Hong Kong can benefit from plan by Hainan to be giant free-trade port
- Hainan’s proximity to city means both economies can complement each other, as businesses on the island may utilise Hong Kong’s expertise in legal and financial services
As Hong Kong evolves to become more like a premier mainland city, Hainan is set to become more like Hong Kong. A multi-year plan is afoot to transform the 35,000 sq km (14,000 square-mile) island at the southernmost tip of the country into the world’s largest free-trade port with low taxes and more relaxed visa conditions to match.
The plan is likely to complement rather than challenge Hong Kong as a financial hub. The city’s incoming administration will be wise to study the plan in depth and prepare to take advantage when opportunities present themselves in the years ahead.
The Hainan project has been years in the making, as the strategically located island aims to catch up with the economic powerhouse of Guangdong, particularly the Greater Bay Area.
It hopes to lure both foreign and domestic investors, businesses and tourists to contribute to national consumerism, which is part of the so-called dual circulation strategy to diversify from external or foreign trade and investment for economic growth.
06:19
High hopes for China’s Greater Bay Area, but integrating 11 cities will pose challenges
It will serve as a bridge to the Asean countries, which collectively have overtaken the European Union as China’s biggest trade partner. By 2025, Hainan is expected to have secondary borders with their own checkpoints for free trade and duty-free purchases, in short, an independent customs regime. The goal is to replicate Shenzhen’s successes in experimenting with new projects and ideas of its own.
Companies from Asean countries will be offered incentives such as tax breaks and low entry barriers to invest in Hainan, especially in the service sector. As well, it hopes to join the traditional tourist routes of Singapore, Malaysia and Thailand. In 2019, tourist trips between China and Asean topped 65 million, up from 57 million in 2018.
The free-trade port has been given a special push by President Xi Jinping to help maintain trade and service flows at a time when the United States is challenging China on multiple fronts and Hong Kong’s role as an international finance hub.
Hainan free-trade port tipped to deepen China-Asean ties
One advantage is the island’s geographical location. It offers easy access to the South China Sea and may therefore link up with the Regional Comprehensive Economic Partnership, the world’s largest free-trade agreement of which China is a key member. The 15-country pact covers almost a third of the global population and about 30 per cent of global gross domestic product.
Hainan’s proximity to Hong Kong means both economies can complement each other, as businesses on the island may utilise the city’s expertise in legal and financial services.
Given Beijing’s understanding of the South China Sea as its core national interest, the geographic position of Hainan will prove to be paramount both economically and strategically going forward.
