Shipowners with Chinese leasing structures 'concerned' amid growth in global bank lending

Meanwhile, Western banks are closely monitoring these developments, which could potentially work in their favour.

So far, there has been no clear guidance on whether vessels leased by Chinese financiers will be classified as Chinese-owned under the proposed fee structure.

Greece-based research firm Petrofin Research highlighted in its recently published global ship finance report that many shipping companies with existing Chinese leases – or imminent newbuilding deliveries financed through such leases that identify a Chinese owner – are expressing apprehension.

According to Petrofin, led by Ted Petropoulos, this concern has materialised in some publicly traded US companies and others converting their financing from Chinese leasing arrangements to conventional bank loans.

"We have received reports that both major Western banks and their clients have secured lower-cost refinancing by replacing previous leasing and bank loan structures, benefiting from reduced loan margins and longer maturities," said Petrofin Research.

In contrast, the Chinese leasing model remains rigid. Domestic banks and leasing companies in China are not structured to replace leasing with bilateral mortgage lending. Furthermore, China’s financial authorities prohibit bank loans to non-Chinese owners.

“Some loans circumvent these restrictions through Hong Kong, but Chinese banks are generally not positioned to substitute leasing with traditional mortgage loans,” the report added.

Petrofin concluded, “The unresolved tariff disputes and potential US penalties on Chinese vessels cloud the long-term outlook for Chinese leasing”, as well as the broader impact on vessel values and cash flows in international trade.

Bank lending on the rise

While Western banks look to capitalise on uncertainties surrounding Chinese leasing, global lending to the shipping industry has also increased.

Petrofin Research noted lending by the world’s top 40 banks reached US$290Bn in 2024, marking a 2% increase compared with 2023 – the second consecutive year of moderate growth.

Europe dominates this space, accounting for 52% of the top-40 lending portfolio with US$152Bn, up 8% year on year. This growth is partly driven by an 18% increase in lending by Greek banks and the inclusion of Spain’s CaixaBank, which secured the 10th spot globally.

In contrast, Asian and Australian banks recorded a decline, largely due to their concentration on leasing finance. However, Japanese banks still maintain a significant 22% share of the top-40 global bank portfolio.

Leading the top-40 list is BNP Paribas, with an almost US$21Bn portfolio, followed by China Exim, KfW IPEX, Crédit Agricole and Bank of China.

Sustainability-linked financing gains momentum

European banks are also spearheading sustainability-linked ship financing. According to Petrofin Research, sustainability considerations are increasingly influencing lending decisions.

By the end of 2024, the Poseidon Principles – a global framework for responsible ship finance – had 35 signatories representing approximately US$240Bn in shipping loans. European financiers make up 68% of these signatories, followed by Asia-Pacific with 28%, and the USA with 4%.

“Cash flow across all shipping sectors remained sufficient to service loans, bolstered by a surge in vessel orders driven by ESG priorities,” said Petrofin. “This focus on ESG not only boosted demand for new ships but also stimulated ship finance activity.”

Sustainability-linked loans primarily target vessel emissions and the carbon intensity of a company’s fleet, incentivising shipowners to reduce their fleet’s carbon footprint. Banks offer improved loan terms – such as margin reductions – based on meeting specific key performance indicators.