Shipping firms pull back from Hong Kong to skirt US-China risks

HONG KONG/LONDON, March 6 (Reuters) - Some shipping companies are discreetly moving operations out of Hong Kong and taking vessels off its flag registry. Others are making contingency plans to do so.

Behind these low-profile moves, six shipping executives said, lie concerns that their ships could be commandeered by Chinese authorities or hit with U.S. sanctions in a conflict between Beijing and Washington.

Beijing's emphasis on the role of Hong Kong in serving Chinese security interests and growing U.S. scrutiny of the importance of China's commercial fleet in a possible military clash, such as over Taiwan, are causing unease across the industry, the people told Reuters.

The U.S. Trade Representative's office last month proposed levying steep U.S. port fees on Chinese shipping companies and others that operate Chinese-built vessels, to counter China's "targeted dominance" of shipbuilding and maritime logistics.

Washington in September warned American businesses about growing risks of operating in Hong Kong, where the U.S. already applies sanctions against officials involved in a security crackdown.

Hong Kong for more than a century has been a hub for shipowners and the brokers, financiers, underwriters and lawyers supporting them. Its maritime and port industry accounted for 4.2% of GDP in 2022, official data show.

The city's flag is the eighth most-flown by ships worldwide, according to VesselsValue, a subsidiary of maritime data group Veson Nautical.

Reuters interviews with two dozen people, including shipping executives, insurers and lawyers familiar with Hong Kong, revealed growing concern that commercial maritime operations could be ensnared by forces beyond their control in a U.S.-China military clash.

Many pointed to China's intensified focus on national security objectives; trade frictions; and the broad powers of Hong Kong's leader, who is accountable to Beijing, to seize control of shipping in an emergency.

"We don't want to be in a position where China comes knocking, wanting our ships, and the U.S. is targeting us on the other side," said one executive, who like others was granted anonymity to discuss a sensitive issue.

The concerns of shipowners and their actions to curb exposure to Hong Kong have not been previously reported. The perceptions of risk have grown in recent years, coinciding with a tightening security climate in the Chinese-ruled city and tensions between the world's two largest economies.

Commercial ships must be registered, or flagged, with a particular country or jurisdiction to comply with safety and environmental rules.

Despite an influx of Chinese-operated ships onto Hong Kong's registry, the number of oceangoing vessels flagged in the city fell more than 8% to 2,366 in January from 2,580 four years earlier, according to independent analysis by VesselsValue. Government data show a similar drop.

Among the ships that left Hong Kong's registry, 74 re-flagged to Singapore and Marshall Islands in 2023 and 2024, chiefly dry-bulk carriers designed to transport commodities such as coal, iron ore and grain. Some 15 tankers and seven container ships separately left the Hong Kong registry for those flags, according to VesselsValue.

The outflow of ships since 2021 marks a reversal for Hong Kong's registry, which official data show grew roughly 400% in two decades following 1997.

In response to Reuters questions, Hong Kong's government said it was natural for shipping companies to review operations given changing geopolitical and trade circumstances, and normal for the number of ships on registries to fluctuate in the short term.

Hong Kong would "continue to excel as a prominent international shipping centre", a spokesperson said, outlining a range of incentives for shipown...
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