Late in 2013, the Chinese government instituted a program whereas Chinese shipowners were provided certain compensation in order to demolish existing Chinese-flagged tonnage at Chinese demolition yards. The program was for relatively new tonnage of vessels newer than twenty years of age for a subsidy worth the equivalent of US$ 125 per gross ton. For (Chinese) shipowners wishing to replace such tonnage with new tonnage, always built at a Chinese shipbuilding yards and flying the Chinese flag, there was an additional compensation of the equivalent of US$ 125 per gross ton.
Just last week, the maritime and offshore news website gCaptain re-published a Reuters article that four Chinese ship-owning companies received 1.8 billion Yuan (approximately $293.3 million) in subsidies to renew their fleets; the companies were China Cosco, Cosco Shipping, China Shipping Development Co., and China Shipping Container Lines.
As delighted as we are at seeing government people hard at work, one cannot miss the point of $300 million ‘free’ money just entering the shipping cycle. Quite a few of the attention-getting private equity funds active in shipping have kept their equity commitments to shipping well below such ceiling.
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