Shipping Companies Leave Hong Kong to Reduce Trade Risks with China

Shipping companies have reduced their activities in Hong Kong in order to reduce risks due to worries about US-China trade tensions.

According to six shipping executives, some shipping companies are secretly relocating their operations out of Hong Kong and taking their vessels off its flag registry, while others are preparing to do the same.

These covert actions are a response to worries that, should tensions between Beijing and Washington worsen, ships would be taken over by Chinese authorities or subject to US penalties. According to industry insiders, the sector is experiencing instability as a result of Beijing’s emphasis on Hong Kong’s role in national security and growing US surveillance of China’s commercial fleet, particularly in the event of a future military crisis like that over Taiwan.

In an effort to combat what it called China’s “targeted dominance” in shipbuilding and marine logistics, the US Trade Representative’s office last month suggested charging high port fees to Chinese shipping companies and operators of Chinese-built ships. Washington, meantime, has alerted US companies to the growing operating dangers in Hong Kong, where authorities engaged in a security crackdown are already subject to US penalties.

Hong Kong has been a major hub for shipowners and the insurance, legal, and financial institutions that support them for more than a century. According to official figures, the city’s port and maritime sector generated 4.2% of its GDP in 2022. According to Vessels Value, a subsidiary of the nautical data business Veson Nautical, the Hong Kong flag is still the eighth most commonly flown by ships globally.

Interviews with two dozen industry professionals, such as shipping executives, insurers, and attorneys acquainted with Hong Kong’s marine business, however, show escalating concerns that commercial shipping would get caught up in a dispute between the US and China. Many point to China’s increased emphasis on national security, ongoing trade conflicts, and the extensive emergency powers given to the leader of Hong Kong, who is backed by Beijing, to seize control of shipping assets if needed.

Speaking anonymously because of the delicate nature of the situation, one executive stated, “We don’t want to be in a position where China comes knocking, wanting our ships, and the US is targeting us on the other side.”

It has never before been documented how concerned shipowners are and how they are working to limit their exposure to Hong Kong. As tensions between the two biggest economies in the world have increased and security measures in the Chinese-ruled city have been tightened, there has been an increase in the sense of risk in recent years.

To comply with international safety and environmental regulations, all commercial vessels must be registered, or flagged, under a particular nation or authority. According to independent analysis by Vessels Value, the number of oceangoing boats flagged in Hong Kong has decreased by more than 8%, from 2,580 four years ago to 2,366 in January, despite an increase in Chinese-operated ships being added to the city’s registry. Data from the government shows a comparable decline.