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Grandway Perspective
Brief Analysis of Hainan Free Trade Port Policy
Pubdate：2021.08.23
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Hit：1398
On June 1, the Chinese government released a Masterplan forHainan Free Trade Port (“Masterplan”), aiming to gradually build the southernisland province as China's largest special economic zone and become ahigh-level free trade port with global influence.
The Masterplan takes "free and convenient trade","free and convenient investment", "zero tariff", "lowtax rate", "tax reduction", "strong rule of law","first-line liberalization & second-line control" as the keywords, demonstrating China's determination to develop an open economy.
1.Timeline
According to the Masterplan, Hainan Free Trade Port willgradually achieve the following development goals by2035:
By 2025 | To implement of the just-in-time market access system:
Formulating a special list of market access liberalization for Hainan Free Trade Port and a negative list of foreign investment access;
Clarifying the geographical scope of the business operations of foreign-invested enterprises established in the specific service sectors that have been opened up first;
Establishing and improving systems for national security review, environmental standards for industry access, and a social credit system, and fully implement the system of “minimal review and approval”;
Deepening the reform to separate certificates from licenses;
Establishing and improving the process supervision system based on credit supervision and compatible with the negative list management.
To facilitate overseas financing:
Supporting domestic enterprises registered in Hainan Free Trade Port to issue stocks overseas in accordance with domestic and overseas financing plans;
Giving priority to supporting enterprises to raise funds by issuing bonds overseas and delegating the management of the foreign debt registration system to the Development and Reform departments of Hainan Province;
The foreign exchange registration for overseas listing of enterprises in Hainan Free Trade Port shall be handled directly by the bank.
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By 2035 | To further improve the opening-up policy and relevant institutional arrangements:
Fully expanding access to investment, except in areas involving national security, social stability, red lines for ecological protection, and major public interests;
In the fields with mandatory standards, the investment system of "standard system + commitment system" shall be established, and the market subjects can carry out investment and operation activities when they make commitment to meet the relevant requirements.
To facilitate overseas financing:
Non-financial enterprises that meet certain conditions are allowed to borrow foreign debt independently according to actual financing needs, so as to realize full convertibility under foreign debt of non-financial enterprises in Hainan Free Trade Port.
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2.Opening up restrictions on foreign investment
The Masterplan has clarified the restrictions on foreigninvestment in telecom business, healthcare, education and finance.In contrast to the Negative List (2020) and the Pilot Free Trade Zone NegativeList (2020), the Masterplan shows more open regulations on foreigninvestment.
Telecom | Opening up value-added telecommunications services, and step by step cancel the equal-share ratio system for foreign investors;
Enterprises with entity registration and service facilities in Hainan Free Trade port are allowed to carry out online data processing and transaction processing services for the whole region and international of the free trade port, and gradually develop businesses nationwide under the premise of security and control;
Opening basic telecommunications services;
Carrying out pilot projects for the interaction of Internet data, international submarine cables and landing sites were built, and an international Communications import and export Bureau was set up.
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Healthcare | Supporting Hainan in vigorously introducing high-quality medical resources from abroad;
Studying and supporting the construction of a regional medical center in Hainan.
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Education | Allowing overseas high-level universities and vocational colleges in the field of science, industry, agriculture and medicine to independently run schools and set up international schools in Hainan Free Trade Port;
Encouraging key domestic universities to introduce well-known foreign institutions to set up Chinese-foreign cooperatively-run schools with independent legal person status in Hainan Free Trade Port.
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Finance | Qualified overseas securities fund and futures trading institutions shall be supported to establish wholly-owned or joint-equity financial institutions in Hainan Free Trade Port.
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3.Preferential tax policy
On June 30, the Ministry of Finance issued the Notice onPreferential Policies for Enterprise Income Tax in Hainan Free Trade Port (the “Notice”),which levied enterprise income tax at a reduced rate of 15% for enterprises inencouraged industries registered in Hainan Free Trade Port and substantiallyoperating.
According to the Notice, income derived from new overseasdirect investment by enterprises in tourism, modernservice industries and high-tech industries set up in Hainan Free Trade Portshall be exempted from enterprise income tax.
Enterprise | For the encouraged industrial enterprises registered in Hainan Free Trade Port with actual operation, the enterprise income tax will be levied at a reduced tax rate of 15%;
Income from new overseas direct investment by tourism, modern service industry and high-tech enterprises set up in Hainan Free Trade Port shall be exempted from enterprise income tax;
For enterprises set up in Hainan Free Trade Port, newly purchased fixed assets or intangible assets whose value does not exceed RMB 5 million are allowed to be included in current cost in a lump sum and be deducted when calculating the amount of payable income; whose value exceeds RMB 5 million, the depreciation and amortization period can be shortened or the depreciation and amortization can be accelerated.
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