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Trade Liberalization and Facilitation (Policy Interpretation - Part III)

FTP Policy Focus Series——


Trade Liberalization and Facilitation

(Policy Interpretation - Part III)

The Ministry of Commerce and other 19 government bodies jointly issued the Circular on Several Measures to Promote Trade Liberalization and Facilitation of Hainan Free Trade Port, aiming to further increase support and accelerate the process of trade liberalization and facilitation of the free trade port. To help you understand the background and practical meaning of the measures, We have published a series of policy interpretations. Today we bring the third part of the Trade Liberalization and Facilitation policy interpretation .

8. Trade in service is an important part of the liberalization and facilitation of the Hainan FTP, and Hainan is one of the 28 pilot zones for innovative development. What explorations have Hainan made in promoting the facilitation of trade in service, and what are the plans for the next step?

Since its launch in 2016, the pilot work on the innovative development of trade in service has come to the third round. As one of the first pilot zones of such kind, Hainan has made a series of active trials. And MOFCOM has provided support in the province’s exploration in the liberalization and facilitation of trade in service.
On one hand, we will support Hainan and other pilot zones in their efforts to fully implement the facilitation initiatives for opening up in the Master Plan. First, speed up the opening up of service sectors. In the previous two rounds, we focused on the key sectors such as law and finance, while in the new round, we further expand the opening up by rolling out 26 measures in such sectors as transportation, education, healthcare, finance, and professional service. Second, facilitate the trade in services. In the previous two rounds, we have made beneficial explorations mainly in the supervision of customs clearance, model innovation, visa facilitation, talent flow, and mutual recognition of professional qualifications. In the recent round, we further carry out 38 measures to facilitate the flow of goods, capital, technology, personnel, and data, which are conducive to accelerating the construction of a free and convenient environment for trade in service.
On the other hand, we back Hainan in its attempt to explore the unique way out. MOFCOM, together with relevant departments, supports Hainan’s initiatives in opening up performance venues, relaxing restrictions on new foreign flights and promoting Sino-foreign cooperation in running schools. We have rolled out a series of favorable policies in facilitating the entry, departure and residence of foreigners, foreign exchange services, temporary entry of foreign tourists on self-drive tours. Among the 122 measures carried out in the third round of pilot projects last year, 33 are dedicated to Hainan and some other pilot zones for the first trial. There are another 15 measures to further liberalize and facilitate trade in services in Hainan introduced in the Circular, which go as follows:

In terms of greater opening up and more market access in the service sector, we encourage the exhibition industry in Hainan, and allow foreign organizations to independently hold foreign-related economic and technological exhibitions whose name shall not contain “China”, “the Chinese nation”, and so forth. In the field of technology trade, foreign trade operators enjoy a relaxed qualifications control and are free of registration in their technology import and export activities. At the same time, trials will be carried out on the cancellation of licensing for new auction enterprises and filing related to commercial franchising.

To nurture featured service industry and trade in services, we will support Hainan FTP in developing tourism and other modern service industries and hosting Hainan Expo an event with international influence. We encourage the Hainan FTP to boost digital, cultural, technology trade and assemble high-quality trade in services enterprises based on innovative development pilots of trade in services and various featured export bases.

To enhance international cooperation in trade in services, we will support the municipal and provincial authorities in Hainan to establish international cooperation mechanisms with local governments in relevant countries. We will support the Hainan FTP in its efforts to organize various international cooperation activities in trade in services and to innovate on models of international cooperation in trade in services. In addition, we will redouble our efforts to promote the key areas and projects of trade in services overseas.

In the next step, MOFCOM will earnestly implement the decision and deployment of the CPC and the State Council. We will continue our efforts in promoting the liberalization and facilitation of the Hainan FTP. To this end, we will work with relevant departments to undertake the innovative development pilots of trade in services and carry out the relevant support initiatives in the Circular as stipulated in the Master Plan for the Construction of Hainan Free Trade Port.
9. General Secretary Xi Jinping required Hainan to achieve a high level of trade liberalization and facilitation in the important speech delivered three years ago. What specific progress has Hainan made over the past three years, and what are the planning and vision for the future high-quality development of trade in the Hainan FTP?

Over the past three years, to thoroughly deliver the spirit of General Secretary Xi Jinping's important speech, we have accelerated the deepening of reform in trade, deepened the high-quality development of trade, and implemented the important deployment of the dual circulation development paradigm in which domestic and overseas markets reinforce each other while the domestic market is the mainstay. By doing so, we have made positive progress in stabilizing growth, improving quality and transforming impetus in foreign trade. The structure of trade in goods continued to be optimized, and the growth rate of the province's import and export of goods over the past three years has been 11.1, 3.4, and 1.1 percentage points higher than that of the whole country respectively. Exports of high quality, high technology, and high value-added products increased, with exports of mechanical and electrical products up by 7.3 percentage points year-on-year to 14.8% of the province's total. Imports of duty-free goods grew by 263.3% to 44.21 billion yuan, playing an active role in meeting the domestic demand for consumption upgrades. Offshore trade gained momentum, with its revenue and expenditure exceeding US$1.8 billion in 2020. The construction of foreign trade platforms has yielded positive results: Yangpu was recognized by MOFCOM as a national foreign trade transformation and upgrading base for petrochemicals, and the "Global Trade Window" project has attracted 425 foreign trade enterprises from 33 countries.

New progress in the innovative development of trade in services. First, notable results have been made in trade in services pilot program with six innovative cases promoted across the country. Second, the implementation of the pilot program for trade in services export enabled Hainan to achieve a surplus in trade in services for the first time in 2019. Third, aggregation effect of featured service exports came into play. Sanya Traditional Chinese Medicine Hospital was listed in the first batch of Chinese medicine service export base, and Hainan Ecological Software Park was included in the first batch of national digital service export base. In 2020, the province witnessed a year-on-year increase of digital trade by 1.28 times to 6.732 billion yuan. In the first quarter of 2021, emerging trade in services grew by 1.95 times, up 32 percentage points from a year earlier.

Higher level of trade liberalization and facilitation. We combined the bonded and export supervised warehouses, explored a new regulatory pattern of loading different types of bonded oil products on the same ship, released offshore duty-free imported cosmetics immediately after sampling, and imposed the inspection policy of “release immediately after inspection” on exported refined oil products. Three “zero-tariff” lists of production equipment, raw and auxiliary materials, and transportation tools were introduced. At present, the goods under the preferential policies are worth nearly 900 million yuan, with over 100-million-yuan tax deducted, which effectively reduced the import costs of enterprises. The single window for international trade was optimized and upgraded, adding 13 new services with Hainan features, such as offshore duty-free products, clearance and logistics and tariff inquiries, creating service highlights for customs clearance facilitation. Through our efforts, the overall customs clearance time at the port has been halved compared to 3 years ago.

During the 14th Five-Year Plan period, Hainan will adhere to high starting point planning and high-standard construction, comprehensively enhance the level of trade liberalization and facilitation, and promote the establishment of a trade policy and institutional system for a free trade port with Chinese characteristics.

Hainan will carry out trade in goods management system featuring "zero tariff", and improve the list-based management system for lifting restrictions over imports and exports in the Hainan FTP. The province will encourage new forms of business and new models of trade in goods, and work to form the deep processing of diamonds, precious jades, aviation materials, medical drugs and apparatus, cubilose and other tonic products. It will also promote around ten types of animal-derived food to radiate across the country and to enjoy their specialized markets of a certain scale.

The province will implement a policy to liberalize and facilitate trade in services, which entitled enterprises with market access and business permission at the same time. It will expedite the launch of the country’s first negative list of cross-border trade in services, deepen the innovative development pilot of trade in services, accelerate the development of new types of trade in services, encourage the development of digital trade, repair and remanufacturing, testing and other businesses, and promote the import of productive services such as R&D, design, energy conservation, and environmental protection, and environmental services.

In addition, Hainan will further open up its trade network with ASEAN and other countries along the Belt and Road, improve the trade coordination and protection mechanism, and actively explore institutional mechanisms conducive to the high-quality development of foreign trade.

10. The Circular mentions that a workstation for trade frictions settlement and an assistance mechanism for trade adjustment will be established. What are the considerations for these measures? How will this workstation and mechanism work? And what role will they play in the liberalization and facilitation of trade in the Hainan FTP?

As what has been stressed by the central government, it is imperative to coordinate development and security. The establishment of the workstation and the mechanism constitutes an economic security system that matches the new system for a high-level open economy in the Hainan FTP. To better control and prevent risks is to provide an “insurance policy” for a higher level of opening up.

The workstation mainly focuses on improving the early warning system of trade friction and industrial security in Hainan, monitoring the risks in the industrial chain and supply chain, and providing the enterprises in Hainan, especially SMEs, with early warning information and legal assistance. In the face of risks, SMEs appear to be more vulnerable, which highlights the importance of the workstation. In other words, it mainly targets SMEs so as to promote the sound development of Hainan’s industries and enterprises. The assistance in trade adjustment is something new to Chinese enterprises and industries, also an innovative policy tool for China. Its main purpose is to learn from the practical experience of relevant countries, study and establish a trade adjustment assistance mechanism in line with WTO rules and China's national conditions. Necessary assistance will be provided to industries and enterprises, especially SMEs, that have been hit by the high level of opening-up so as to enhance their competitiveness and viability and promote industrial adjustment.
Since these two measures are innovative, the Hainan FTP needs to consider its practical conditions, undertake in-depth study and thorough implementation, and gain experience from it. These two measures underpin the policies and measures to promote trade liberalization and facilitation of the Hainan FTP, which will help the port to usher in a high-level opening-up.