Unique Advantages
[Why choose Hainan]
On June 1, 2020, the CPC Central Committee and the State Council promulgated the Overall Plan for the Construction of Hainan Free Trade Port (hereinafter referred to as the “Overall Plan”) to push ahead with the establishment of the policy framework that is geared to high-level FTP. According to the Overall Plan, China is in an effort to build Hainan FTP into a distinctive flagship and an important gateway that leads China’s opening-up in the new era.
The Overall Plan proposes the development goal in three steps. By 2025, a policy framework for the FTP with emphasis on trade and investment liberalization and facilitation will have been put in place. The business environment will advance to domestic first-class level as we can see substantially growing market players, significantly improved industry competitiveness, and effective risk prevention and control. By 2035, the system and operational mode of the FTP will be more mature, while trade and investment rules featuring freedom, fairness, rule of law, and high-level process supervision will be basically built, and liberalization and facilitation of trade, investment, cross-border capital flows, entry/exit of people, transportation, as well as data transfers in a secure and orderly manner, will be seen. By the middle of this century, a high-level FTP with strong international influence in all aspects will be built.
Besides that, the Overall Plan proposes construction of frameworks for tax preferences, liberalization and facilitation of cross-border capital flows, entry/exit of people, transportation, and development of modern industry system, in order to facilitate the trade of market entities in Hainan FTP, and greatly energize market entities.
On January 1, 2022, the Regional Comprehensive Economic Partnership (RCEP) officially came into effect. RCEP is a series of reciprocal agreements on trade and investment facilitation, tariff preference, and national treatment, etc., which are entered into by 15 countries including 10 member states of ASEAN, China, Japan, South Korea, Australia, and New Zealand through joint consultation. RCEP marks the official launch of the free trade zone with the world largest population, the largest economic and trade scale, and the most development potential, which accordingly brings more opportunities and conveniences for Hainan FTP’s overseas direct investment.
[Geographical Advantages]
Located at the geometric center among South China Economic Circle, Beibu Gulf Economic Circle, ASEAN Economic Circle, and Southeast Asia Economic Circle, Hainan Province is the regional sea transport hub of China that links southeastern coastal areas with ASEAN and Southeast Asia, and serves as a vital opening-up portal toward the Pacific and the Indian Ocean.
Hainan is situated at the southernmost tip of China. Globally, it is right the intermediate node that links China and Southeast Asia, the two most active regions in the world. Departing from Hainan, it takes only 4 hours of flight time to cover 21 countries and regions throughout Asia, equivalent to 47% of the global population and 30% of the global GDP, and it takes 8 hours of flight time to cover 59 countries and regions, equivalent to 67% of the global population and 41% of the global GDP.
● Fulcrum for International Circulation
As the strategic fulcrum for the Belt and Road Initiative and a vital hub for the New Western Land-sea Corridor, Hainan is the Chinese province closest to Southeast Asia, and it is opposite to the Philippines, Indonesia, Brunei, Malaysia, Singapore, Thailand, and Vietnam, etc. across the sea. Since it is located within the 4-hour flight economic circle, Hainan Province boasts the enormous advantages in cooperation with the Southeast Asian regions.
● Fulcrum for Domestic Circulation
Hainan Province is adjacent to the economically developed areas in the Pearl River Delta of China, and located within the 1.5h flight economic circle covering Hong Kong, Macao, Shenzhen, and Guangzhou, thus it’s convenient for Hainan to get supports in capital, technology, and talent. Qiongzhou Strait, with width of 18 miles, is located to the north of Hainan Province and separates Hainan from the Leizhou Peninsula of Guangdong, thus Qiongzhou Strait is reputed as “Sea Corridor” between Hainan Island and the Chinese mainland, and also used as a shipping channel between the Beibu Gulf and the South China Sea.
[Legislative Guide]
● Legislative Guidance
On June 10, 2021, Law of the People's Republic of China on the Hainan Free Trade Port was enacted and put in place, and a batch of supporting laws and regulations were promulgated in succession, for example, Regulations of Hainan Free Trade Port on International Vessels, Regulations of Hainan Free Trade Port on Social Credit, Regulations of Hainan Free Trade Port on Improving Business Environment, Regulations of Hainan Free Trade Port on Fair Competition, etc.
● Reform Autonomy
Hainan FTP is entitled to instituting its laws and regulations on the premise of abiding by provisions of the Constitution, laws, and administrative regulations. Hainan FTP’s laws and regulations may have some changes to provisions of laws and administrative regulations according to Hainan Province’s real conditions.
● Four Highlights of the Law on the Hainan FTP
Persevere in principled and fundamental positioning, focus on basic framework and key system, and stipulate that the State shall establish the leadership mechanism for construction of the Hainan FTP and the administrative management system geared to construction of the Hainan FTP.
The Law on the Hainan FTP sets forth the trade in goods supervision mode featuring “Free flow through the first line and efficient control at the second line”, and manages the cross-border trade in service beyond negative list according to the principle of internal and external consistency.
According to the principle “Streamlined Tax Structure, Zero Tariff, Low Tax Rate”, clarify the requirements about streamlined tax structure when and after closing off of the customs by Hainan FTP, the circumstances for exemption from tariff, tax arrangement for goods entry and exit between Chinese mainland and Hainan FTP, and preferential income tax for qualified enterprises and individuals.
