Initiative looks to UK maritimes services

Hundreds of years of experience put at the disposal of Chinese shipping companies

London's maritime services firms are closely watching for new business opportunities created by China's Belt and Road Initiative.

With centuries of expertise behind them, these firms are hoping to provide support services for new infrastructure projects along the maritime belt proposed by China, in areas including maritime insurance, broking, financing, leasing, engineering advice and legal services.

Leading these initiatives is Maritime London, a promotional body of the United Kingdom's maritime service industry, which hosted two conferences in last month for businesses to explore opportunities. Titled "One Belt, One Road: China's development strategy - what it may mean to the UK's maritime industries", the two conferences were held in London and Shanghai.

"There are already a number of well-established UK companies in China providing ship-broking, legal, insurance and other services," Doug Barrow, chief executive of Maritime London, says. "It is envisaged that more will follow and it is London's openness to international markets that give it its strength and ongoing future."

China is regarded as an emerging strength in the global maritime industry. According to Clarkson Research Services, China now controls 10 percent of the world fleet, 33 percent of new building deliveries on a compensated gross tonnes basis and 38 percent of the global order book in CGT terms.

The top 30 largest container ports globally also include 12 in China last year, according to Shanghai Shipping Exchange data. Shanghai topped the table with 35.3 million TEU (twenty-foot equivalent unit) capacity, and other notable ports include Shenzhen, Hong Kong and Ningbo-Zhoushan.

The Belt and Road Initiative, proposed by President Xi Jinping when he visited Central and Southeast Asia in October 2013, consists of the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

To achieve this integration, China has already deployed funds totaling around $100 billion, consisting of $40 billion for the Central Asia-focused Silk Road Fund, $50 billion for a new Asian Infrastructure Investment Bank, and $10 billion to the BRICS-led New Development Bank.

The belt includes countries situated on the ancient overland Silk Road through Central Asia, West Asia, the Middle East and Europe. The initiative calls for the integration of the region into a cohesive economic area through building infrastructure, increasing cultural exchanges and broadening trade.

"China's ship finance industry is relatively new, but has grown rapidly," Barrow says. "However, a good working relationship with well-established UK finance service providers is essential in avoiding some of the potential pitfalls."

"The UK companies have many years of experience to call on, and by working together there will be a win-win long term for all."

One significant milestone in the UK-China maritime cooperation was the opening of the Shanghai Maritime and Finance Excellence Center earlier this year, located in the Shanghai free trade zone.

Many heavyweight Chinese shipping and commodity trading companies are scheduled to move into the center this year or next, and the center is now inviting foreign companies to locate their subsidiaries there, particularly among maritime and finance industrial firms, so they can be close to their clients in China.

Barrow says the center "will form the nucleus of a maritime hub allowing companies from China and the UK to work even closer together".

Much of London's expertise in maritime services was built up over more than 300 years, going back to the days when the UK was an empire that dominated the world's sea routes and imported products like sugar, spices and tea.

Nowadays Britain's dominance in world trade is much reduced, but the strong expertise of the professional services sectors remains to form a world-class cluster. Much of this expertise can be used to give advice on global trade projects that are not in the UK's jurisdiction, so the industry would generate revenue for the UK economy with a larger outreach than the UK's physical imports and exports sector.

To make the best of the opportunity to work with China, Maritime London began talks with Chinese government bodies and commercial organizations six years ago, and last year it signed a memorandum of understanding with China Merchants Group.

Mark Yong, director at BMT Asia Pacific Ltd, says the Belt and Road Initiative will create many opportunities for infrastructure building projects particularly in Southeast Asia, and these will create strategic alliances between businesses in China and its partner countries.

BMT Asia Pacific Ltd is the Asian arm of BMT Group, formerly known as British Maritime Technology.

"Prior to this coherent strategy, trade between China and its partner countries were mostly initiated by pure commercial needs, but the Belt and Road Initiative will create partnerships at a government-to-government level, and this will naturally flow to increased trade activities and other social programs as increased trusting partnerships at various levels are established," Yong says.

BMT Asia is now a partner with major Chinese-listed companies, helping give advice on investment appraisal, design review and construction supervision of infrastructure assets outside China to ensure compliance to international standards.

"For example, international shipping companies that send ships to newly built ports would like to know that the ports meet their requirements for safety and various international rules such as safe navigation, hence meeting such standards is important for infrastructure construction."

Yong says many companies in the UK's financial services industry can benefit from participating in new infrastructure projects, and examples include maritime law, insurance companies and ship-broking firms.

While many shipping companies are not UK-based, they use the country's ship brokerage services because of the UK's high concentration of brokerage firms that help ship owners to sell or charter their vessels, so this distinct advantage would mean it is set to benefit from the China-led increase in infrastructure construction, Yong says.

Harry Theochari, global head of transport at Norton Rose Fulbright, a global law firm, says there are many opportunities for British financial services firms to directly participate in infrastructure investments that are part of China's Belt and Road Initiative.

Although the infrastructure projects themselves are located in various areas, such as Southeast Asia, or the Middle East, the deals could be struck in London because various service firms in the City of London have long experience providing services to the global transport and infrastructure sectors.

In addition, companies that are a part of the Belt and Road Initiative supply chain could also seek capital in London via the London Stock Exchange, which has expertise in infrastructure and in developing markets, he says.

In the legal sector, Theochari's team is well-versed in all forms of transport law including maritime law, in different jurisdictions worldwide, which is helpful in structuring a deal that involves cross border investment.

For example, if a ship is built using finance from banks in more than one country, and is built in another, with a third jurisdiction providing export credit to the lenders, then the lawyer involved needs to draft a coherent legal document that takes account of conflicts of laws from different jurisdictions, and such expertise allows Theochari's team to win international shipping industry business.

Because the rapid growth of China's imports and exports means that China has already become the backbone of the global maritime industry, such a policy would have particular significance for global maritime trade and its related services, he says.

"China is fundamental to the shipping industry, as the success of this industry is determined by what China is doing. The heyday of the shipping industry, between 2002 and 2007, is largely down to Chinese demand."

After the financial crisis, a lot of excess capacity in the global maritime industry was created as large containers could not be filled with products and it was difficult for ship-owners to gain access to finance for shipbuilding, but the Chinese government's support for all ship-owners, not just Chinese owners, in the form of export credit guarantees made a big difference.

In addition, the willingness of Chinese banks to finance the shipping industry is very helpful, especially as banking regulations such as Basel III are tightening the amount that many Western banks can lend on capital intensive projects such as shipbuilding, Theochari says.

Barrow says there is still a lot of expertise and knowledge in the London market and there are many opportunities for the UK and China to work well together.

"It is not just a case of knowledge transfer, but must involve a win-win for all parties. The maritime services sector, be it law, insurance, ship-broking, accountancy, or education, can now work together with Chinese companies to assist with joint ventures and business opportunities.

"One only need look at the relationship the UK maritime services sector has had with the Greek ship-owners over many years to see how a relationship can develop with mutual trust and respect."

cecily.liu@chinadaily.com.cn