Hainan is China’s biggest special economic zone and boasts the biggest pilot free trade zone and features strong Chinese characteristics. The building of the Chinese style free trade port is a big project planned, guided, and promoted by General Secretary Xi Jinping in the Country’s reform and opening-up plan and is a strategic implementation made by the Central Committee of the Communist Party of China (CPC) considering the domestic and international situation.
The Masterplan for Hainan Free Trade Port
China passed a law on June 10 relating to the Hainan Free Trade Port, implementing institutional arrangements for the development of the Hainan Free Trade Port at the national legislative level. New laws cover a range of high-level opening-up measures including low tax rates, zero tariffs and a refined and simpler tax system as well as nurturing the business climate and facilitating investments and free trade. The Hainan (FTP) Laws will provide a legal structure to build the free trade port in a structured way. It will develop a law-based administrative department with well-defined functions and duties, as well as defend the rights and interests of foreign and private enterprises, including stimulate the market.
The Hainan (FTP) Law has displayed the country’s determination to develop a (FTP) in Hainan with a focus on openness, making institutional efforts for building a high-quality Free Trade Port at the national legislative level. The new law will boost businesses confidence in foreign investors, having a long-term strategy for their investments in Hainan.
On June 1, 2020, Chinese authorities released the full Plan for the development of the Hainan Free Trade Port otherwise known as “the Masterplan.” It is a big plan to transform the whole island province into a free trade port, making it the biggest special economic zone in China. The Hainan Free Trade Zone will cover the entire province of 35,000 km2 in size and including it’s 9.5 million population, dwarfing regional competitors such as Hong Kong and Singapore on all fronts.
The 6+1+4 policy framework of Hainan Free Trade Port
 – Five aspects of freedom and facilitation+ Safe and Orderly Flow of Data
Trade Freedom and Facilitation
Under the premise of effective regulation, a special zone for customs supervision with independent customs clearance will be established. Institutional arrangements for freedom and facilitation featuring “zero tariff” will be made. For trade in service, Freedom and facilitation policy measures based on “access and permission of operation” will be implemented
Investment Freedom and Facilitation
Efforts will be made to significantly lower market-entry requirements for the Hainan Free Trade Port, Strengthen the protection of intellectual property rights, Guarantee fair competition, create a fair, transparent and predicable investment environment and further stimulate the vitality of all types of market entities.
Free and Convenient Cross-border Capital Flow
Committed to developing finance in a way that serves the real economy, focusing on trade and investment freedom and facilitation, opening-up capital projects on a phased basis, and advancing the free and convenient flow of capital in Hainan Free Trade Port and overseas.
Free and Easy Access for People
Based on the development needs of Hainan Free Trade Port, a wider talent and residence policy will be implemented targeted at high-end industry talents to build a highland of talent agglomeration. Under the premise of effective prevention and control of foreign related potential security risks, a more convenient entry and exit management policy will be implemented.
Free and Convenient Transportation
Efforts will be made to implement a highly free, convenient and opening-up transportation policy, advance the construction of western land and sea new channel international shipping hub and aviation hub, and accelerate the construction on a modern integrated transportation system.
Safe and Orderly Flow of Data
Under the premise of ensuring safe and controllable data flow, we will work to open the data field even wider, make innovationsin the design of safety systems, achieve full convergence of data and foster the development of data economy.
 – Constructing Modern Industrial System
We will work to vigorously develop the tourism, modern service and high-tech industries, continuously consolidate the foundation of real economy and enhance industrial competitiveness
 – Institutional Construction in Four Aspects
A tax system adapted to a high-level free trade port will be established on a gradual basis according to the principle of zero tariff, low tax rate, simplified tax rules, strengthened rule of law and implementation by phases
Every effort will be made to promote the government institutional reform and the transformation of government functions, encourage the application of blockchain and other technology integration to the modernization of governance system and governance capacity, and construct a complete, science-based, standardized and well-functioning free trade port governance system.
Rule of Law System
We will strive to establish a rule of law system for the free trade port based on Hainan Free Trade Port Law, with local laws and regulations and commercial dispute resolution mechanisms as important components, and create a world-class legal environment for the free trade port Risk Prevention and Control System
Effective measures will be developed to guard against and resolve major risks in trade, investment, finance, data
flow, ecology, public health and other fields in a targeted manner
Highlights of Preferential Policies
- Maximum personal income tax of 15% for eligible talents;
- Tax exemptions on imports and sales for overseas exhibits during exhibitions;
- Offshore duty free shopping quota raised to 100,000 yuan ($14,000);
- Categories of duty-free products expanded;
- Corporate income tax of 15% on encouraged industrial enterprises;
- Corporate tax exemptions on certain FDI in tourism, services & high-tech industry.
- Implementing a more convenient visa free entry policy;
- Salary ranges employed as main indices to evaluate talents;
- Negative list management on the issuing of work permits for foreign employees;
- Foreigners are able to serve as legal representatives in public institutions and enterprises.
- Conducting a special list of market access to Hainan FTP;
- Special Administrative Measures for Foreign Investment Access to Hainan Free Trade Port (Negative List)
- Treating domestic and foreign enterprises as equals in government procurement;
- Constructing a negative list of foreign investment access to Hainan FTP;
- Foreign universities with certain specialties to open campuses independently in Hainan;
- Opening up basic telecommunications services in a safe and orderly fashion;
- Conducting cross border asset management services;
- Opening up value added telecommunications services;
- Expanding the scope of cross border asset transfer;
- Removing restrictions on overseas ship and aircraft financing.
- Development Activities
- Building an international aviation hub;
- Building a shipping hub for the New Int’l Land-Sea Trade Corridor;
- Building Yangpu Port into an international port of registry;
- Building a pilot zone for cruise ship tourism;
- Building a pilot zone for the yacht industry;
- Building Hainan into an international Design Island;
- Granting greater autonomy to various industry organizations.
Hainan will develop tourism, modern service and high-tech industries; develop a strong and excellent tropical-style high-efficiency featured agriculture; create globally competitive modern industrial clusters and platforms; move faster to build an open, ecological, and service-oriented modern industrial system; write a new chapter for stellar industry development in the Hainan Free Trade Port.
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