Investing in Hainan: Industry, Economics, and Policy
Hainan (海南) is the smallest and most southern province of the People’s Republic of China (PRC), comprising several islands in the South China Sea. The vast majority (about 97 percent) of the province is made up of the island of Hainan, which is also China’s largest and most populous. The name, which translates to “south of the sea,” reflects the island’s location, which lies south of the Qiongzhou Strait, which divides it from the Leizhou Peninsula.
Nearly 200 islands spread across three archipelagos, Zhongsha, Xisha, and Nansha, belong to the Hainan province, with a total land size of 33,920 square kilometers – of which the island of Hainan covers 32,900 square kilometers. From 1950 to 1988, the area was a part of Guangdong province, then became the largest Special Economic Zone (SEZ) as part of the then-ongoing Chinese economic reform program led by Deng Xiaoping.
Hainan includes 10 counties and 10 major cities. On the northern shore of Hainan Island is Haikou, the provincial seat, while on the southern side is Sanya, a popular tourist destination. Wenchang, Sansha, Qionghai, Wanning, Wuzhishan, Dongfang, and Danzhou are other significant cities.
The island is inhabited by various ethnic groups: 15 percent of the population is made up of indigenous peoples like the Li, who are among the 56 ethnic groups officially recognized by the Chinese government. The Han community still makes up the majority (82 percent) of the population.
Hainan’s location in the economically developed area of the PRD region and within a 1.5-hour flight radius of Hong Kong, Macao, Shenzhen, and Guangzhou, ensures access to capital, technical assistance, and talent.
Its advantageous position has turned Hainan into a significant shipping hub that links China’s southeast coastal regions with ASEAN and Southeast Asian markets and serves as a key entry point for China’s opening up to the Pacific and the Indian Oceans. It is situated in the overlap area of the South China Economic Circle, Guangxi Beibu Gulf Economic Zone, and the ASEAN Economic Circle.
On June 1, 2020, Chinese authorities released the Overall Plan for the Construction of Hainan Free Trade Port, a large-scale plan to transform the entire island province into a free trade port (FTP) – making it the largest special economic zone in China. The policies are designed to reduce Hainan’s dependency on traditional sectors and to serve as a key location for trade and investment within China. In addition to a phased strategy for capital account opening and free movement of capital, Hainan will offer greater market access to foreign businesses, especially in sectors like telecommunications, tourism, and education.
Due to its large territory (measuring 13-times the total area of the remaining 23 trade zones in China), diverse industries, rich resources, and the FTP development plan, Hainan is becoming a hotspot for foreign investors.
In this article, we provide an overview of Hainan’s economic and industrial development and discuss the benefits of investing in this rapidly growing region.
The GDP of Hainan has been growing consistently. According to the Hainan Provincial Bureau of Statistics, 2021 Hainan’s economy grew 11.2 percent year-on-year to RMB 647.52 billion (US$89.224) in 2021.
With a reported worth of RMB 135.39 billion (US$18.66 billion), the service sector has grown to be a major contributor to the province’s economy. The wholesale and retailing industries registered their largest growth in 2021, with a 35.6 percent increase over the previous year.
In 2021, every industry experienced balanced and consistent growth:
- The value added of the primary industry was RMB 125.44 billion (US$17.28 billion), up 3.9 percent year-on-year.
- The value added of the secondary industry was RMB 123.88 billion (US$17.03 billion), up 6 percent year-on-year.
- The value added of the tertiary industry was RMB 398.19 billion (US$54.88 billion), up 15.3 percent year-on-year.
Among all Chinese provinces, Hainan has the highest GDP share in the primary sector. Agriculture contributes the most to Hainan’s economy, which is dominated by the fishing industry. The island’s extensive coastline makes it a favorable environment for shrimp, shellfish, and other aquatic products. Sanya and Qinglan are two of the main fishing ports in Hainan.
