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China's shipping sector develops in Tianjin
Published on: 2010-08-06
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As the Chinese shipbuilding industry overtakes its Korean counterparts, the need for Chinese shipbuilders to have more tax-friendly financial packages at their disposal has been identified.

China overtook South Korea to become the world's top shipbuilding country for the first time in the first half of 2010.

In anticipation of the need to provide support services for shipping, Tianjin, China's third largest city has been nominated for development. Tianjin is located on the estuary of the Haihe River on Bohai Bay and is the main port of North China.

Incentives may be offered to foreign companies wishing to establish the right kind of shipping service offices there, which could include allocation of land and tax breaks.

With the approval of the National Development and Reform Commission, the Tianjin Shipbuilding Industry Fund was established at the end of 2009 with initial investments of CNY2.85bn (USD420m) and ambitions to raise CNY20bn.

Cui Jindu, deputy mayor of Tianjin recently announced that China's two major shipbuilders, China CSSC Holdings and the China Shipbuilding Industry Corp., intended participating in the fund.

A recent report indicated that the fund had already financed 45 new ship orders for domestic shipbuilders and fostered investments of CNY15bn in shipbuilding projects.

Tianjin has the ear of central government with regard to providing the right tax incentives for ship financing packages and is spearheading developments in this direction.

However, there are also complaints that ship-financing in China is hindered by red tape and tax regulations, especially a 5% tax on operating leases which some consider to be discouraging business. Other issues such as vessel registration procedures may also act as a disincentive.

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