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Opinion | Hainan Free-Trade Port, China's gateway to the global market in the 21st century

By Augustus K. Yeung

Introduction

While there is war in Eastern Europe, there will be peace in Hainan, situated close to the South China Sea, and not far away from the South Pacific.

While the American leader is fueling fire in Ukraine, the Chinese leader may be sowing seeds of peace --for a peaceful unification between Beijing and Taipei. This may be my wishful thinking.

While the world economy and food security may very likely be in great danger of being thrown into chaos, this piece of good news comes as a tremendous comfort and a source of hope for the Chinese.

As a Chinese national, this is by far my best invitation to sociological imagination: From now on, I am deeply convinced that the nation's reunification dream with Taiwan is in the air, about to be fulfilled, before I go to see my maker.

Here is What the Reporter Has to Say about the Good Tidings

China is inching closer to implementing an independent customs system on Hainan by 2025, with President Xi Jinping saying during a trip to the island province this week the regime must be in place as "scheduled", reports Frank Tang for the Post. ("XI GIVES PUSH TO HAINAN FREE-TRADE PORT PLAN". South China Morning Post. Saturday, April 16, 2022)

The plan to introduce a separate customs zone is part of a government blueprint to transform Hainan into the world's largest free-trade port, creating a center for offshore financing and duty-free shopping that will lure tourists and businesses with a competitive tax regime and relaxed visa requirements.

Beijing has high hopes the transformation will boost domestic consumption – a key part of the new "dual circulation" economic strategy – and make the island competitive with the likes of Hong Kong and Singapore.

Hainan was Earmarked to Showcase the Nation's Economic Opening

"The free-trade port is a complicated, systematic project…It will be long-term work," Xi said during a field visit on Wednesday. However, he added that the province must be "sealed off for [independent customs] operations as scheduled".

Hainan was earmarked four years ago to showcase the country's economic opening.

Authorities passed legislation in June last year that will remodel the 35,000 sq km island into a free-trade port by 2035. To attract talent and financing, the province of 9.5 million people has reduced its income tax rate for selected individuals and companies to 15 percent, far lower than the mainland and closer to the average 17 percent in Hong Kong.

The island will focus on liberalizing trade and investment by aiding the free, orderly, safe and convenient flow of production and establishing a modern industrial system, according to a new investment guide released on Wednesday by the Hainan commerce department and multinational accounting and advisory firm Deloitte.

"The year of 2022 is a crucial year for Hainan free-trade port and a key preparation period for independent customs operations across the whole island," the guide said.

Some 25 sectors will be given special treatment, including international tourism, duty-free shopping, finance, conferences and exhibitions, international education, healthcare, the digital economy, ocean research and aerospace.

Will Hainan Relax Restrictions on Horse Racing, Gambling, Free Flow of Capital and Information?

There has been speculation Hainan will relax restrictions on horse racing, gambling and the free flow of capital and information, which would underline its determination to challenge Hong Kong as an international financial center and gateway for foreign investment to the mainland.

Xi said China's economic opening needed to be "bigger in scope and depth", while highlighting the role that tourism, modern services, hi-tech industries and tropical agriculture could play.

But he also said the "correct political direction" must be firmly upheld, including the socialist system and party leadership.

"We must…insist on national security, strengthen risk identification and prevention, and coordinate reform, development and stability," he told state media.

The province registered 1,936 new foreign-invested enterprises last year, up 92.6 percent year on year. But the amount of utilized foreign capital was US$3.5 billion in 2021, accounting for only 2 percent of the national total. Foreign trade was valued at 147.7 billion yuan (HK$181 billion) last year, 0.4 percent of the national size.

Comparatively, Hong Kong accounted for more than half of China's accumulative foreign direct investment and about 6 percent of its annual trade value.

What Do Experts Say about the Hainan Free-Trade Port Plan?

He Weiwen, a senior fellow with the Centre for China and Globalization, said Beijing's push to turn Hainan into a commercial hub was not designed to cast Hong Kong aside.

"The status of Hong Kong has not been decided by administrative regulations, but formed by history and through market forces. Although the impact on the city needs to be further observed, these regions are not against each other, but have room to cooperate," he said, citing the example of Shanghai and Hong Kong, which are both international financial centers.

"Hainan is of strategic, not solely economic, consideration because China needs a gateway to the global market," he said.

"From a trade perspective, its development still relies on local industries and supply chains," reports Frank Tang. ("XI GIVES PUSH TO HAINAN FREE-TRADE PORT PLAN". South China Morning Post. Saturday, April 16, 2022)

Conclusion

We now know President Xi intends Hainan to be the 'bigger' opening of the nation's economy: There is the liberate talk that the island will feature more expansive commercial, gaming and sporting activities, including gambling, horse-racing, etc.

Xi also expressed his concerns about the security of the Hainan Free-Trade Port, the word "security" reminiscent of the sensitive situation in Taiwan, a stone's throw away.

If my hunch is right, this is by far the best design for fulfilling our country's dream of national reunification as it looks much more attractive than the privileges the central government has to offer Hong Kong, Shanghai and Shenzhen.

Hail Hainan!

 

The author is a freelance writer; formerly Adjunct Lecturer, taught MBA Philosophy of Management, and International Strategy, and online columnist of 3-D Corner (HKU SPACE), University of Hong Kong.

The views do not necessarily reflect those of DotDotNews.

Read more articles by Augustus K. Yeung:

Opinion | Mr. President, do you hear mothers of starving children crying in Africa?

Opinion | Amid Russia-Ukraine conflict, the sweet smell of peace in the spring air

Opinion | As Biden blasts Putin in Poland, President Xi may turn Ukrainian crisis into an opportunity

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