Tropical cash crops like coconut, pepper, coffee, tea, and rubber are widely grown in Hainan, which is also the most significant breeding ground for tropical fruit seeds in China. Pineapple, lychee, longan, and bananas are among the most notable fruits grown on the island. The province also serves as a hub to produce herbal medicines.
The manufacturing industry in Hainan is relatively small. In 2020, the processing of petroleum and nuclear fuel constituted around 23.2 percent of the total industrial output. Other significant industries on the island, besides transportation equipment, typically deal with natural resources. Notably, Hainan is the largest producer of rubber in China. There is a large variety of rubber goods produced there, including latex gloves, conveyor belts, and tires. Food processing and beverage-related industries are both robust.
Hainan’s tertiary sector has also quickly developed in recent years, and in 2021 it accounted for 61.5 percent of the economy.
Hainan’s trade and investment
The Hainan FTP is undergoing a high-level opening-up by China. As its business environment continues to improve, Hainan has experienced a significant increase in international investment inflows.
Foreign direct investment (FDI) in the province reportedly increased from US$740 million in 2018 to US$3.52 billion in 2021. That was compared with a national growth rate of 8.1 percent.
Preferential policies allowed more foreign capital to penetrate the actual economy in Hainan. In 2021, over 97 percent of the province’s total foreign investment was in the province’s advanced manufacturing and modern services sectors.
Hainan welcomed 1,936 new foreign-invested businesses in 2021, an increase of 92.6 percent from the previous year. In 2021, the actual use of foreign capital was US$3.519 billion. Between 2018 and 2020, Hainan doubled its usage of foreign capital, with the value exceeding exceeded US$8.8 billion, roughly the whole amount of foreign capital attracted to Hainan in the previous three decades combined since its establishment.
Hong Kong is Hainan’s major investment partner, owning 75.3 percent of the total used FDI of which 53.1 percent was used for leasing and commercial services and the remaining 22.7 percent for geologic prospecting, technical services, and scientific research.
The case of Italy
Over the past two years, the FTP initiative has attracted many famous international companies to settle in Hainan, including those from European countries such as Italy, which are big on exports of refined luxury goods.
As for investments in Hainan, Italian companies have good potential for cooperation in the sectors of consumption, tourism, advanced services, high-tech industry, tropical agriculture, etc., particularly in the field of yachts.
In July 2022, the island province hosted the second edition of the China International Consumer Products Expo (CICPE), China’s leading platform to promote openness and exchanges, which counts as one of the four major trade shows nationwide. Over 70 Italian brands took part in the Expo, which served as a platform for Italian consumer goods companies to introduce their high-end products to the Chinese market. Building on the success of its past editions, the Hainan Provincial Bureau of International Economic Development announced that Italy will be the guest of honor at the 2023 CICPE. This choice suggests that Hainan is pursuing increased trade and investment ties with Italy as it hopes to attract more businesses from the Mediterranean country to attend the exhibition.
Key industries to watch in Hainan FTP
Hainan aims at becoming a tourism-centered industrial system by 2025, with sightseeing as its cornerstone, and pushing the development of sectors such as luxury tourism, culture, and sports tourism, and health-oriented tourism. The province aims at embracing more diverse, high-end, and globalized tourism services thanks to enhanced business forms, better-released consumer potential, more high-end services available, and corresponding procedures and mechanisms in line with international norms.
In 2021, over 81 million tourists traveled to Hainan, up 25.5 percent from the previous year and up 97.5 percent from 2019. Tourism-related revenue increased by 58.6 percent compared to 2020 and by 30.9 percent compared to 2019, to reach RMB 138.43 billion (US$16.1 billion).
By providing better recreational facilities, encouraging national-level sports-related tourism demonstration zones, and improving the tourism and cultural business environment, Hainan intends to establish itself as a leading hotspot for “island-wide” tourism.
The tourism industry in Hainan has several development advantages, including:
- Unique tourism resources: Hainan is the only tropical island province in China, which offers a wide array of natural resources for tourists.
