Earlier last month, at the beginning of June, Beijing officials unveiled the master plan behind the enormous Hainan free trade port. This incredible engineering feat aims to redesign an entire island into what is known as a free trade port (FTP). Many of these zones exist around the world, however, nothing will be able to compete with the size and scale of what China plans for Hainan. By its completion in 2035, it will be the biggest and most trafficked free trade port in all of Asia.
If you're not familiar with Hainan Province, let's discuss its geographical location for a bit. As an island on the southernmost point of China, the landscape is dotted with sandy beaches and resorts. Its strategic location serves to place China at the forefront of relations and interactions with ASEAN nations. This offers China direct access to ASEAN markets and other southeast Asian countries. By incorporating the Hainan FTP into China's Belt and Road Initiative; Hainan stands to become a thriving port island and an integral part of what is being coined the Maritime Silk Road.
So far, the Hainan FTP Master plan has unveiled some pretty amazing special policies. Some of those policies have eliminated import duties, dramatically reduced income tax percentages for high-level individuals, set a limit for corporate tax rates at 15% and significantly reduced visa requirements for tourists and business travelers. These sweeping changes have created an environment where commerce rules and everything else takes a back seat.
Traditionally, Hainan was known for its resorts, beaches and the influx of capital from Chinese and Asian tourists. The recent master plan unveiled by Beijing has essentially diversified the Hainan economy to encompass a wide array of income-generating activities. Furthermore, the Hainan FTP helps establish yet another global trade and investment region in China.
If you happen to belong to an international agency or firm seeking to do business in China, Hainan will offer you tremendously streamlined market access. This will be especially true for the global trade of telecommunications equipment, tourism and education. The free exchange of capital between Hainan and overseas businesses gives the entire world a destination from which to network, connect and grow without the pressure of strict government rules, policies and tariffs. Continue reading to understand how the countdown to Hainan will impact the world.
The Hainan Free Trade Port 2035 countdown begins
The first whisper of the Hainan free trade port was announced in 2017. After submitting their application, the province of Hainan was offered provisional approval in the later months of 2018.
Before the official announcement from Chinese officials, Hainan regulators put forward an astounding plan to convert Hainan into an official medical tourism zone. Medical tourism was already a flourishing industry in the region. With the addition of the Hainan FTP, we can expect even more global tourists from around the world to come seeking tax-free services from board-certified Chinese doctors operating out of Hainan.
This opportunity opens the door for distributors and suppliers of Chinese wholesale medical supplies to find great success in the coming years by implementing a plan to capitalize on the planned expansion.
This 2020 finally delivered a master plan set in stone for how things will move forward in the coming days. With everything set in motion, it seems things are on schedule to become a fully functioning Free Trade Port by 2035.
Stay tuned for more information to be released by Hainan officials. The world is patiently waiting and watching for more information. Those distributors, suppliers, manufacturers and global trade groups that act fast will be among the first to profit from the new expansion.
China free trade port Master plan
China's government has been working hard to establish a free trade port in the nation's Hainan Province by rolling out an area called The Hainan free trade port. This area will be 35,000 square km, the size of the island province, making it the largest free trade port in the area.
By transforming the area into a free trade port, the government should be able to liberalize the flow of investment, capital, trade, transport, personnel and data across the country's borders with its neighboring nations.
The master plan is adhering to a strict, four stage timeline which will help move the development of the area along quickly and efficiently:
Implementations in 2020
Starting in 2020, the Hainan free trade port will become an operable area. On top of that, international openness will improve significantly and trade and investment will be easily facilitated. Plus, there will be increased regulation of the legal environment and financial services will improve. Finally, the ecological environment will improve and the government will commence construction for creating the Free Trade Port
Implementations in 2025
The free trade port network will be totally in place by 2025. The creation of the FTP will also increase the competitiveness of industrial operations and improve control and risk prevention systems. What's more, there will be an ongoing improvement of local regulations and laws surrounding the building of future free trade ports.
Implementations in 2035
2035 will see the Hainan Free Trade Port functioning at a high level. There will be an easy, free and straightforward exchange of people, data and transportation. And China will have established a leading business environment allowing the country to position itself at the forefront of modernization.
The Finishing Touches in 2050
The free trade port will wrap up in 2050 as an established, internationally influential port. The country plans to commence operations in the FTP by 2050, if not sooner, by strictly sticking to the four-stage plan.
Critical Rules & Regulations Investors Need To Know About The Hainan 2035 FTP
Free trade of goods and services
This is by far the most critical feature of the master plan. The establishment of first-line and second-line custom regulations in China has some serious implications. Let dig a bit deeper into that.
