Accelerating Efforts to Build a Free Trade Port with Chinese Characteristics and Global Influence

The establishment of a free trade port with Chinese characteristics in Hainan Province represents a significant reform and opening up initiative, with President Xi Jinping playing a personal role in its design, planning, and promotion. It also stands as a major strategic decision taken by the Central Committee of the Communist Party of China (CPC) based on both the domestic and international contexts, in order to advance the innovative development of Chinese socialism. In April 2018, President Xi solemnly announced that the CPC Central Committee would support Hainan in making gradual explorations and steady progress in building a free trade port with distinctive Chinese features. During his tour of Hainan in April 2022, President Xi called for accelerated efforts to build a free trade port with Chinese characteristics and global influence, so that Hainan would become a model for China’s reform and opening up in the new era and Hainan Free Trade Port an impressive showcase for China’s unique style. In doing so, he entrusted Hainan with a new mission of even greater significance. The report to the 20th CPC National Congress held in October 2022 further called for faster progress in developing the Hainan Free Trade Port, upgrading pilot free trade zones, and expanding China’s globally oriented network of high-standard free trade areas.

The strategic framework: one fundamental guide, three institutional cornerstones, four key planks, and eight pillars

While the world has entered a new round of major development, transformation, and adjustment, socialism with Chinese characteristics has entered a new era, in which the CPC is leading the Chinese people in rejuvenating the nation through modernization.

President Xi holds great expectations for the development of the Hainan Free Trade Port. In April 2022, during a tour of Hainan Province, he stressed that “Hainan is tasked with accomplishing a historic endeavor, which is also a strategic move in the development of special economic zones for socialism with Chinese characteristics. This will see us forging a unique path through continuous explorations and bold experimentation.” He noted that “the development of the free trade port is a complex, systemic project, requiring both mental and practical preparations for sustained efforts over a long period.”

In practice, Hainan has developed a strategic framework consisting of one fundamental guide, three institutional cornerstones, four key planks, and eight pillars. The fundamental guide refers to President Xi’s speeches and instructions in regard to Hainan. The three institutional cornerstones refer to the Guidelines of the CPC Central Committee and the State Council for Supporting Hainan in Comprehensively Deepening Reform and Opening Up, the Overall Plan for the Construction of Hainan Free Trade Port, and the Law of the People’s Republic of China on the Hainan Free Trade Port. The four key planks are the objectives of establishing Hainan as a pilot zone for furthering comprehensive reform and opening up, a national pilot zone for ecological conservation, an international tourism and consumption center, and a service and supporting zone for major national development strategies. The eight pillars are the policy environment, legal environment, business environment, ecological environment, economic development system, social governance system, risk prevention and control system, and organizational and leadership system, all of which serve as crucial supports.

An ecologically restored park on Xiaozhou Island, Sanya, Hainan Province, September 24, 2023. Since its ecological restoration, the island has become a popular destination for locals and tourists to visit and engage in fitness activities. PHOTO BY HAINAN DAILY REPORTER WANG CHENGLONG

Forging a distinctive model and key gateway to spearhead China’s opening up in the new era

Reform and opening up has been a crucial move in making China what it is today and in the development of Hainan. Precisely, Hainan Province was established and has prospered as a result of reform and opening up. To serve as a model and beacon for the comprehensive reform and opening up drive in the new era is the new noble mission entrusted to Hainan by the CPC Central Committee. On a new journey in the new era, the basic logic of Hainan’s reform and opening up is to drive in-depth reform through high-standard opening up and promote high-quality development through in-depth reform. The comprehensive reform and opening up represents the essence of, and the fundamental driving force for, the development of the Hainan Free Trade Port.

A Han-style clothing parade and other promotional activities attract the participation of many shoppers at the Haikou International Duty-Free City, Hainan Province, September 29, 2023. PHOTO BY HAINAN DAILY REPORTER CHEN YUANCAI

Upholding reform and opening up, Hainan has earnestly fulfilled its primary responsibilities and scored major breakthroughs in its efforts of promoting reform and opening up. As a result, the development of its free trade port is flourishing and rapidly gaining shape and momentum. We have effectively put in place a free trade port policy system featuring zero tariffs, low tax rates, and a simplified tax regime, as well as the liberalization and facilitation of trade, investment, cross-border capital flows, the flow of people and transportation, and the safe and orderly flow of data. We have implemented China’s first negative list for cross-border trade in services and pared down the negative list for foreign investment to just 27 items. Preparations for independent customs operations on Hainan Island have also been fully initiated.

