China is ramping up its controversial state-backed funding programme for foreign owners through a $170m financing facility extended to Torm by the Export-Import Bank of China (China Eximbank).

The Danish company is set to use the money to pay for six 53,000-dwt medium-range (MR) products tankers on order at Guangzhou Shipyard.

The move comes on top of a $50m facility extended by the same bank to Montenegro last week to help the country build up its fleet through Chinese newbuildings. Last year, China Eximbank extended $389m to US tanker operator Overseas Shipholding Group (OSG) to fund its newbuildings in the country.

Torm chief executive Mikael Skov says the newly secured funding is part of a Chinese government initiative to boost domestic shipbuilding. "We have our entire newbuilding programme in China and Chinese banks are setting further initiatives to motivate shipbuilding in the country, so it is natural that we have a dialogue with them," he said.

Skov declines to outline the terms of the funding other than to say it is competitive. "We are obviously satisfied with what we have got and it is in line with similar finance we have secured," he told TradeWinds.

However, he says he does not believe the funding represents "soft" government finance.

Torm earlier last year agreed to a 10-year term loan of $167m with a syndicate led by Bank of China and Societe Generale, with risk underwritten by China Export & Credit Insurance Corp for six other MR tankers. Torm now has $337m finance in place to cover 12 MR newbuildings.

State-backed funding for newbuildings has proved controversial during the credit crunch with Europe and Japan calling for governments to outline the extent of their financial support for export contracts.

They want to know if soft funding, at rates below levels that are commercially available, are distorting the market.

As revealed in TradeWinds, China failed to turn up at a recent Organisation for Economic Co-operation and Development (OECD) meeting in Paris where shipbuilding nations were invited to reveal the scope of their export funding. South Korea was criticised for not offering full transparency.

Skov is upbeat about shipbuilding in China and says he has no complaints about quality or service. "We know the shipyard well and we are extremely happy," he concluded.