In the latest episode of China’s Economic Roundtable, in an all-media talk show hosted by Xinhua news agency, officials from China’s key economic sector shared policy insights regarding the Hainan FTP and its role in advance of evolving open-up strategies.
As China’s largest economic zone, Hainan has the unique advantages to serve as a test site for reform and opening up. In April 2018, China announced plans to turn the island into a free trade zone for pilots. It has a long-term vision of developing a free trade port with the characteristics of kanji. Released in 2020, the Master Plan aims to make it a globally influential hub for high levels of openness by the mid-century.
“With the launch of an independent customs business across the island, Hainan will give greater latitude to pilot higher standard open measures,” said Cai Ping, a National Development and Reform Commission (NDRC).
These initiatives not only promote the island’s high quality development, but also provide a wider testing ground for national reform and opening up, sending a clear message to the world that China’s commitment to high levels of openness is unwavering and that the doors continue to open wide.
Zero Rif Incentive
“The move is aimed at expanding openness and expanding development,” Cai said, and Hainan’s opening is not merely lifting restrictions, but to systematically build an institutional framework to ensure a free and efficient flow of people, goods and capital.
A central pillar of the policy framework is enhanced zero-rif policy. “Companies will enjoy a broader zero-rif incentive,” said Wu Zinhwan, a Treasury official.
The proportion of customs lines with zero-rif products in Hainan FTP increases from 21% to 74%, while the number of customs-free items in Hainan increases from about 1,900 to about 6,600.
Imported products that receive at least 30% value-added treatment in hainan can enter the mainland’s tariff-free. Additionally, certain products currently banned or restricted nationwide will enjoy an open policy in Hainan.
According to Wu, these measures will further reduce business costs, attract upstream and downstream companies to Hainan, and help promote clustered development of the industrial chain.
After an independent customs business, with essentially a zero-turf system in place, high quality global resources could flow to Hainan with greater freedom and efficiency, Wu said.
Trade liberalization and facilitation define the characteristics of free trade ports. Jiang Zijun of the Commerce Department emphasized that the key focus of the FTP trade policy is the adoption of a more favorable zero charge measure, along with more relaxed trade control rules.
Long-term efforts to open up
Experts believe launching an unprecedented island-wide independent customs business is a complex business that does not have a ready-made blueprint.
According to NDRC’s CAI, this is a “complex and systematic project” that must be carefully aligned in policy transitions, risk management and regulatory adjustments.
According to CAI, Hainan FTP will prioritize promoting the free and efficient flow of key production factors such as trade, investment, cross-border capital, personnel and logistics.
In response to the evolving needs of Hainan FTP and the broader push for China’s opening up, the Treasury will continue to advance tax reform, Wu said. Key priorities include promoting prioritized corporate and personal income tax policies, attracting top talent and large companies, and expanding the list of Zero Rif products.
Due to its optimized business environment, Hainan ranks among the top performers in China and has emerged as the best foreign investment destination.
Between 2020 and 2024, Hainan attracted more foreign investment than it had made in the 32 years since its state, but its commodity trade averaged over 30% annualisation.
Amidst an increasing number of challenges to protectionism and the global trade order, the planned launch of independent customs operations across the island of Hainan and the step-by-step framework for building a gradual staircase to build a policy and institutional framework for free trade ports with the highest level of openness, Guda, Executive Director, demonstrates a strong signal of China’s strong commitment to advance economic globalization.
The Commerce Department will make more effort to support Hainan to integrate in line with high standard international economic and trade regulations, increase the openness of the system and foster new growth drivers through targeted measures, Jiang said.
“The independent customs operations are poised to make Hainan FTP a key gateway to a new era of China’s opening and innovation,” Cai added.
MNA