The openness of Hainan’s economy has markedly increased, with utilized foreign investment growing by an annual average of 63.2% over the past five years, and the establishment of new foreign-funded enterprises rising by 73.1% annually. This growth has seen Hainan breaking into the country’s top ten provinces for foreign investment utilization. A total of 134 achievements in institutional innovation have been publicly announced, with the province’s integrated planning reforms being adopted as a national model. Thanks to the in-depth implementation of innovative systems such as the “land supermarket” and “machine-based planning,” Hainan has continued to push itself into more critical reform and carve out new developmental advantages.

Preparations for establishing independent customs operations across Hainan Island will be our top priority in developing the free trade port. We will step up the pace to complete all task lists, project inventories, and stress tests to ensure the transition to independent customs operations by the end of 2025 as planned. To steadily expand institutional opening up, we will leverage the combined advantages offered by the Regional Comprehensive Economic Partnership agreement and Hainan’s free trade port policies. We will pilot economic and trade rules concerning the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement, moving faster to align rules, regulations, management processes, and standards. We will strive to promote joint development between the Guangdong-Hong Kong-Macao Greater Bay Area and the Hainan Free Trade Port and work to transform Hainan into a headquarters base for Chinese enterprises venturing into international markets as well as for overseas enterprises entering the Chinese market. We will also develop Hainan as a shipping hub for the New International Land-Sea Trade Corridor and a regional aviation gateway for the Pacific and Indian oceans, and build networks for global air and sea transportation and international economic and trade cooperation.

We will deepen integrated institutional innovation and better coordinate policy measures to deliver more impactful and overarching institutional innovations in key areas such as trade and investment, fiscal and taxation systems, the financial sector, social governance, and the environment. With business operators’ true sentiments in mind and following World Bank standards, we will foster a law-based, internationalized, and enabling business environment, with a view to making Hainan one of the best places to do business in China by 2025 and in the world by 2035.

We will fully utilize major platforms like the annual conference of the Boao Forum for Asia, the China International Consumer Goods Expo, and the Hainan Island International Film Festival to reinforce practical cooperation with countries and regions involved in the Belt and Road Initiative. We will work to develop an important hub for the 21st Century Maritime Silk Road and effectively facilitate the building of a global community of shared future.

Speeding up high-quality development of Hainan Free Trade Port

The purpose behind developing a free trade port with Chinese characteristics is to propel the development of Hainan Island and reinforce the appeal of Chinese socialism. In pursuing development, therefore, Hainan must align itself with the new stage of development, apply the new development philosophy, and contribute to and become part of the new development dynamic. It must pursue development that is primarily innovation-driven, is characterized by coordination, is environmentally friendly, mandates openness, and seeks shared benefits as a fundamental goal. It must pursue development that reflects the strengths of the Chinese system, China’s cultural confidence, a people-centered purpose, and a commitment to putting the environment first. In doing so, we will make Hainan a vital window for showcasing China’s success in building a modern socialist country.

In accordance with the requirement to fully and faithfully apply the new development philosophy, Hainan has focused on adjusting structures, increasing growth drivers, and benefiting the people. We have achieved marked improvements in economic quality as well as reasonable increases in economic scale, signaling a positive trend toward high-quality development. Hainan’s economic transformation has been impressive. We have moved past a painful adjustment period where we eliminated the over-reliance on real estate and reached a consensus across the province on developing the “four leading industries” of tourism, modern services, new and high technology, and efficient tropical agriculture. We have also scored initial results in developing the “three future-oriented industries” of seed breeding, deep-sea technology, and aerospace. With the recovery of overseas consumption in high-end shopping, medical care, and education, these three sectors have become a hallmark of our development as a free trade port.

A new pattern of coordinated regional development, referred to as the “three poles, one belt, and one area,” has taken initial shape (This refers to the three poles of Haikou-Chengmai-Wenchang-Ding’an Metropolitan Area, the Greater Sanya Metropolitan Area, and the Danzhou-Yangpu Area; the coastal city belt; and the ecological conservation area in the central mountains). We have accelerated the integrated development of Danzhou-Yangpu area, established and refined the provincial-level mechanisms for comprehensive planning based on the Haikou and Sanya economic circles, and promoted the coordinated development of the coastal city belt and the ecological conservation area in the central mountains. The five island-wide infrastructure networks for optical fiber, electricity, roads, gas, and water have also been efficiently interconnected.

We regard our excellent ecological environment as our strongest advantage and greatest asset. We have steadily advanced the development of signature projects for building a national ecological conservation pilot zone. These projects include the Tropical Rainforest National Park; initiatives for a clean energy island and clean energy vehicles; ban on plastics; coordinated development of sewage treatment, water supply, drainage systems, flood prevention, water conservation, and seawater protection; and the Boao Dongyu Island Zero-Carbon Demonstration Zone. These initiatives have ensured that our environment remains among the best in the nation.

