At a glance: The National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) issued measures to widen market access in the Hainan Free Trade Port (FTP). Notable measures include:
- Healthcare: Encourage domestic and foreign firms to develop pharmaceuticals and support the local production of innovative high-end medical equipment
- Financial services: Support the development of securities, insurance, funds and other financial institutions in Hainan to optimize financial sector market access
- Automotive: Support the construction of charging and battery swapping facilities for new energy vehicles and promote the application of autonomous driving tech
- Aerospace: Widen market access in the commercial aerospace and civil aviation sectors, supporting international cooperation in tech R&D and encourage the application of new tech like 5G in airport security
Additionally, MOFCOM led the release of 28 further measures to liberalize and facilitate trade in goods and services, including tech and digital services, in the FTP.
MERICS comment: The policy document is the latest effort to establish Hainan as a globally influential FTP. First proposed in 2018 and formally launched in June 2020 with the release of a masterplan, Hainan is China’s largest free trade area. Nearly a year on, authorities are opening the region even further to foreign investment, encouraging overseas financial institutions to settle in Hainan and promising a further reduction of the negative list.
On paper, Hainan is China’s most open free trade area with the shortest negative list for foreign investment: Foreign players face no restrictions in the automotive sector and fewer shareholding limits in telecommunications. The government is already touting its success, citing the creation of 1,005 foreign firms in 2020. However, openness alone does not guarantee success. Despite extensive foreign investment, Shanghai’s Pilot Free Trade Zone, for example, did not live up to its initial hype and even drove away businesses with tight capital controls.
Crucially, the FTP proclaims itself to be the “intersection point” of the two circles of China’s dual circulation strategy. A key goal of attracting foreign know-how and talent is to upgrade Chinese companies’ manufacturing capabilities and the quality of Hainanese exports, especially in high-tech sectors. Ultimately, foreign firms are welcome so long as they help Chinese companies become more competitive.
Policy name: Opinions on Special Measures to Support Market Access Liberalization of the Hainan Free Trade Port (关于支持海南自由贸易港建设放宽市场准入若干特别措施的意见) (Link)
Issuing bodies: NDRC, MOFCOM
Date: April 8, 2021