On January 27, 2014, China’s Ministry of Transport announced the Trial Implementing Measures for Increasing the Proportion of Foreign Investment in International Shipping and International Ship Management in the Free Trade Zone (the Decree), which became effective immediately.
Foreign investors have been permitted to establish Sino-foreign shipping businesses in China since 2001 by establishing joint ventures with Chinese partners. However, these were subject to a 49% foreign ownership cap. Under the Decree, these businesses (i.e., serving international ports from China) can now be incorporated in the Shanghai Free Trade Zone (FTZ) without any restriction on foreign ownership.
Furthermore, the Decree permits the chairman and general manager of such businesses to be appointed by either party instead of by the Chinese partner as previously required.
The Decree also allows foreign investors to establish both wholly foreign-owned and joint venture international ship management businesses in the FTZ. Outside of the FTZ, such businesses must still be in the form of joint ventures.
Such incremental changes as these can hardly be regarded as bold reform, but do reflect the Chinese government’s eagerness to attract more foreign capital and know-how into its hidebound shipping industry.
