China will offer a tax holiday to entice Chinese-owned, foreign-flagged ships to switch to carrying the Chinese flag, as a rising number of such ships in Chinese waters complicates rescue and maritime procedures.
The offer could potentially expand the tonnage sailing under the Chinese flag by 16 percent and simplify maritime authorities' jobs in case of accidents and collisions in Chinese waters.
Ships will be exempt from value added tax on imports and tariffs for two years if they register in Shanghai, Tianjin or Dalian starting from July 1, Xu Zuyuan, vice minister of Communications, told a press conference on Tuesday.
"The flagging out of Chinese-owned vessels has negative impacts on the healthy development of the country's shipping industry and national economic security," the State Council's press office said.
"It affects the control of the country over the safety of the vessels, induces sub-standard shipping and poses potential risks, and is also detrimental to the protection of the legitimate rights and interests of Chinese seafarers."
In May, a Chinese operated freighter sailing under the flag of St. Vincent and the Grenadines collided with a South Korean vessel in fog in the Yellow Sea, sinking the South Korean Golden Rose. Sixteen sailors from South Korea, Myanmar and Indonesia drowned.
Relatives of missing South Koreans said a slow Chinese reaction may have cost lives, and the Chinese ship was accused of fleeing the accident and failing to quickly report it.
Because the Chinese vessel had a foreign flag, Chinese authorities had to work with St Vincent and South Korean authorities during the rescue and investigation, Xu said. China's ocean-going fleet consists of 1,920 vessels with a total 24.58 million dead-weight tonnes, Xu said. The policy could increase the ocean-going fleet's capacity by another 4 million dead-weight tonnes, he estimated.
China intends to improve its water transport safety capacity through 2020, in order to be able to conduct rescues more quickly and better cope with oil spills, the Ministry of Communications said. One weak point is the Taiwan Straits, where about one-sixt.