Since SISC (Shanghai International Shipping Institute) has entered into a new stage of development, it is widely acknowledged as a pressing task to create a better soft environment. Among problems concerned, the drastic decline in registered ships of international voyage has drawn wide attention. As a shipping center in China, Shanghai is to play a pivotal role in leading the reform of ship registration system.

Current Situation
In 2011, as many as 3,701 ships went through registration formalities with Shanghai Maritime Safety Administration. The 2,182 registered ships (2 ships less than in 2010) measured a total of 15,198,917 tons, up 9.1% YoY. Among others, 25 ships were entitled to duty-free entry, measuring 314,357 tons, and 355 ships engaged in international voyage (22 ships more than in 2010), measuring 9,038,451 tons. There were another 990 ships of coastal traffic (51 ships more than in 2010), measuring 5,162,418 tons, and 837 ships of inland river transport (52 ships less than in 2010), measuring 998,048 tons. It is noteworthy that the registered ships entitled to duty-free entry had seen a slight increase of 2 ships to the small sum of 25, indicating that the duty-free policy was less effective than expected.

Existing Problems
At present, the registration services at SISC are pestered by the long-lasting problem that ships tend to change their nationalities abroad and avoid registration at home. China’s ship registration system has embarked on an arduous journey of reform, highlighted by the issuance of the duty-free policy and the ship registration system for Yangshan Bonded Port.

1. Heavy taxation dents the competitiveness of ship registration services in Shanghai
For a long time, China has been levying heavy customs and value-added tax. In 1982, a 9% tariff was imposed on imported ships, followed by a 6% value-added tax in 1985 which grew to 12% in 1988 and further to 17%. After the tax reform in 1994, the sum of imported ship duty and value-added tax accounted for 27.53% of the ship price, in sharp contrast to the duty-free policy of major shipping countries for ships purchased abroad by domestic liners along with the exemption or reduction of value-added tax. The heavy tax burden has put the ships flying the flag of China in a disadvantageous position.

2. Poor financing hinders the development of ship registration services
The loan services for ship building and purchase have been dominated by foreign-funded banks, which is mainly due to the higher interest rate of ship loans than most shipping countries. In addition, China’s banks are lack of special policies and evaluation systems for the funding of shipping industry. As an advanced shipping center in China, Shanghai suffers from limited financing channels, and the small- and medium-sized shipping companies feel the pain to large amount of money for fleet development.

3. Legal and political environment poses negative effect on ship registration
Given the legal and political uncertainties in China, the profits of liners cannot be fully guaranteed. The excessive government intervention has posed some negative effect on ship registration in Shanghai. In comparison with other countries, China’s ship financing system and legal framework are relatively backward, resulting in the lack of confidence among international banks.

Supporting policies
In 2011, the Ministry of Transport formally approved the ship registration services for enterprises registered with Yangshan Bonded Port Zone, which became a new port of registry and the first to run the said business in China. As of July 2012, the port zone had the inaugural registered ship named Guanhai Chaoyang, and the effect of the business remained to be seen. Regions concerned should adjust to the needs of international ship operation and establish an institutional framework as competitive as that of leading countries and regions. The ship registration system for Yangshan Bonded Port may succeed on the condition of favorable environment and policy guidance.