In April 2018, China announced the decision to support the southern province of Hainan in developing the whole island into a pilot free trade zone and gradually exploring and steadily promoting the establishment of a free trade port (FTP) with Chinese characteristics.
Five years on, the construction of the Hainan FTP has achieved fruitful results and significantly boosted the development of the province.
Hainan’s GDP expanded 5.3 percent annually on average in the past five years, while the province’s trade in goods and services surged 23.4 percent and 17.7 percent each year averagely during the same period.
Hainan’s total foreign trade accounted for 34.7 percent of its GDP last year, up 15 percentage points in five years. Besides, it’s actual use of foreign capital doubled for three consecutive years in 2018, 2019 and 2020, and the five-year total exceeds the sum of the previous 30 years.
The Yangpu international container port at Yangpu economic development zone, Hainan province, has opened 40 domestic and international sea routes. Last year, the port handled nearly 1.77 million twenty-foot equivalent units, a year-on-year increase of 34.06 percent.
Tourism, modern services, high technology and high-efficiency agriculture with tropical characteristics, which are four leading industries of Hainan province, now make up 70 percent of the province’s GDP, up from 53 percent five years ago. In 2022, 13 key industrial parks in the Hainan FTP reported revenue of over 1.8 trillion yuan ($262.05 billion), 31.6 percent more from a year ago.
Hainan has become an engine that forcefully drives consumption. Sales of offshore duty-free shops in the province have exceeded 130 billion yuan in the past five years; the Boao Lecheng International Medical Tourism Pilot Zone, a cluster of industries of international medical tourism, has introduced and employed more than 300 types of drugs and medical equipment; six Sino-foreign education joint ventures and projects have been officially approved and kicked off in the Hainan Li’an International Education Innovation Pilot Zone.
Over the past five years, Hainan province has vigorously optimized its business environment, making it law-based, internationalized and business-friendly, as well as fair, transparent and expectable, which offers important support for the construction of the Hainan FTP.
Hainan has introduced more than 180 policies to optimize its business environment, including exempting tariffs for imported raw materials, transportation vehicles, yachts and self-use production equipment, lowering the income tax rate to 15 percent for eligible companies, capping the personal income tax rate at 15 percent for individuals with high-level and in-demand expertise working in Hainan, and exempting tariff for domestic sales of goods with added value. The province’s foreign investment negative list contains only 27 items, the shortest in the country.
As Hainan’s business environment continues to be optimized, the province has become a hot destination for business entities. It is reported that the number of newly established business entities in the province in the past five years is more than the total of the past three decades.
“Our trade volume increased significantly last year, with more types of products being exported. Our business has been expanded to South Korea, Malaysia, Indonesia and other countries,” said Li Xiaotao, general manager of a foreign trade company in Hainan.
Li’s company received its first Certificate of Origin under the Regional Comprehensive Economic Partnership (RCEP) on the day that the trade pact went into force on Jan. 1, 2022. Thanks to the certificate, the company enjoyed zero tariff treatment for a batch of aluminum sulfate products exported to Japan.
At present, Hainan province is enjoying the dividends from both the RCEP and FTP policies. Last year, the province’s trade volume with RCEP members grew 23.7 percent to reach 71.18 billion yuan, accounting for 35.4 percent of Hainan’s total foreign trade in the same period.
On Jan. 6, the first project for independent customs operations in Hainan province was completed at the Boao airport in Qionghai, Hainan.
Projects for independent customs operations are iconic and fundamental projects for the construction of the Hainan FTP. According to an overall plan on the construction of the FTP, before 2025, the province, centering on trade and investment liberalization and facilitation, and based on effective supervision, will take systematic steps to advance opening-up process, facilitate the convenient and efficient flow of various factors, achieve early harvest, and initiate independent customs operations throughout Hainan Island in due courses. So far, Hainan has comprehensively kicked off the preparations for independent customs operations.
The projects for Independent customs operations would turn Hainan province into a region inside the national border but outside the customs territory of China, which will further highlight freedom and facilitation, said Liu Feng, director of the Research Center for Free Trade Port with Chinese Characteristics of Hainan Normal University. According to him, independent customs operations will maximumly optimize the resource allocation for the Hainan FTP.
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