China has given subsidies worth 1.8bn yuan (US$293.2m) to four shipping lines including China Cosco and China Shipping Container Lines (CSCL) to encourage them to retire and replace obsolete vessels.
The central government special subsidies will go towards the “implementation plan” to accelerate the “early retirement and replacement of obsolete and worn-out transportation vessels and single-hull oil tankers”.
China Cosco received the largest share, 1.4bn yuan (US$224.6m), through its controlling shareholder, state-owned China Ocean Shipping Group, for the decommissioning and upgrading of vessels. Sister company Cosco Shipping received 182.9m yuan (US$29.8m) for ship upgrades.
China Shipping Development Company was allocated 215m yuan (US$35m) from the Ministry of Finance for the disposal and scrapping of 15 vessels. Meanwhile, China Shipping Container Lines (CSCL) was given 40m yuan (US$6.5m)
As per the accounting standards for business enterprises, each subsidy counts as non-operative revenue and therefore, must be included in each company’s profit and loss figures for 2014; this will have a positive impact on 2014 financial results according to all four companies.
The subsidies were approved jointly by China’s Ministry of Finance, Ministry of Transport, Development and Reform Commission and Ministry of Industry and Information Technology.
Currently, the government is seeking outside support for debt-ridden private shipbuilder China Rongsheng. Although it pledged to reduce subsidies for industries with overcapacity, it is still keen to maintain the strength of large ones such as shipbuilding.