Chinese ship leasing companies are using the Maltese flag to revive financing business with European owners, offering aggressive rates while seeking to distance vessels from mounting China-related trade and compliance risks, according to Splash247.
Chinese leasing activity with international owners was effectively put on hold last year as tensions between Washington and Beijing intensified and the US moved to impose additional port fees on China-linked vessels, Splash247 reported. Chinese leasing houses are now making a comeback, increasingly structuring bareboat charter transactions through Malta, an EU member state whose flag, tax regime and recently strengthened creditor protections provide a more palatable framework for European shipping companies and their lenders.
Chinese leasing firms are now making a comeback with aggressive rates, according to Splash247.
Comeback on the Maltese register
Central to the renewed push is the use of Malta-flagged special-purpose companies to own vessels financed under long-term bareboat charters, Splash247 reported. While the ultimate owner may remain a Chinese financial institution, registering the ship in Malta places its operational regulation, crew standards and environmental compliance under an EU flag administration. This can help reassure European charterers, cargo interests and financial institutions concerned about exposure to Chinese-owned tonnage, the report stated. The structure can also make it easier for European shipowners chartering the vessels to meet EU flag requirements associated with national tonnage tax regimes.
Finance charter instrument adds lessor protection
Malta has further strengthened its appeal by amending its Merchant Shipping Act last year to introduce a finance charter instrument (FCI), a legal mechanism designed specifically to protect lessors in bareboat charter financing transactions, according to Splash247. The FCI allows a leasing company to register charter-hire and other payment obligations as a security interest attached directly to a Malta-flagged vessel. In the event of a charterer default or insolvency, the lessor gains a statutory route to recover possession of the ship rather than relying solely on provisions in the leasing contract.
The key elements of the arrangement, as reported by Splash247, include:
| Structure element | Benefit |
|---|---|
| Malta-flagged special-purpose companies | Own vessels under long-term bareboat charters while the ultimate owner remains Chinese |
| EU flag administration | Puts operational regulation, crew standards and environmental compliance under EU rules; reassures European charterers, cargo interests and financial institutions |
| Finance charter instrument (FCI) | Lets a lessor register charter-hire and payment obligations as a security interest attached to the vessel |
| FCI ranking | Sits behind registered mortgages and certain privileged maritime claims, allowing lessors to raise conventional bank debt while retaining extra protection |
Splash247 reported that a Chinese leasing company was the first financier to use the new framework, registering FCIs against two Malta-flagged ships shortly after the legislation came into force. The instrument ranks behind registered mortgages and certain privileged maritime claims, enabling lessors to raise conventional bank debt against a vessel while retaining an additional layer of protection over their ownership interest.
Fleet scale and leading lessors
Data from VesselsValue cited by Splash247 shows there are now around 130 Malta-flagged ships effectively owned by Chinese companies, with leasing institutions accounting for the majority. More than 10 Chinese lessors are represented, including:
- Bank of Communications Financial Leasing
- ICBC Financial Leasing
- China Development Bank Financial Leasing
- China Merchants Bank Financial Leasing
The fleet spans LNG carriers, large containerships, chemical tankers and small and medium-sized bulk carriers, according to Splash247.
Implications for European operators and financiers
Malta places no nationality restrictions on shipowning companies, masters, officers or crews and has developed the largest merchant fleet register in Europe, positioning itself as a European ship finance platform capable of bridging Chinese capital and western shipping markets, Splash247 reported. For European shipowners, charterers and lenders, the EU flag administration attached to these Chinese-owned vessels provides a framework that addresses compliance exposure concerns while preserving access to Chinese leasing capital. The availability of the FCI adds a statutory recovery route that did not previously exist, reducing reliance on contractual provisions in the event of charterer default.
Watch list
- Whether the US extends additional port fees on China-linked vessels, the factor Splash247 cited for the earlier suspension of Chinese leasing activity with international owners.
- Adoption of Malta's finance charter instrument by more Chinese lessors after the first two registrations.
- The trajectory of the Malta-flagged Chinese-owned fleet, now around 130 ships according to VesselsValue data cited by Splash247.
Sources:
