18 Early Arrangements for Hainan Free Trade Port

On June 1, 2020, the Overall Plan for Hainan Free Trade Port is officially released to the world. Hainan Free Trade Port will align itself with high-level global economic and trade rules, and become a flagship of China's opening-up and a key opening door in the new era, while focusing on trade and investment facilitation, forging ahead the opening process in stages and good order, and achieving early harvest through early arrangements.

1.Strengthen the establishment of Special Customs Supervision Zones

An import export management system featuring "free flow through the first line and efficient control at the second line" will be first adopted by Yangpu Bonded Port Area and other qualified Special Customs Supervision Zones. More special customs supervision zones will be set up based on the need for the construction of Hainan Free Trade Port.

2.Implement zero-tariff policy on certain imported goods

Except for goods prohibited from tariff exemption or import by laws and regulations:

The zero-tariff negative list management will apply to production equipments imported by enterprises for own use;

The zero-tariff positive list management will apply to following goods:

--Ships, aircrafts, other means of transport and yachts imported to the island for transportation and tourism;

--Raw and auxiliary materials imported for production within Hainan, or for processing trade (or in the process of trade in service) of which final products would be exported to overseas markets;

--Imported goods consumed by residents of Hainan.

Goods and items under the management of zero-tariff lists will be exempt from import duties, import value-added tax and consumption tax. The lists will be dynamically adjusted by relevant departments according to practical demand and supervision requirements of Hainan. The quota for offshore duty-free shopping will be raised to 100,000 yuan per person per year, and the categories for duty-free goods will be expanded.

3.Reduce restrictions on cross-border trade in service

Take initiatives to standardize domestic rules and regulations that affect the facilitation of trade in service in key areas. Formulate and release the negative list of cross-border trade in service in Hainan Free Trade Port, and grant national treatment to overseas service providers. Establish the Hainan International Intellectual Property Exchange, foster institutional innovation in the transfer, utilization and taxation of intellectual property, and carry out law-based exploration for the securitization of intellectual property.

4.Implement the most-simplified-approval investment management system

Roll out the special list for Hainan Free Trade Port to relax market access and the negative list for foreign investment access. Define the geographic range for business operations of foreign-invested enterprises in specific service sectors that are opened up at early stage. Establish and improve the national security review, environmental standards for industrial access, social credit system among other mechanisms, and in all respects promote the most-simplified-approval system. Deepen the reform on streamlining business license approval. Establish and improve a process supervision system based on credit supervision and compatible with the negative list management.

5.Promote pilot reform on cross-border securities investment and financing policy

Support enterprises registered in Hainan Free Trade Port to issue stocks abroad according to their domestic and overseas financing schemes. Give priority to supporting enterprises in financing through issuing bonds overseas. The Development and Reform Department of Hainan province will be in charge of the registration management of foreign debt issued by domestic enterprises. Explore pilot programs on cross-border asset management businesses and further facilitate foreign exchange operations for cross-border securities investment and financing. Develop trial businesses for enterprises in Hainan Free Trade Port to register foreign exchange directly at banks when they go public abroad.

6.Accelerate the opening up of financial sector to both domestic and overseas markets

Promote financial institutions in Hainan to develop and build up the capability of serving the opening up process, and support Hainan Free Trade Port to take initiatives to implement opening policies in the financial sector. Support qualified overseas institutions dealing with securities, funds, and futures businesses to set up wholly or jointly owned financial institutions in Hainan Free Trade Port. Support financial institutions to develop new financial products and improve quality and efficiency of services in Hainan based on development needs of key industries such as tourism, modern service, and high-tech industry, etc. Promote the development of relevant over-the-counter derivative businesses to address needs for the construction of Hainan Free Trade Port. Support Hainan in building property rights trading venues on the basis of optimizing and upgrading existing trading venues, and allow non-residents to participate in trading and fund settlement according to relevant regulations. Support the established trading venues in Hainan Free Trade Port to roll out rules and institutional systems aligned with international practices in terms of membership, trading, taxation, clearance, settlement, protection of investor rights, and anti-money laundering. Support the establishment of property insurance, life insurance, reinsurance, mutual insurance and self-insurance institutions and companies in Hainan Free Trade Port within legal framework.

