Cao Desheng, deputy director of the Ministry of Communications’ Water Transport Department, has said the government will encourage foreigners to invest in China’s shipping industry to help expand its fleet. This is part of the plan to make China’s ocean-going fleet the third largest in the world by 2010 and, at the same time, improve maritime security and better protect national interest.

The plan is to more than double the total deadweight tonnage of Chinese-flag flying ocean vessels by 2010. That is up from 44 million dwt to 100 million dwt by 2010 which appears a major leap but there is a fairly simple way around this.

One way to get there is the ministry will encourage banks, logistics enterprises, cargo owners and foreign investors to invest in its shipping industry.

Cao Desheng said, ‘They can set up new companies along with domestic shipping enterprises, with the latter holding at least 25% of the total shares of a new company to overcome worries over shipping security.’

Foreign investors have to necessarily register their companies in China first, and the ships should fly the Chinese flag. This is for security reasons.

The second way of doing it it to bring home the foreign flag registrations. High tariff and value-added tax on imports, or 27.53% cost of shipbuilding, has caused many Chinese ship-owners to register their vessels in other countries. According to official figures, the number of Chinese vessels registered abroad has been increasing, and they account for half of the country’s total international tonnage.

Get them all back under the Chinese flag and the target is nearly met. Thus the Ministry of Communications is dangling a carrot — tax exemption to Chinese-owned ships that were registered abroad before 2006. This incentive is expected to make them register at home — in Shanghai, Tianjin or Dalian — within the next two years. The ministry is also discussing some other long-term policies to encourage Chinese-owned ships to register at home. If all that were to happen the target would be easily met.