Financial Policies for the Hainan Free Trade Port

The construction of the Hainan Free Trade Port (FTP) is a major national strategy personally planned and promoted by Communist Party General Secretary Xi Jinping. The release of the Master Plan for the Construction of the Hainan Free Trade Port on June 1 demonstrated that the program has entered the full implementation stage. The plan provided a roadmap and timeline for building a FTP with Chinese characteristics. So what can we expect in the near future? Chen Zhiwei, the editor-inchief of China Forex and Cao Xiehe, president of Bank of China Haikou Central Sub-branch, discuss the financial characteristics of the free trade port and how this should ensure vital highquality financial services.

momentum. A modern economy relies on the real economy and its lifeblood - the financial system.

The Master Plan calls for the broadening of industrial financing channels as well as innovation in terms of technology and financial policies, products and tools. It also calls for supporting enterprises in the Hainan Free Trade Port to issue bonds at home and abroad. It encourages them to move ahead in pledge loans, tourism asset securitization, financial products for shipping logistics and supply chain financing.

Meanwhile, there is a goal of supporting the development of financial technology, commercial medical insurance services, and cross-border medical insurance. The financial sector in Hainan needs to comprehensively improve its services in terms of quality and efficiency so that it can serve the real economy. It also needs to accelerate the implementation of these measures, support FTP market entities in broadening the scope of these cross-border financial activities, drive production factors to flow towards the real economy, and facilitate the economic and social development of Hainan, especially in key areas such as tourism, modern service industries, and the high-tech sector.

Policies for the Hainan Free Trade Port are unique so they may not be easily replicated elsewhere. While experimenting with these innovative financial policies, we should gradually explore the establishment of financial management systems, organizational systems, market structures and risk prevention and control mechanisms that are in line with internationally accepted rules. The ultimate objective is to promote the construction of a free, open, effective and safe financial service environment. We should focus on innovation in offshore finance, offshore renminbi, renminbi internationalization as well as capital account convertibility. The innovations need to be closely linked to legislative developments, fiscal and taxation policies, clearing and settlement, as well as protecting confidentiality and combatting money laundering.

FTP in carrying out product innovation in crossborder financial services and provide convenience and services for cross-border transactions and cross-border financing.

First, the plan calls for advancing the financial work in a step-by-step and phased manner. The financial sector in Hainan will coordinate the financial reform and opening up work based on the development goals of the two phases to provide convenient services at all phases for market entities.

Second, it focuses on the financial planning in the region and the FTZ park. According to the Master Plan, the Hainan FTP will set up a number of special customs supervision zones and key parks before completion of the construction work. These will serve as the major vehicle and platform for the construction of a modern industrial system for the FTP, as well as an "incubator" for the trial operation.

Third, there is a need to determine the financial services of the FTP after the construction work is completed. The Hainan FTP will start island-wide customs clearance operations before 2025. Timely adjustments and deployment will be necessary by then.

Moreover, accelerating the improvement of the organization of the financial system is extremely important. Implementing the support policies specified in the Master Plan in a timely manner is also critical alongside giving full play to the functions of existing financial institutions. A number of local legal financial institutions such as banks, securities companies and insurers will be cultivated, while efforts will be made to attract top tier domestic and overseas financial institutions to the FTP area.

Lastly, we must continue to broaden the financing channels for the development of the FTP. Preferential policies on domestic and overseas financing are being extended to enterprises within the port in various forms. Enterprises are allowed to issue stocks and bonds overseas, carry out crossborder asset management, develop real estate investment trusts (REITs), and make cross-border asset transfers. specifically designed for the FTP, to vigorously introduce domestic and overseas capital. This will be aimed at strengthening cooperation in product innovation and corporate governance, and enhance the internationalization and modernization of the financial sector in the FTP.

We should integrate the operations with the international financial system, especially in terms of bringing in financial talent from overseas. Special policies developed for the Hainan FTP should be used to attract senior financial sector executives with an international perspective, familiar with international capital operations, and proficient in international financial technology operations.

At the same time, we should make full use of the policies proposed in the Master Plan to encourage fintech research, including in artificial intelligence, big data and cloud computing. We need to encourage financial institutions to transform traditional services and products by means of fintech, developing "contactless finance" to provide safe and convenient real-time online services. We should expand the usage of fintech in crossborder financing, clearing and settlement, asset management and other areas. The aim is to provide the real economy with diversified and professional financial services at low cost.

Chinese characteristics. It will unswervingly adhere to this guideline. The leadership of the Communist Party of China is the key feature of this architecture and the FTP's biggest advantage. To build a high-quality FTP with the highest degree of openness in the world today, we must uphold and strengthen the overall Communist Party leadership, proactively arm ourselves with "Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era" and put it into practice. We must fully implement the centralized, unified leadership of the Communist Party during the whole construction process of the FTP. This is to ensure the party always provides overall leadership and coordinates the efforts of all involved in the construction of the Hainan FTP.

The financial sector in Hainan should implement thoroughly the significant speech and instructional spirit delivered by General Secretary Xi Jinping on the FTP. We need to promote the implementation of various tasks from a national strategic perspective. We also must firmly adhere to the party’s overall leadership in financial work and implement the "two upholds" (resolutely uphold General Secretary Xi Jinping's core position on the Communist Party Central Committee and in the party as a whole, and resolutely uphold the Communist Party Central Committee's authority and its centralized, unified leadership) in the financial work of the FTP. We must strictly follow the ruling party and the country's requirements on the construction of the Hainan FTP and ensure correct political direction for all financial work in the FTP. 16th among the 31 provinces, municipalities and autonomous regions. Its foreign direct investment accounts for less than 2% of the country’s total. Currently, Hainan’s economic development mainly relies on its close economic and trade ties with mainland.

The Hainan FTP is an important component in the development of our economy. We need to ensure there is a strengthening of international technology exchanges and cooperation. We should also maintain the sound relationship with the mainland in the flow of capital, technology, products, industries, people and data.

The financial sector in Hainan should make full use of both domestic and international markets. It is necessary to deepen its connection with the mainland’s financial market and organically integrate the port with the mainland to ensure adequate services to be provided to the FTP. We also need to make full use of the unique advantages of a "first-tier opening up" and maximize the function of international financial resources. In this way we can serve as a bridge between domestic and international financial interaction while participating in global economic and financial activities.

Chen Zhiwei: The construction of the Hainan Free Trade Port has great practical and far-reaching strategic significance. Experimentation with a higher degree of opening up to stimulate deeper reform will help us build a first-class business environment and a platform for further opening. This will assist in the high-quality development of China's economy and ultimately contribute to the stability of the global economy. As General Secretary Xi Jinping said in his important speech in 2018, "market entities from all over the world are welcome to invest in Hainan, to participate in the construction of the Hainan free trade port, share the development opportunities here, and enjoy the dividends of Hainan's reform and opening up."