Hainan FTP puts in place the most stringent ecological environment protection system, as well as implements the one-vote veto system for completion of the environmental protection objectives and the lifelong accountability system for damage on ecological environment.
[Special Tax System]
According to different construction stages of Hainan FTP, put in place Zero Tariff, Low Tax Rate, and Streamlined Tax Structure step by step.
Low tariff policy will help Hainan bring in high-quality commodities, and excellent talents and enterprises from abroad. Preferential policies such as zero tariff and low tax rate will cover more comprehensive and specific items. Tax systems such as VAT and consumption tax will be streamlined and consolidated, helping enterprises bring down costs.
● Zero Tariff
Before closing off of customs, imported goods and items under “Zero Tariff” list management will be exempted from import duties, import value-added tax and consumption tax. After closing off of customs and streamlining of the tax structure, the goods excluded in the catalogue of taxable imported goods and allowable for being imported by Hainan FTP are exempted from import tariff.
● Low Tax Rate
Enterprises registered in Hainan FTP that have a practical operational record are entitled to a reduced corporate tax rate of 15%;
For tourism, modern service and high-tech industries, enterprises established in Hainan FTP are entitled to exemption from corporate income tax as regards to their income from newly increased overseas direct investment before year 2025.
Capital expenditures that meet certain requirements are allowed to be fully deducted from the taxable income or to be depreciated and amortized at an accelerated speed in the current accounting period.
High-end talents and highly-demanded talents employed in Hainan FTP are entitled to the personal income tax rate of 15%.
● Streamlined Tax Structure
When the customs is closed off in Hainan Island, value-added tax (VAT), consumption tax, vehicle purchase tax, urban maintenance, construction tax, education surcharges, etc., will be streamlined and consolidated, and sales tax in retail sale will be levied.
For flow of goods from Chinese mainland to Hainan FTP, VAT and consumption tax levied shall be refunded according to relevant provisions of the State Council.
[Important Policies]
● Trade Policies
Hainan has enacted three “Zero Tariff” lists, and dynamically adjusted its “Zero Tariff” policy for raw & auxiliary materials and self-owned production equipment, in order to promote expansion of applicable goods scope and applicable entities. To comply with international high-standard economic and trade rules Hainan has enacted 20 measures, seized opportunities from implementation of Regional Comprehensive Economic Partnership (RCEP), actively aligned it with Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP ), and relaxed some administrative measures for import and export of goods in its pilot project.
● Investment Policies
Hainan has enacted negative list for foreign investment access, relaxed special measures on market access, put in place a batch of key projects such as Hainan Electronic Prescription Center and Hainan International Culture and Art Trading Center, and pushed ahead with implementation of 10-plus approval optimization matters such as right of approval to clinical much-needed drugs and medical instruments other than first-time use, and authority of approving and issuing seed production and operation license. The Catalogue of Hainan Province on Encouraged Industries for Foreign Investment adds 72 items on the basis of the national general catalogue, with total number of items remaining the domestic first place.
● Fiscal and Tax Policies
Hainan has enacted “Two 15%” preferential income tax policy, in addition to other relevant policies, for example, enterprises are exempt from corporate income tax as regards to their income from overseas direct investment, capital expenditures are allowed to be fully deducted from the taxable income or to be depreciated and amortized at an accelerated speed, state-level exhibition’s overseas exhibits are exempt from tax in import and sales, and domestic ships with both domestic and foreign trade goods on board are allowed to refuel with bonded oil.
● Financial Policies
Hainan is embarking on research of the plan for the construction of “Electronic Purse Seine" of capital, and pushing ahead with the establishment of the multi-functional free trade account system;
Hainan Provincial Financial Regulatory Bureau took the lead in enacting the Pilot Measures of Hainan Province on Carrying out QFLP Balance Management System, promoted the opening-up of the financial industry, and served the trade and investment liberalization and facilitation. Hainan Province put QFLP balance management system in trial implementation in Yangpu Economic Development Zone, in order to better bring in foreign capital, to turn Hainan into a gateway from which foreign capital invests in Hainan and in China, and to broaden the cross-border investment and financing channel for foreign capital.
● Shipping and Aerospace Policies
Hainan quickened its pace to build Yangpu-Port-of-China into the port of registry, and has registered a total of 38 international ships, making total tonnage of its international voyage ships ranking 2nd in China. Besides, Hainan stepped up efforts to promote integration of port and shipping in Qiongzhou Strait, and adjusted and optimized the port’s functional layout. Hainan has become China’s only province that takes the initiative to open the 3rd, the 4th, the 5th, and the 7th traffic rights, symbolizing the highest level in opening-up of China’s traffic rights.
● Talent Policies
Hainan has enacted FTP high-level talent classification standard, and creatively pushed ahead with “Two in One” of work permit and residence permit for foreigners.
● Data Transfer
Hainan steadily promoted data sharing, carried out pilot implementation of special cross-border exchange channel in order, advanced international undersea cable construction, explored to establish security management working mechanism for outbound data transfer in the industrial sector, and quickened to pace to propel pilot implementation of international data center for game exporting.