Opinion | Hainan-Hong Kong economic cooperation continues to progress, Sanya investment prospects are promising

By Lee Chun Ting

A group from the Hainan-Hong Kong Economic Cooperation and Development Advisory Committee visited Sanya, the only tropical coastline tourism destination in China's Hainan Province, on January 5, 2023. Quan Leung Chun-ying served as the delegation's counselor. Sanya organized two outbound investment attraction teams to travel to Hong Kong within a week in order to conduct in-depth site visits at important enterprises as early as December 2022. The city has also collaborated on projects with renowned firms like PricewaterhouseCoopers. In the recent past, Mayor Chen Xi of Sanya also stated that "the municipal government and relevant departments are currently working hard to promote a number of key projects to land in Haitang Bay, strengthen close interaction with Hong Kong, introduce Hong Kong brand enterprises, enrich the industry economy, and jointly promote the construction of Hainan-Hong Kong Economic Cooperation Sanya Demonstration Zone."

Hainan has been drawing more and more interest from investors domestically and internationally since since the overall plan for the construction of the Hainan Free Trade Port was formally announced. In terms of openness, the Hainan Free Trade Port (FTP) represents "first-line liberalization" between China and other nations, and represents the highest level of openness in the world. The FTP stipulates that the "one negative & three positive" list management implementation of Hainan FTP's "zero tariff" policy took place prior to the shutdown of the entire island of Hainan. The policy is explicitly stated: so long as enterprises are not on the negative list of imported production equipment for their own use and are on the positive list of imported camp usage of transport and boats, enterprise production of raw and auxiliary materials and imported goods purchased by island inhabitants are exempt from import tariffs, exempt from import linkages VAT and consumption tax. Furthermore, commodities originating in Hainan or containing imported materials processed for value-added greater than 30% are exempt from import levies into mainland China. Enterprise income from foreign direct investment is exempt from income tax, etc. Hainan is one of the key entry points into southern China in terms of transportation, with 103 international connections, more than 400 domestic routes, and two international airports, Sanya Phoenix and Haikou Meilan. 59 nations and regions, home to 67% of the world's population, can be reached in eight hours by flight, whereas 21 countries and regions, home to 47% of the world's population, may be reached in four hours. To successfully attract market players and talent to Hainan, Hainan FTP has adopted a policy of imposing a maximum personal income tax of 15% on talents and adopting a maximum corporate income tax of 15% on FTP-encouraged businesses.

Likewise, as the construction of the Hainan FTP continues to advance, the cooperation between Hainan and Hong Kong has become increasingly tight. Hong Kong is an FTP that operates under the principle of "one country, two systems," and as such, it has extensive experience with long-term opening. This experience can be used as a model for the construction of the Hainan FTP, and it also serves as the primary source of foreign investment in that province. Since April 13, 2018, 1,976 new Hong Kong-invested enterprises have been founded in Hainan, making up 42.5% of all new foreign-invested enterprises in the province. Since April 13, 2018, 1,976 new Hong Kong-funded enterprises have been established in Hainan, making up 42.5% of all newly established foreign-funded enterprises in the province. US$9.55 billion of Hong Kong capital has actually been used, making up 76.34% of all foreign capital actually used in the province. Hong Kong's involvement in the construction of the Hainan FTP is crucial in this situation.

Sanya has pushed the development of a contemporary service sector cluster in the free trade port in recent years as one of the key positions in Hainan's free trade port construction. Based on "Hong Kong's strengths and Hainan's requirements," Sanya and Hong Kong inked a strategic collaboration agreement for the construction of the Hainan-Hong Kong Economic Cooperation and Development Demonstration Zone in 2022. (Demonstration Zone) The Demonstration Zone's projected land area is 700,000 m2, and it has a mix of hotel, retail, business, and residential uses. The Sanya Demonstration Zone is dedicated to ensuring the unrestricted movement of Hong Kong goods throughout the area, linking to the strictest economic and trade regulations in Hong Kong, and committing a number of resources to ensure the construction of a demonstration "Hong Kong City" site. Simultaneously, the Sanya Demonstration Zone wants to jointly develop with Haitang Bay high-speed railway station, and gather the high-speed railway station to establish tourist distribution centers, long-distance passenger transportation, taxi stations, and other transportation facilities and supporting commercial services, so as to accomplish zero interchange between various modes of transportation and create a "high-speed railway core city" in the style of Hong Kong.

The Haitang Bay National Coastal Recreation Park contains the Sanya Demonstration Zone, which is easily accessible via high-speed national highway and railway that pass through the park. The Addison, Yanlord Crown, and Atlantis are just a few of the well-known luxury hotels that line the area's main thoroughfares. The medical and recreational, exposition, and financial sectors are all beginning to take shape. Sanya International Duty Free City, the biggest single duty-free retailer in the world, is also situated nearby.

The Haitang Bay National Coastal Recreation Park contains the Sanya Demonstration Zone, which is easily accessible via high-speed national highway and railway that pass through the park. The Addison, Yanlord Crown, and Atlantis are just a few of the well-known luxury hotels that line the area's main thoroughfares. The medical and recreational, exposition, and financial sectors are all beginning to take shape. Sanya International Duty Free City, the biggest single duty-free retailer in the world, is also situated nearby.

Currently, PwC's first global investment in the park project - "Future Space" - will be landing, and Sanya Haitang Bay will be transformed into an international first-class science and innovation training center. In line with Sanya's high standards, Sanya also secured an agreement with Hong Kong United Faith International Limited to construct an entertainment complex. Swire Properties and CDFG's commercial complex project, as well as China Resources Super Vientiane City, were taken up at Haitang Bay in 2022 and are projected to begin operations after 2025; Jardine Matheson Group, New World Group, Shun Tak Group, Hang Lung Properties, and other enterprises are also actively negotiating and marketing.

According to the 2023 Hainan Provincial Government Work Report, Hainan will expand its connections with Guangdong, Hong Kong, Macao, and other significant national regional strategies like the Greater Bay Area during the course of the next five years. In order to further open up professional services to Hong Kong, it will increase cooperation between Hainan and Hong Kong this year. In order to make it easier for Hong Kong investors to expand in Hainan, Sanya has also established the Hainan-Hong Kong Economic Cooperation Investment Promotion Center and set up a special class in Haitang Bay to provide services for businesses, according to Fu Wenbo, minister of the international operations section of Sanya Investment Promotion Bureau. Sanya is currently strongly supporting system integration and innovation, continuously improving the business climate, and making every effort to offer one-stop services for enterprises. Through their shared history of cooperation and business, Sanya and Hong Kong are bound together by relationships that are personal, cultural, and commercial. Hong Kong enterprises have made some early investments in Sanya in recent years. Sanya is fostering system innovation and integration, enhancing the business climate, and offering one-stop services for enterprises. This year, Hainan will carry out an international investment promotion and open up to the outside world in all regards. This will present major and historic prospects for Hong Kong investors, and businesspeople from Hong Kong will find a larger stage in the repositioning of Hainan and the new development of Sanya.

Lee Chun Ting, born and raised in Hong Kong, is currently a PhD candidate at the School of Marxism of Tsinghua University and Vice-President of Hong Kong Commerce & Industry Association of Youth Entrepreneurs Federation Limited. His main research interests are Marxist theory, Chinese Communist Party and Guangdong-Hong Kong-Macao Greater Bay Area.

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