Shipowners Move Out From Hong Kong Amidst U.S- China Trade Tensions

Shipping Companies are moving out of Hong Kong and taking their ships off its registry to prevent them from being commandeered by China or struck with U.S. sanctions in case of a conflict between Beijing and Washington.

There have been concerns within the industry, given the United States’ scrutiny of the role of Beijing’s commercial vessels in a potential military conflict over Taiwan and Hong Kong’s position in meeting China’s security interests.

The U.S has warned American-based companies about the risks of operating in Hong Kong, where it has already applied sanctions against a few top officials.

For over a century, Hong Kong has remained a centre for shipowners, financiers, brokers and maritime lawyers. Its maritime sector accounted for 4.2% of its GDP in 2022, and its flag is the 8th most flown by ships across the world.

Many people in the industry expressed worries, pointing to China’s focus on its national security and trade wars with the U.S. along with the Hong Kong leader, who is accountable to China, to seize control of shipping in case of an emergency.

An executive from Hong Kong said that he does not want to be in a place where China wants their ships and the U.S targets it from the opposite side.

Among the vessels that left the registry of Hong Kong, 74 re-flagged to Marshall Islands and Singapore in 2023 and 2024, mainly dry-bulk carriers which transport coal, iron ore and grain.

The Government of Hong Kong said recent developments were expected given the changing geopolitical and trade situation. It emphasised that Hong Kong would continue to be a prominent shipping hub, offering tax breaks, green subsidies and other benefits to shipowners.

One spokesperson also said that laws which govern its registry and also emergency provisions do not allow the Hong Kong leader to commandeer vessels to serve in the Chinese merchant fleet.

Basil Karatzas, consultant with Karatzas Marine Advisors & Co, outlined how Singapore is becoming perfect for shipping companies since it offers less risk than Hong Kong.

Though Hong Kong’s ship registry is noted for its regulatory standards and safety measures, enabling ships to pass easily through international ports, its flag is now flown by many Chinese state-owned ships, which is a concern for many.

According to PLA military studies and four security analysts, these ships could form the backbone and serve the PLAN Navy in case a conflict arises, supplying vital necessities like oil, food, etc.

On the other hand, the U.S has a small shipbuilding industry and fewer ships sailing under its flag.

Though Beijing’s state-owned fleet is increasing in number, the U.S. could target it in a clash, and China might need other ships to transport supplies, given its dependence on international trade lanes, according to three analysts.

References: Shipping Matters, Safety4sea

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