Any item coming in from abroad will be automatically labeled first-line. The officials in charge of the Free Trade Port project will be responsible for putting together the list of goods and items free from tariffs as well as those items prohibited from entering into the province.
Although this list has not been created yet, we can expect the catalog to be accompanied by classifications of goods and the sliding scale of import duties if any that accompanies them. Any item not listed is guaranteed to be exempt from any tariffs and therefore can enter and exit the province without restriction.
At this moment, there is no specific catalog of goods to review however, the master plan outlines certain products and categories that will be exempt from import duties, import VAT, and consumption tax:
Mechanical production equipment for enterprise use
Personal luxury vehicles and yachts
Raw imported materials used in production within Hainan
Any items imported for personal use
Products being transported from Hainan to mainland China will be subjected to the normal, already established import regulations and customs duties and taxes.
Conversely, any goods being transported from the mainland, through Hainan and heading back to mainland China will not be subject to customs checks, processing, or additional tariffs. This classification of products will simply need to be loaded and unloaded on the designated areas to be separated and stored with other similar items.
Tax advantages In Hainan
The Chinese government has been devising a strategy to make the Hainan free trade port on par and competitive with Hong Kong and Singapore. Both these regions have enjoyed low tax policies that make the destination an attractive option for foreign investment. Currently, Hong Kong enjoys a 16.5% tax rate and 17% for Singapore. If you compare that against the 25% tax rate of Mainland China for foreign investments, it becomes clear why Hong Kong and Singapore have a clear advantage in attracting foreign investments.
Due to this, any company registered within the Hainan free trade port that meets the requirements set by officials will receive a lowered Corporate Income Tax of 15%. This not only makes it comparable to Hong Kong and Singapore but more favorable. Whether you are in the business of logistics, distribution of Chinese industrial machinery, or something else, you will enjoy favorable rates in Hainan.
This tax advantage doesn't stop at enterprise organizations. It also extends to individuals and caps the Individual Income Tax at 15% compared to 45% that mainland Chinese citizens and residents pay.
These amazing tax advantages are not just given to anyone wishing to transport goods through the Hainan free trade port. These preferential policies have been set in motion to encourage individuals and businesses to plant roots within the province to stimulate long term economic operations. Instead of simply creating a tax haven, Hainan is intended to become a center of commerce and trade rather than a shelter for capital. The world has enough havens for wealthy individuals to protect their assets. Hainan wants to break away from that stigma to create a truly equitable region of economic activity that benefits everyone from workers to businesses to investors as well as mainland Chinese residents.
Relaxing Of Financial Sector Regulation
The new master plan aims to allow Hainan to open up its financial sector for increased foreign investment. This involves opening up the areas of energy production, shipping, property rights, equity and other trading venues. These are sectors that were traditionally reserved for Chinese registered businesses only. However, the new masterplan will allow qualified overseas financial institutions to set up and manage branches within the Hainan free trade port
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This masterplan also includes policies aimed at supporting innovative financial products and services to operate with less restriction. The sectors of tourism, modern services and high-tech industries are highly favored industries where innovative financial products and services are encouraged to operate.
To entice foreign investment in these areas, the Chinese government has announced a new, minimal and streamlined approval process that dramatically relaxes barriers and negatives that previously prevented foreign investments in the region.
An Ongoing Free Exchange of Resources
The beauty behind the Hainan FTP masterplan is that it allows funding to flow across borders so that the government can create even more trading venues. Energy, shipping centers, equities and clearing centers will all be made possible by the creation of this zone.
In addition to physical goods flowing through the port, the Hainan FTP will also make it possible for effective and straightforward logistics to flow in the following ways:
A trial policy creating tax rebates for any goods departing from the Yangpu Port to China
The Hainan FTP port will allow ships and airplanes an opportunity to refuel and restock on supplies as they enter and exit Hainan.
Domestic ships will be eligible for tax rebates as long as they are conducting international transport and are registered at China's Yangpu Port.
There will be slightly eased travel regulations to encourage potential employees to live, work or stay in the free trade area.
For one, the entry-exit bureau will offer salary incentives and improved talent acquisition to bring in quality, capable international employees.
On top of this, the government will implement a negative list system to regulate what foreign personnel are welcomed into the port and are later allowed to leave.
On top of this, the port will allow for a visa-free entry policy so that it is easier for people and resources to come and go through the port.
The Free Trade Port will also assist with data securely flowing through the port by improving the design of local institutions and developing the digital resources and economy in the area.
The government of the Hainan province has plans to implement international data exchange programs that will allow for improved communications and an expanded business landscape.
In conclusion, the Hainan FTP is recognized globally as a new opportunity to create lasting financial legacies and new economic prosperity for all.
