Hainan Free Trade Port to serve as new growth engine

Master blueprint sets out detailed measures to ensure island's success in the future

China has put together a package of preferential policies to help build Hainan into a free trade port, which will serve as a new growth engine for the nation and the global economy, officials and experts said on Monday.

A master plan for the Hainan Free Trade Port was released by Chinese authorities on June 1, aiming to build the southern island into a globally influential high-level free trade port that embodies Chinese characteristics by the middle of this century.

Building the Hainan Free Trade Port is of vital importance for pursuing an open economy, deepening market-based reform and improving the business environment. It is also a strategic choice for advancing high-quality development and concrete action to support economic globalization and building a community of a shared future for humanity, according to the mega-plan.

The plan said that during its development, the port will draw on advanced experience to form an internationally competitive opening-up policy system. It will forge itself into a frontier zone that can integrate China into the global economic system while conforming to Hainan's orientation and sticking to bottomline thinking and management.

In April 2018, China announced plans to build a pilot free trade zone covering the whole of Hainan Island－which is 35,400 square kilometers or 32 times the size of Hong Kong－and explore the establishment of a free trade port with Chinese characteristics.

At a news conference in Beijing on Monday, officials explaining the master plan said that the country will build a high-quality free port in Hainan province in steps and phases.

An official from the National Development and Reform Commission said at the news conference that the first phase of the government's master plan is to be completed in 2025, with a focus on liberalization and aiding trade and investment.

"We will make a big push to boost the free and efficient flow of various production factors and strive to make breakthroughs in around three years, which will lay a solid foundation for the islandwide special customs clearance operation," he said.

The second phase will focus on further optimizing opening-up policies and relevant institutional arrangements. By 2035, high-level process supervision will be constructed to achieve free trade and investment facilities, free cross-border capital flows, free and convenient transport and access for people, and safe and orderly flow of data, according to the mega-plan for the Hainan Free Trade Port.

By then, Hainan will become a new hub of China's open economy, with its business environment more optimized, the laws and regulations system improved, the risk prevention and control system more stringent, and the modern social governance pattern established, said the official.

China will take orderly measures in cutting tariffs and removing non-tariff barriers, such as permits and quotas, to enhance trade liberalization at the Hainan free trade port, according to officials at the news conference.

An official from the Ministry of Commerce noted that China will make a pioneering negative list for cross-border service trade in Hainan free trade port in 2020, to facilitate cross-border delivery and the flow of people. Cross-border service trade not on the list will be granted free entry to the port.

Measures that center on zero tariffs on goods to enable the free flow of trade will be introduced in steps and phases, according to an official from the Ministry of Finance.

"Before the islandwide customs clearance operation in 2025, some imported goods are exempt from import duty, value-added tax and consumption tax, including production equipment for enterprises' own use and qualified transport and tourism vehicles, raw and auxiliary materials and consumer goods for the island," said the official.

"Import duties will be exempt on all imported goods other than those listed in the catalog of imported taxable commodities after 2025," the official added.

The official said the Hainan Free Trade Port will substantially relax the limitations on duty-free shopping with quotas to be raised from 30,000 yuan to 100,000 yuan ($4,240 to $14,130) per person a year. The 38 categories of duty-free commodities will be further expanded, and administration will be optimized to offer greater convenience to customers.

China launched the pilot offshore duty-free program 2011 in Hainan, in an effort to make the island a world-class tourist destination. Duty-free sales have raked in 55.07 billion yuan in the past nine years as the island received more than 16.09 million customers and sold over 72 million duty-free items, according to Haikou Customs.

The Hainan Free Trade Port plan also includes a positive list of duty-free commodities for Hainan residents, which means local residents will enjoy cost-effective and high-quality imported goods in the future, said the official from the Ministry of Finance.

Hainan FTP will establish a zero-tariff negative list and three positive lists, with a focus on supporting high-tech, environmental protection and specialty industries. More efforts will be made to gradually shorten the negative list and expand positive lists in the future, said the official from the Ministry of Finance.

An official from the People's Bank of China said the government will encourage commercial banks and other financial institutions to develop capabilities suitable for an open economy and support global exchanges for energy, shipping and bulk commodities.

Market entities, meanwhile, will enjoy benefits in investment, tax and market access when doing business at Hainan FTP. License application and government approval will only be required for industries that are prohibited by law or mandatory standards, according to the master plan.

Foreign investment will be subject to an administrative system that combines pre-establishment national treatment and a negative list designated for the free trade port. This further reduces restrictions and prohibitions on the basis of free trade zones.

The master plan also envisions grasping opportunities in the technological and industrial revolution, focusing on tourism, modern services and high-tech industries to foster new competitive edges for the island.

Given that a market access list has been specially designed－the first of its kind across the country－to boost the growth of the Hainan FTP, Hainan is expected to attract global companies from logistics, civil aviation, medical tourism, shipping, financial and service sectors to invest and expand their presence in its market, experts said.

Liu Cigui, Party secretary of Hainan province, said that Hainan welcomes all investors from home and abroad and will build a people-centered free trade port.

"We should not only make the people of Hainan feel a strong sense of gain and happiness, but also ensure the people of the whole country, as well as enterprises and talents from all over the world who have and will come to Hainan, to share the dividends of the development of the Hainan Free Trade Port," he said.