China Regulates Cargo Owners’ Investment into Domestic Shipping Industry

China is tightening regulations on investment by cargo owners into the country’s domestic shipping industry in a bid to avoid excess competition amid the continuing global shipping downturn.

The “Announcement on Further Regulating Cargo Owners’ Investment into Domestic Shipping Industries (MoT Announcement [2011] No.58)” released last month by the Chinese Ministry of Transport (MoT) stressed the following principles:

• The signing of long-term strategic transportation agreements between large-scale cargo owners and major domestic shipping enterprises shall be actively encouraged
• A cargo owner with the actual need for a self-owned fleet can establish a joint-venture shipping enterprise with a major domestic shipping company
• In principle, a cargo owner can only establish one joint-venture shipping enterprise and the domestic shipping enterprise shall be the major shareholder
• The shipping capacity of the jointly-invested company shall be under control through the coordination of China Ship Owners’ Association, especially when the domestic shipping capacity exceeds the market demand