International Experience and Hainan’s Path to Building a Free Trade Port

Abstract

According to the unified arrangement of Document No. 12 of 2018 issued by the Central Committee of Communist Party of China (CPC) and the State Council, the first free trade port (FTP) with Chinese characteristics was to be built in Hainan. Certain difficulties and challenges will inevitably arise during the building of the port, including lack of a unified foreign trade structure, low added value for the tourism industry, low utilization rate of foreign investment, and lack of innovation and openness within the financial industry. However, Hainan also enjoys certain advantages that are conducive to the building of a FTP, such as the existence of its natural outlying islands, a sound ecological environment, experience in reform and innovation of special economic zones, and policy support from the central government, as well as other basic conditions beneficial to the construction of such a port. Hainan must learn from the successful experience of other international FTPs in areas such as trade regulation, business environment, port clearance, financial openness, and fiscal and tax policies. It will be necessary for China to benchmark not only against the highest international standards but also to focus on positioning by differentiated functions, lay a solid foundation for development and transcend policy incentives, make up for financial shortcomings, encourage financial openness and innovation, and carry out differentiated fiscal and tax policies. At the same time, the division of powers and functions between the central and local governments must be properly handled, and an integrated administrative organization that promotes collaboration between the central and local governments must be established.

Keywords

FTP / international experience / differentiated competition / Hainan’s path

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