To strongly promote the sharing of development gains, we have implemented the rural revitalization strategy, actions to improve employment quality, and housing projects. Our goals of providing access to quality education close to home and ensuring that minor illnesses can be treated locally instead of going into hospitals in big cities and major diseases can be treated right on the island are becoming a reality.

In accelerating the development of a modern industrial system, we will place a keen focus on the “four leading industries,” the “three future-oriented industries,” and the recovery of overseas consumption in high-end shopping, medical care, and education. We will refine industrial and innovation chains and the industrial innovation ecosystem and build an open, eco-friendly, and innovative modern industrial system.

Treating the province as a single unified entity and advancing toward island-wide urbanization, we will place importance on urban-rural integration, land and maritime coordination, connectivity between mountain and coastal areas, and resource integration. We will comprehensively enhance and upgrade the five infrastructure networks, advance rural revitalization, and optimize the allocation of development factors. To promote the industrial development of green resources and the greening of industries, we are building the Hainan International Blue Carbon Research Center and a carbon emissions trading center. We will strive to lead the way in achieving carbon peaking and carbon neutrality and in applying the notion that lucid waters and lush mountains are invaluable assets. We will make sure that Hainan’s ecological environment keeps improving and no deterioration occurs.

Baskets of fresh catch are moved ashore and piled up on a fishing dock in Lingshui New Village, Hainan Province, morning of September 22, 2023. PHOTO BY HAINAN DAILY REPORTER WANG CHENGLONG

We will proactively ask our people about their needs and our performance, doing all we can within our power to address and resolve the pressing difficulties and problems that concern them. We will see that people’s lives improve and make steady strides toward common prosperity.

Ensuring no systemic risks arise

From Hainan’s perspective, we have no precedent to follow in developing a free trade port in China. This means we must explore and progress through continuous trial and experimentation. With respect to the external environment, as we witness accelerating changes unseen in a century in the world, our efforts to achieve the highest level of openness are faced with many uncertainties. Historically speaking, one important lesson we have learned is that Hainan’s development has faced ups and downs because risks were not well-managed. The process of developing the Hainan Free Trade Port is akin to walking a tightrope: we must not become distracted by the scenery above and neglect the dangers below. A balance must be struck, ensuring we proceed neither too slowly nor too rashly. Only with robust regulation can we create the conditions for further opening. We must adhere to the principle of establishing the new way of development before giving up the old, pursue reform and innovation without taking reckless actions, and work for positive progress without seeking immediate results.

Hainan is committed to both pursuing development and ensuring security. We regard risk prevention and security as the most critical variables in determining the success or failure of the development of the Hainan Free Trade Port. We have seen that the planning, deployment, and advancement of risk prevention and control and policy implementation are carried out in an integrated way. To optimize working mechanisms, we have convened dedicated plenary meetings of the provincial CPC committee to study risk prevention and control issues, establishing 16 specialized working groups led by provincial leaders to manage risks related to political security, smuggling, and other issues. We have also established risk registers, enhanced supervision and evaluation, and formed a closed-loop operations system. To reinforce prevention and control platforms, we have constructed three defense circles in offshore, shoreline, and island areas. The information platform for social management has been put into full operation, and effective regulation over the flow of people, logistics, and capital has been ensured. We have effectively mitigated potential risks in critical sectors, launching a special operation to combat smuggling through schemes that use one’s own identity and duty-free allowances to purchase items on behalf of others for a commission and the identities and allowances of others to purchase duty-free for a profit. We have also put into place a traceability system for duty-free goods. In addition, the bankruptcy reorganization of HNA Group Co., Ltd. has been appropriately handled in line with legal requirements.

We will strengthen our sense of responsibility and maintain constant vigilance, paying close attention to major risks that are of concern to the central authorities, of public interest, and more prone to occur in Hainan. Monitoring, early warning, management, and handling of these issues will be heightened. We will refine our systems of work and improve the mechanisms for information sharing and joint risk response. We will bolster collaboration among specialized working groups, departments, municipalities, counties, and industry stakeholders and establish a vertically integrated, highly efficient work framework based on well-defined responsibilities. We will strengthen capacity building with a focus on the foundational initiatives of “Smart Hainan” and “Integrity Hainan.” We will continue to reinforce the practical capacity of our information platforms for social management, fully establish a new type of credit-based regulatory mechanism, and improve the community-level governance platforms for grid-based management, meticulous services, and IT-based support. We will buttress our stress testing capabilities, making sure that risks of all types can be detected and effectively mitigated.

Feng Fei is Secretary of the CPC Hainan Provincial Committee and Chairman of the Hainan Provincial People’s Congress Standing Committee.

(Originally appeared in Qiushi Journal, Chinese edition, No. 23, 2023)