Hainan Free Trade Port

DESTINATION HAINAN

1. A Tropical Island with a Rich Past and a Bright Future

The tropical island of Hainan is found at the southernmost tip of China. Roughly the size of Belgium, its lush forests, vibrant biodiversity, and monsoon rains form a unique part of China’s natural heritage.

Totalling one-third of China’s rainforests, Hainan is a hotspot for fauna and flora with thousands of species of plants and animals living there, including rare endemic species of monkeys, deer, and the Asian bear. The natural wealth of this unique ecosystem is preserved in one of China’s first and largest national parks.

2. A Pioneer in Blue Economy

In addition to its green heritage, the tropical island also intends to become a world-class pioneer in the field of the blue economy, i.e. the sustainable development and management of ocean resources.

Hainan already benefits from its white beaches and clear waters through tourism, but new projects are coming to life from coastal carbon capture projects and the restoration and protection of maritime ecosystems to the development of sustainable fisheries. Thus, the island is turning an emerging concept into vibrant economic opportunities.

3. A Distinct and Diversified Culture

With a population of over 10 million, Hainan is also home to an ancient culture distinct from the mainland.

The Li people have thrived on the island for thousands of years. To the present day, they have maintained their traditions, notably a strong practice of gender equality, atypical architectural constructions, or folk dress and music, which attract millions of tourists from the Chinese mainland and beyond every year.

4. Port Cities: History & Beauty

More than 2000 years ago, Hainan’s city of Sanya was known as “the end of the Earth”. Yet, enjoying a warm climate all year round, Sanya is today famous for its palm trees and beaches, its luxurious hotels, and for being the home of the largest duty-free shopping mall in the world.

Twin city of Cannes, Blackpool, and Cancún, Sanya is the hotbed of Hainan’s growing tourism industry.

Hainan’s capital Haikou was one of the first ports opened to Western merchants in 1858. And still today, the city benefits from its proximity to one of the busiest trade routes in the world.

Its long history as a trading hub and cultural melting pot is showcased in its broad range of architecture, mixing both Western and South-East Asian styles with Chinese and local traditions.

In 2022, the whole island became the largest free trade port in the world with the promise of becoming a central node in global maritime trade routes, as well as one of the drivers of Chinese growth and innovation. The free trade port policy identifies key sectors enjoying lighter and tailored regulations but also reduced taxation and other incentives welcoming foreign talent and capital.

Making the Business Case for Hainan, the World’s Largest Free Trade Port

In 2022, the island of Hainan became the largest free trade port in the world and constitutes a key pilot project in China’s national « opening up » policy which aims at trade and investment liberalisation.

The Hainan Free Trade Port is founded on 6 key pillars:

Free Trade

A competitive entry point into China’s mainland markets:

Free trade both in goods and services between Hainan and the rest of the world with the establishment of a special customs supervision zone
Zero-tariff trade policy for a wide range of goods (e.g. equipment used by Hainan-based companies, yachts, vehicles, raw materials, …) not falling within a limited catalog of goods
Full establishment of the zero-tariff regime by 2025
Reduced tariffs on more than 12,000 categories of goods (notably electromechanical, textile, pharmaceutical and chemical products)
Cargos transporting goods included in the selected categories are exempted from routine inspections
Goods flowing from Hainan into China’s mainland are exempted from import tariffs if at least 30% of their value is added to Hainan island
Expanded and equal access in service sector procurement for foreign investors, manufacturers and service providers
Simplified administrative procedures across the board

Investment Liberalisation

China’s most open and welcoming market on a number of dimensions:

Expanded market access for foreign investors in priority sectors (further details below)
Equal treatment of foreign and domestic companies in administrative procedures, government procurement, standard setting, permit issuance, business operations, …
Application of competition and anti-monopoly laws
Enforcement of property laws, notably intellectual
Qualified individuals benefit from a reduced 15% income tax rate
Comprehensive simplification of the tax framework as a whole

Table retrieved from: Expanding Your Business into Asia: Why Location Analysis is Key – Fiducia Management Consultants (fiducia-china.com)

Free Cross-Border Capital Flows

An offshore financial center in-the-making that will gradually enable the free flow of capital between Hainan and the rest of the world by:

Opening China’s financial sector to international actors, notably through an expanded scope of use of foreign capital
Supporting the establishment of trading venues and settlement centres in the fields of energy, shipping, property rights, equity management, …
Supporting the development of real estate investment trusts
Facilitating foreign debt fund exchanges
Facilitating trade settlements by allowing for post-operation authenticity checks
Launching a distinctive multi-functional free trade account system
Developing new forms of cross-border investment and asset management

Free Movement of People

A top destination for domestic visitors with unique attractions for international talents and tourists through:

Gradually implementing a visa-free entry policy
Facilitating the issuance of work permits for foreign talents in strategic sectors linked to high-tech industries, modern services, and tourism
Enabling convenient access to the island for yachts and cruises
Allowing foreign personnel to work as legal representatives in public institutions and state-owned enterprises

Building a Global Transportation Hub

A transportation hub of world-class proportions through:

Supporting ship registrations in Hainan’s port of Yangpu
Increasing shipping and flight routes
Easing airspace controls and airway rights restrictions
Facilitating financing for the shipping and aerospace industries, notably by lifting restrictions on foreign investment in these sectors

Open and Secure Data Flows

A digital environment fostering a secure and innovative high tech economy:

Data openness will be expanded
Innovation in system security design will be promoted
Equity ratios for foreign companies in value-added telecommunication services will be lifted