Island's biz-friendly policies deliver critical competitive advantages

A German-funded enterprise has successfully completed its full establishment in Hainan province, leveraging the province's streamlined digital business system.

With all prepared materials submitted electronically, the approval was completed within seconds. Siemens Energy (Hainan) Co Ltd received its business license in Danzhou on Thursday following this automated procedure.

Cross-border funds are now settled in two to three hours. "Previously, receiving cross-border funds took one to two workdays. Now, through Hainan's multi-functional free trade account, it takes just two to three hours," said Chen Qiuyi, financial director of Sunrise Fuel (Hainan) Co Ltd.

These examples highlight the attractive policies and accelerating growth of business currently found in the island province. Since the release of the Master Plan for the Construction of Hainan Free Trade Port in June 2020, Hainan has cut institutional costs by aligning with high-standard international trade rules, fueling interest from domestic and foreign capital.

To date, the dual 15 percent tax incentive policies — a reduced corporate income tax rate for eligible enterprises and a capped individual income tax rate for high-end and highly sought after talent — have provided tax reductions exceeding 36 billion yuan ($5.1 billion) and 19 billion yuan, respectively. Furthermore, by September, imported goods under Hainan's three zero-tariff lists had reached a total value of 27.06 billion yuan, generating tax exemptions of 5.09 billion yuan.

Another preferential policy, which exempts import tariffs on products with no less than 30 percent added value after processing, has fueled significant growth since its 2021 introduction. It has facilitated 11.42 billion yuan in domestic sales and waived 878 million yuan in duties.

The cumulative effect of these measures is clear in business formation: over the past five years alone, Hainan has added 2.7 million new business entities, surpassing the total from the 32 years following the province's establishment in 1988.

For companies on the ground, these are critical competitive advantages. "For us as an enterprise, a 10 percent tariff reduction significantly lowers costs," said Meng Weiwei, general manager of Jia Green Chocolate Works (Hainan) Co Ltd, a subsidiary of Canadian chocolatier Green Chocolate Works.

The sentiment is echoed by Zhang Hui, chairwoman of Ausca International Oils and Grains Co Ltd, who attributes her company's explosive growth — from 1 billion yuan output in 2021 to a projected 8 billion yuan in 2025 — directly to policy benefits like the import tariff exemption policy, which has saved about 300 million yuan in tariffs.

The island-wide special customs operations, a milestone in Hainan FTP's development, promises further transformation. This system will implement a comprehensive regime of zero tariffs, low tax rates and simplified tax structures, which aim to strengthen Hainan's role as a bridge between China's domestic market and global supply chains.

Hainan's geographic and strategic position amplifies its potential. As a vital intersection for domestic and international markets, about three-quarters of China's export trade and one-third of global trade pass through the region, according to Zeng Rong, chief economist at Hainan provincial bureau of international economic development. Hainan's ambition, she said, is to become "a base for the headquarters of Chinese companies going global and for foreign companies entering the Chinese market".

The benefits will also extend directly to individuals. Hainan is poised to offer an optimized duty-free shopping experience, with recent expansion of its duty-free policies, effective Nov 1, already boosting sales. In November, duty-free shopping hit 2.38 billion yuan, up 27.1 percent year-on-year.

"The new expansion makes duty-free shopping much more convenient for us island residents," said a Haikou resident surnamed Zhang, while shopping at the Global Duty-Free Plaza, adding that for imported items like milk powder and diapers for her child, she can now buy and take them immediately based on her departure record from the island. "The prices are better, it's a real benefit for our daily lives."

More than 2,300 goods, the largest portion being over 2,100 personal consumer items, remain excluded from the zero-tariff list, and that future plans aim to shorten the negative list further, said Yang Changyao, deputy director of the tax policy division at the provincial finance department.

Through its innovative policies, Hainan is solidifying its role as a new and dynamic window for China's opening to the world. Xu Bo, a local official, said launching the island-wide special customs operations underscores China's "determination and confidence to unwaveringly expand high-level opening-up".