Managers of shipping companies appear generally content to let the central
government promote the shipbuilding/shipping industry at the broad policy level.
Yet, like the state oil companies, they may resist government meddling in their
daily operations. If the economic returns from other common tanker market prac-
tices—such as chartering tankers out to national and private operators worldwide
—trump those of pooling up and serving the Chinese national oil companies,
shippers will favor the more profitable approach. Similarly, if the national energy
companies find it easier or more cost-effective to have foreign tanker operators
haul their oil, they may oppose a forced marriage with Chinese oil shipping firms.
Chinese analysts lament the lack of coordination between state energy produc-
ers and state energy shippers.^17 However, the Chinese government will probably
have to give Chinese tanker owners economic incentives such as low-interest loans
and/or tax breaks to entice them to work more closely with China’s national
energy companies. At present, an estimated 90 percent of China’s oil shipping
capacity, or more than 10.8 million DWT, is serving foreign clients.^18 It is likely
that this is driven largely by the fact that the shippers realize the greatest profits
by evaluating business on its commercial rather than political merits.
Several Chinese shipping firms, all of which either specialize in energy ship-
ping or have substantial positions in the business, have held IPOs (initial public
offerings of stock) within the past three years. This may be regarded as yet
another indicator of the fundamentally commercial character of Chinese firms’
energy shipping operations. Table 6.1 shows major Chinese energy shipping
IPOs over the past three years. Much of the global shipping IPO activity of the
past two years has occurred in the dry-bulk sector, but strong tanker markets have
driven a number of energy shipping offerings as well. It appears unlikely that
Chinese firms (particularly state-owned enterprises) will sell controlling shares.
Rather, they will sell minority stakes to raise cash while still retaining full control.
Shipping Sector Parallels with Oil Company/Central
Government Relations
Understanding the relationships between China’s national energy companies
and the government will help elucidate how relations between tanker operators
and the central government may unfold. Erica Downs of the Brookings
An Oil Armada? 115Table 6.1 Chinese Energy Shipping IPOs
Company Amount Raised Date Exchange
China Merchants Energy Shipping $727 million November 2006 Shanghai
China COSCO Holdings $1.22 billion June 2005 Hong KongSource:Lloyd’s Sea-Web.