7.Enhance financial sector’s capability of serving the real economy

Support the issuance of corporate credit bonds, project revenue notes, and special bonds for housing lease. Promote pilot projects on the securitization of high quality tourism assets with stable cash flows. Support financial institutions to develop premium financing, warehouse receipt loans, receivables pledge, intellectual property pledge and other businesses in the area of trade in service under the premise of regulatory compliance and effective risk control. Support marine-related high-tech enterprises in carrying out pledge financing on equity and intellectual property rights, and promote the regulated and controllable development of shipping, logistics and supply chain-related financial products. Take initiatives to apply research achievements in the fields of artificial intelligence, big data and cloud computing in Hainan Free Trade Port in a law-abiding and orderly way. Explore and develop commercial medical insurance services connected to international commercial insurance payment systems. Support financial institutions of the insurance sector in developing cross-border medical insurance products in collaboration with overseas institutions.

8.Apply a more convenient visa-free entry policy

Open up more visa-free application channels to foreigners including self-declaration and invitation and reception by local entities, apart from invitation and reception by travel agencies. Relax restrictions on foreigner’s application for visa-free entry, and allow visa-free entries to Hainan on business, visit, family reunion, medical treatment, exhibition and convention, sport events and other purposes. Apply the 15-day visa-free stay policy to foreign tourist groups traveling by cruise ships.

9.Apply a more open shipping policy

Establish Yangpu-Port-of-China as the port of registry, streamline the inspection process, gradually release restrictions on the statutory survey of ships, establish the Hainan Free Trade Port international ship registration center, and creatively establish convenient and efficient ship registration procedures. Remove the limitation on foreign shareholding proportion for ship registration body. Under the premise of effective supervision and risk control, domestically built ships registered at Yangpu-Port-of-China and engaged in international shipping are entitled to export tax rebate as in the situation of export. Domestic ships with both domestic and foreign trade goods on board which transit at Yangpu Port are allowed to refuel with bonded oil required for the voyage, or tax rebate could be claimed if the ships refuel with locally produced fuel oil for the voyage. For container cargoes that meet relevant conditions and transit at Yangpu Port for final departure from China, a trial policy of tax rebate at port of departure will apply. Speed up the integrated development of shipping and port in Qiongzhou Strait.

10.Apply a more open policy on air transportation

On the basis of reciprocity, promote the realization of the third and fourth freedom rights for inbound and outbound flights for carriers of both parties of bilateral air transportation agreements, and expand air freedom arrangement including the fifth freedom right necessary for building the Hainan Free Trade Port in accordance with China’s air transportation policies. Support Hainan in trial implementation of the seventh air freedom. Allow airlines from relevant countries and regions to carry passengers or freight via Hainan to a third country or region. Provide combined transportation service to international transfer passengers and their luggage. Support airline companies with Hainan as their core base to expand international flight routes. Allow both inbound and outbound flights to refuel with bonded aviation oil.

11.Facilitate cross-border data transfers

Launch pilot projects on security management of cross-border data transfers to explore and develop a convenient and secure cross-border data transfer mechanism within the framework of national security management system for cross-border data transfers.

12.Deepen industrial opening-up

Support the development of headquarters economy. Hold the China International Consumer Products Expo. The import and sale of foreign exhibits during national level exhibitions will be entitled to tax exemption policy which will be formulated by relevant departments. Support Hainan in introducing high quality foreign medical resources from abroad. Draw from the trial experience of regional medical centers to explore and support the building of regional medical centers in Hainan. Allow high-level universities and vocational colleges specialized in science, engineering, agriculture and medical science to run international schools independently in Hainan Free Trade Port. Promote the partnership between Chinese top-level universities and world-renowned foreign colleges to set up jointly-run schools as independent legal entities in Hainan. Build the Hainan national blockchain technology and industrial innovation and development base.

