Capital markets may anchor weak sector

Industry insiders have realized that support from capital markets will be key to the restructuring and reinvigoration of the Chinese yacht industry.

Fu Yuanzhuang, director of the Hainan Yachting Association, said that the yacht industry is made up of many interlinked processes from boat design and shipbuilding to the construction of peripheral facilities and sales.

By introducing creative financial products catering to these different parts of the yacht business, the industry will be able to enjoy more sustained growth.

The Hainan branch of the Industrial and Commercial Bank of China did just that when it introduced the personal yacht loan in September 2015. With this, the maximum amount of a single loan is 5 million yuan ($721,500), with the longest loan term being 10 years. The loan can be used to buy yachts sold by manufacturers or dealers, and yacht berths sold by yacht service providers.

Similarly, Shenzhen-based Sunfo Financial Services Co Ltd started to provide yacht loans in October. Mainly targeting the smaller boats priced at around 1 million yuan each, the company allows buyers to pay 50 percent of the total price to obtain ownership of the boat. The interested buyer will first make a loan request to Sunfo Financial. As the intermediary agent, Sunfo Financial will then seek a public fundraising for this loan request.

Yan Changshi, vice-president of Sunfo Capital Management Group, parent company of Sunfo Financial said, yacht consumption is in the early stage in China. There is hardly any bubble in the market and so the risk is lower.

Meanwhile, there are very clear rules for yacht berthing. There is little chance that the buyer will abscond with the boat, so the risk of default will be lower.

“The people who can afford yachts are mainly those with high personal wealth, high repayment ability and good credit, all strong support for yacht loans,” said Yan.

Seeking capital from the stock market is a more direct way. By 2016, there were four yacht companies that listed on the National Equities Exchange and Quotations.

Although the market is sluggish in general, these listed companies managed rapid growth.

The total net assets attributable to shareholders of Nantong Suma Ship Equipment Manufacturing Co Ltd, which went public in March 2016, reached 12 million yuan in the first half of 2016. Fujian Yihong Yacht Co Ltd, which went public in February 2016, saw its sales in the first half of 2016 reach more than 69 million yuan, up 3.32 percent year-on-year.

Yang Baomin, a senior member of the China Commercial Real Estate Association, said: “The yacht industry should receive more attention from capital markets.”

The people who can afford yachts are mainly those with high personal wealth.”

Yan Changshi, VP of Sunfo Capital Management Group