Hainan FTP to benefit from new measures

Since the Ministry of Commerce and other 19 central government bodies recently introduced 28 new measures to propel highquality development of the Hainan Free Trade Port, including facilitating faster goods and services trade, the measures are seen as key policy documents addressing growth of Hainan FTP after the central government released the Overall Plan for Hainan Free Trade Port in June last year — aiming to build the southern island province into a globally influential high-level free trade port by the middle of the century.

This is a key step for the free trade port to achieve higher-level and phased development goals.

As the master plan requires the Hainan FTP to initiate independent Customs operations for Hainan island to identify and block any safety loopholes before year 2025, the early preparation for trade and investment liberalization and facilitation is an important prerequisite to reach this goal. This calls for the Hainan FTP to benchmark the practices and supporting measures of opening-up and effective management to take the lead in testing in specific areas and certain sectors before 2025, as well as explore new paths and accumulate experience in Customs clearance operations.

Therefore, the introduction of a package of measures around trade liberalization and facilitation marks a crucial step for the Hainan FTP to launch independent Customs operations.

Under the government plan, the Yangpu Bonded Port Area and the Haikou Comprehensive Bonded Zone along with other special Customs supervision areas will no longer be reserved. Relevant supervision plans will also be rolled out by related departments.

While independent Customs territories cover the whole island of Hainan, the current value-added tax, consumption tax, vehicle purchase tax, urban maintenance, construction tax, education surcharges and other taxes and charges will be streamlined based on laws, and related work for charging and collecting sales taxes for retail sales of goods and services will be initiated.

Because trade liberalization and facilitation is a common feature of international advanced free trade ports, and also a key point for the construction of Hainan FTP, the government should promote the opening of high-level trade in goods and take the lead in implementing them in specific areas. For example, the Yangpu bonded port in Hainan province will pilot a special Customs supervision area where imports and exports of crude and refined oil will not be subject to general regulations governing enterprise qualification and quantity. Sugar imports in the area will be exempt from the total tariff quota management.

In some special areas, import licenses for mechanical and electrical goods will not be needed, while support for the development of secondhand car exports and new offshore international trade was also announced.

In addition to needing a greenlight from the central government to allow international vessels to refuel bonded oil in the province, the Hainan FTP will pilot the examination and approval institutions to enhance early detection and management of safety risks associated with exports and imports.

In terms of pursuing high-quality development of trade in services, it is necessary to push that high-level service trade liberalization measures are implemented in some areas within the Hainan FTP

First, opening of the services sector and trade in services must recognize that the sector has characteristics of having “no boundaries”. Even though trade in services cannot be advanced and implemented within specific industrial or port zones like goods trade, it can take the lead in implementing certain opening measures of the sector in certain areas without limiting the scope of specific regions.

For example, a number of measures in the services trade field clearly allow foreign institutions to run businesses with more policy support. The new measures will allow overseas institutions to independently organize foreign-related economic and technological exhibitions except for those using words such as “China “or “National” in their names. Registration requirements for commercial activities regarding technology imports and exports, and licenses for setting up auction firms, have been eased.

Fast track treatment for services export and import safety management cooperation between the Ministry of Commerce and Hainan province will be established, and in some key areas, domestic regulations will be standardized to support the latter’s free trade and trade facilitation in the services sector.

As development of the Hainan FTP is a strategic choice to implement new development concepts to promote high-quality development and build a modern economic system, the free trade port must be built into an area featuring high-quality production factors such as capital, knowledge, technology, management and data, and provide many demonstration practices for the highquality development of the country. Several measures have fully reflected the needs of the high-quality development of the Hainan FTP, and a series of targeted and important measures have been launched.

Among the 28 new measures, 13 measures focus on goods trade while the rest deal with services. The supporting measures include the following: piloting accreditation of trade in goods-related commodities; management and service certification bodies; encouraging Hainan to develop new trade patterns such as offshore global trade, digital, technological and cultural trade; developing the exhibition economy; welcoming the establishment of trade bases of cultural goods; vigorously innovating models of international cooperation in the trade in services sector; and expanding trade by focusing on market entities so as to build Hainan into a new global and regional offshore trade center as well as an exhibition center.

All these moves will support policy optimization not only in the trade of goods, but also in serving the high-quality development of Hainan’s pillar and emerging industries such as tourism, modern services and tropical agriculture.

In addition to improving risk warning and rapid response supervision capabilities for the quality and security of foreign goods trade, and strengthening innovation of Customs supervision models, these new policy measures will certainly help the local government implement multilevel approval models, facilitate prescribed examination procedures, support Hainan to participate in establishing recommended national, regional or group standards and improve the statistical monitoring system and other measures in a bid to realize integrated innovation in trade systems.

Apart from focusing on the innovation of regulatory models, the government must pay attention to establishing early warning, risk management and response capacity systems, as they can be guarantees for ensuring openness and industrial security.

Under such circumstances, it is equally important to set up work stations across government departments and levels to help deal with trade frictions and launch trade adjustment assistance programs, as well as reinforce the quality and safety risk warning mechanism and rapid response supervision capabilities of trade in foreign goods.

Again, a law-based environment is the best business environment as well as the most stable and predictable. As China will accelerate the formulation of laws and regulations for the development of the Hainan FTP on fair competition, social credit and business registration and deregistration this year, it is vital to push forward the building of law-based governance in all respects and regulate activities between the government and market in a law-based manner and through law-based procedures and approaches, thus better protecting the legitimate rights and interests of investors.