13.Optimize taxation policy arrangement

From the date of issuance of the arrangements, for encouraged industries, enterprises registered in Hainan Free Trade Port that have a practical operational record are entitled to a reduced corporate tax rate of 15%; For tourism, modern service and high-tech industries, enterprises established in Hainan Free Trade Port are entitled to corporate tax exemption for income from newly increased overseas direct investment before year 2025. Capital expenditures that meet certain requirements are allowed to be fully deducted from the taxable income or to be depreciated and amortized at an accelerated speed in the current accounting period. High-end talents and highly-demanded talents employed in Hainan Free Trade Port are entitled to the personal income tax rate of 15%. The list management will apply to high-end talents and highly-demanded talents who enjoy the mentioned preferential tax rate, and Hainan province will consult with the Ministry of Finance and the State Administration of Taxation to roll out specific administrative measures.

14.Strengthen central financial support

The central government will provide comprehensive financial support to make reasonable compensation for the shrinkage of Hainan’s local fiscal revenue. Encourage Hainan to issue local government bonds within the limits approved by the State Council to support facility construction of the free trade port. Steadily increase the amount of special bonds issued by local governments of Hainan to support major infrastructure projects under the premise of effective risk control. Encourage Hainan Free Trade Port to issue local government bonds to eligible global investors. Hainan will make overall arrangement of central funds and own financial resources to establish the Construction Investment Fund for Hainan Free Trade Port which will operate under government guidelines and market rules.

15.Be fully authorized by law

Polices and measures in the arrangements that require adjustment of existing laws and regulations should be implemented after the authorization by the National People's Congress and its standing committee or the State Council. Roll out working procedures for streamlining and adjusting existing laws or regulations to put them into effect as soon as possible. Authorize Hainan to formulate the free trade port’s regulations on business registration and deregistration, bankruptcy, fair competition, expropriation and requisition. Speed up the roll-out of Hainan Free Trade Port Law.

16.Strengthen guarantee for the utilization of land and sea

In accordance with relevant national provisions, and under the premise of never crossing the red line of ecological protection or breaking key indexes such as permanent basic farmland area, cultivated and forest land area, total scale of construction land as well as ensuring the quality of land will not be undermined, Hainan is authorized to approve the layout adjustment of cultivated land, permanent basic farmland, forestland and construction land, and incorporate the approvals in the spatial planning process at provincial, city and county levels. Actively foster the integrated and coordinated development of urban, rural and reclamation areas, promote new models for construction land in small towns, and push forward the capitalization of agricultural reclamation land. Establish intensive development and conservation system for land resources, evaluation criteria and policy system for revitalizing and disposal of existing construction land stock. Leverage on and advocate the experience from the three pilot rural land reforms in Wenchang county and support the entire Hainan island to undertake in-depth rural land reforms. Guarantee to meet the sea utilization demand for national key projects according to laws.

17.Prepare for the initiation of independent customs operations throughout Hainan island

Issue the catalogue for import taxation, list of restricted items for import, list of prohibited items for import, list of restricted items for export, list of prohibited items for export, administrative measures for means of transport, standardized paperwork for customs clearance with mainland customs, operating procedure for customs clearance with mainland customs and operating procedure for export clearance. Open more ports and build facilities necessary for independent customs operations throughout Hainan island.

18.Launch independent customs operations throughout Hainan island in due time

Conduct overall assessments in due time on the preparatory work for the initiation of independent customs operations for Hainan island to identify and block any safety loophole before year 2025. Launch independent customs operations only after all preparations are done. The Yangpu Bonded Port Area, Haikou Comprehensive Bonded Zone along with other special customs supervision areas will no longer be reserved. Relevant supervision plans will be rolled out by related departments respectively. While independent customs territory will cover the whole island of Hainan, the current value-added tax, consumption tax, vehicle purchase tax, urban maintenance, construction tax, education surcharges among other taxes and charges will be streamlined based on laws, and related work for charging and collecting sales tax in retail sale of goods and services will be started.