PRC’s Government recently announced a number of special measures aimed at further relaxing market access in the Hainan Free Trade Port.
New measures include supporting online sales of prescription drugs, helping the island develop an online games sector, exploring the delegation of the approval of online games to Hainan, supporting Hainan in building charging stations for new energy vehicles and pressing ahead with autonomous driving technologies and boosting the innovative development of homegrown high-end medical equipment.
China rolled out 22 measures to facilitate the free flow of key production factors and cultivate industries with comparative advantages internationally, according to a document jointly released by the National Development and Reform Commission and the Ministry of Commerce last June.
The plan included incentives such as exemption of over 30% VAT tax for products processed in Hainan. The island residents would enjoy duty-free purchases and tourists will be allowed to acquire duty free products in Hainan valued at 100,000 yuan per year. Going further, the incentives included corporate and individual income taxes at no more than 15% for businesses registered in Hainan province and people working in the island.
“Facing a complicated and grim international situation, China chooses to not shut its doors but open up wider to the outside, which will help inject new impetus to global economic recovery,” Cui Weijie, Director of the Institute of Industry Development and Strategy under the Chinese Academy of International Trade and Economic Cooperation said.
Fueled by a package of preferential government policies, foreign investment in Hainan amounted to $3Bn last year against the $1.5Bn attracted in 2019, according to the Hainan Provincial Commerce Department.
Around 249 projects have already started off construction in Hainan this year totalling an investment of 70.8Bn yuan.
Hainan’s area is over 40 times larger than that of Hong Kong, 30 times larger than Singapore, and 14 times the total area of the other 20 free trade zones in China all together.
The move is part of the Government’s ongoing efforts to build a testing ground for reforms and pursuing opening-up at higher levels. It is also intended to help build Hainan Island into an internationally influential and high-quality free trade port, which will serve as a new growth engine for both the national and the global economy.
The plan: replicating Hainan’s free trade port model to other locations in China
Xu Shanchang, director of the NDRC’s Department of Economic System Reform, said the new measures have demonstrated the country’s firm determination to deepen reforms and open up wider to the outside world.
“The new document will help fully spur the vitality of market entities, … attract global capital and talent as well as accelerate the technology push,” Xu added. “It is also a key move to help further shortening the nationwide negative list for market access.
“Once tested and proved to be effective in Hainan Island, some measures will be applied nationwide with a new, shortened negative list.”
Eyeing an attractive free trade zone in Hainan by 2025
Cui Weijie, Director of the Institute of Industry Development and Strategy under the Chinese Academy of International Trade and Economic Cooperation, said the new measures mark the government’s latest move to implement the master plan released in June on building a high-quality free trade port in Hainan province.
The plan aims to establish a basic free trade port policy system with a key focus on enhancing free trade and investment by 2025.
Cui highlighted measures supporting tourism, modern services and high-tech sectors, saying those measures will help foster high-quality development in Hainan and build it into a model for economic transformation and opening-up nationwide.
Opening plan dating back to 2018
The development of the project was part of a host of measures announced by President Xi Jinping at a grand gathering in Haikou, the provincial capital, on April 13, 2018, to mark the 30th anniversary of the establishment of the province and the Hainan Special Economic Zone.
Xi, who is also general secretary of the Communist Party of China Central Committee, highlighted the importance of focusing on institutional innovation, offering the free trade port greater autonomy in reform and opening-up key sectors such as healthcare, education, telecommunications, the internet, culture and aviation.
The latest master plan for Hainan Free Trade Port was unveiled in June 2020.