routes indicate that it has the potential to thrive as a global maritime finance centre. In addition to traditional shipping finance, the city has created a diverse and lively alternative financing sector, which includes a variety of leasing houses, private equity and hedge funds to fill the voids left by traditional shipping finance.

Hong Kong can attract more investment in sustainable maritime solutions

According to the Hong Kong Monetary Authority (HKMA) figures in June 2023, the total amount of shipping loans and advances exceeded $10bn, accounting for 1.4% of loans and advances for use in Hong Kong—a number expected to likely grow as the city continues to make changes towards green practices and projects concerning the sustainable development of its maritime industry.

Business groups and local government have been raising Hong Kong’s profile of the shipping sector for some time, suggesting several measures, including tax incentives and so-called green loans, that would encourage greater competition in the region.

Launched in May 2021 and extended this year to 2027, the Green and Sustainable Finance Grant Scheme provides subsidies for the costs associated with eligible green and sustainable bond and loan issuances in Hong Kong. Administered by the HKMA, the scheme’s scope was extended to include subsidies for transition bonds and loans to encourage industries in the region to utilise Hong Kong’s transition financing platform as they advance towards decarbonisation.

“The government’s initiatives to develop a green maritime fuel bunkering centre and promote sustainable financing will enhance Hong Kong’s status as a leading center for ship finance. By capitalising on these trends, Hong Kong can attract more investment in sustainable maritime solutions,” notes Biju Narayanan, deputy general manager at Wah Kwong Ship Management, part of one of Hong Kong’s most important legacy shipowners.

In May this year, HKMA also published the Hong Kong Taxonomy for Sustainable Finance, which essentially provides a framework for classifying green and sustainable activities for voluntary use by industry to reduce the risk of greenwashing. It may, for example, be used for labelling of green bonds, classification of green loans, as well as supporting specific reporting for the shipping sector.

“As environmental sustainability becomes increasingly important in the maritime industry, Hong Kong can leverage its position as a leading center for green finance to support environmentally friendly initiatives within the shipping sector,” adds Gautam Chellaram, executive chairman at Hong Kong owner KC Maritime.

With the leasing market taking off substantially in Asia, particularly in China, most shipping experts believe this can be seen as beneficial to Hong Kong, and that combination of PRC lessors and banks presents an opportunity for the city.

“Hong Kong’s role in global ship finance will continue to progress well, especially as it is China’s national policy to continue to consolidate Hong Kong’s position as an international finance, shipping and trade centre,” says Hext.

Firoze Mirza, managing director of BSM Hong Kong, part of the Bernhard Schulte Shipmanagement empire, agrees that the city’s ship lending climate is likely to move in the right direction with the growing influence of Chinese leasing companies, who have become significant players in the maritime finance sector, providing substantial funding for ship acquisitions and operations.

“As these companies continue to expand, Hong Kong can serve as a key financial hub for their activities,” he adds.

Most recently, Hong Kong announced the reconstitution of the Hong Kong Maritime and Port Board to support the government in policy implementation and to promote the sustainable development of its maritime industry. Furthermore, in October, Hong Kong’s International Maritime Centre (IMC) announced the creation of the Hong Kong Chamber of Shipping—a big step forward in boosting Hong Kong as an international maritime hub, according to Hong Kong-based lawyers at Hill Dickinson.

Of particular note, the establishment of the chamber involves major key industry players, such as COSCO, China Merchants Energy Shipping, Sinopec, and PetroChina, amongst others.

KC Maritime’s Chellaram reckons Hong Kong’s role in global ship finance is likely to progress confidently as its expertise in areas such as banking, investment, insurance, and asset management provides a strong foundation for growth. He also finds that the city’s access to international capital markets and its extensive network of financial institutions make it an attractive location for ship financing transactions, and that in addition to that, Hong Kong has a stable legal system and regulatory framework that promotes transparency, security, and investor protection.

Operational, financial, legal, and other forms of support make up Hong Kong’s status as a global maritime hub rather than just a port, according to lawyers at Hill Dickinson.

“As the Hong Kong government and industry stakeholders consistently make steps towards positive developments and advancement of Hong Kong’s unique offerings, it will only continue to solidify itself as a full service shipping centre,” they say in an emailed response.

“There are very, very few cities in the world that have strengths in all three areas – finance, shipping, and trade. I have every confidence that Hong Kong will continue to do well, with core strengths in all these three areas,” concludes Vanmar’s chairman, Hext.