- Duty-free upon exit: Hainan features the biggest duty-free store in the world, and the prices there are 15 percent to 35 percent lower than average. On July 1, 2020, the government increased the annual duty-free shopping cap per person from RMB 30,000 (US$4,134.74) to RMB 100,000 (US$13,782.46), with no time restrictions. Additionally, electronic goods, such as mobile phones, were added to the list, increasing the number of eligible product categories from 38 to 45.
- High density of luxury hotels: Hainan is home to 94 international brand hotels and 78 well-known hotel management firms, all of which have a concentration of luxury resort hotels.
- Visa-free policy for 59 countries: Citizens from 59 countries can enter Hainan without a visa, for a maximum stay of 30 days. More than foreign 470,000 tourists entered Hainan without a visa in 2019 – an increase of 33 percent over the previous year.
In order to increase high-end tourism consumption and improve the standard of the tourism sector, the province will actively promote new enterprises and tourist hotspots through the following actions:
- Shopping tours: Improving the convenience of duty-free shopping regulations.
- Sports tours: Encouraging the integration of sports, tourism, and elder care.
- Medical tours: Following the guidelines of the Boao Lecheng International Medical Tourism Advance Zone expand the opening of medical areas.
- Culture tours: Boosting the consumption of emerging cultures such as video games and digital media.
- Cruise home port construction: Combining the cruise and sightseeing industries.
- Yacht tours: Creating a full-service platform for yacht tours and intensifying oversight of boat rental.
Yachting and cruising
The coastal cities of Sanya and Haikou are home to two cruise ports and four cruise berths. They can hold a cruise ship that weighs up to 150,000 tons. Between 2012 and 2019, 840,000 visitors from 1,115 overseas ships visited Hainan.
The island province is also famous for its yacht-friendly environment. 15 yacht marinas with 2,568 berths, 638 registered ships, 60 yacht clubs, and associated businesses have been created and are being run in Hainan. They include production, maintenance and repair, instruction, sales, financial insurance, and other services. In 2019, there were more than 96,300 yachts in the province, and there were 29,136 sailings – an increase of 70.9 percent over the previous year. Hainan now plans to expand this sector even further.
There are several advantages related to the sector, including:
- Imports of yachts and cruise ships are exempt from customs duty, import value-added tax, and consumption tax.
- Hainan is the only province that permits yacht leasing.
- Sanya is expected to surpass all other cruise home ports, becoming the biggest in the world.
- Companies involved in the cruise and yacht industries will be encouraged to establish regional offices.
- In addition, the province plans to establish the Hainan International Yacht Trading Center and concentrate on the growth of yacht trading, display, leasing, design, production, maintenance, and crew training.
The finance sector in Hainan is continuously expanding, with financial service providers showing substantially improved capabilities and positive developments across a wide range of indicators. In 2021, the added value of the Hainan financial sector increased by 3.6 percent year-on-year to RMB 42.3 billion (US$5.8 billion), while provincial-level private finance increased by RMB 17.1 billion (US$2.3 billion), or 17.6 percent, to RMB 114.1 billion (US$15.7 billion).
Through convenient cross-border financial flow, significant efforts have been undertaken to build new forms of offshore international trade businesses. Pilot banks recorded 521 connected transactions totaling US$146 million in 2021, an increase of 500 percent year-on-year in foreign-related income and expenditure in new offshore global trading activities.
Hainan has been pushing pilot qualified foreign limited partner (QFLP) and qualified domestic limited partner (QDLP) systems for cross-border investment. By the end of 2021, 61 QFLP transactions had been finished, bringing in US$763 million. Forty-five QFLP funds have been established, with a total registered capital of US$5.11 billion and a cross-border capital inflow of US$636 million.
To further facilitate cross-border financing, the Hainan government eliminated the requirement that non-financial firms register their foreign debts on a case-by-case basis. In 2021, the State Administration of Foreign Exchange’s Hainan branch finalized the once-and-for-all registration of 34 businesses’ foreign loans totaling US$13.352 billion.
Moreover, the provincial government has developed and improved several mechanisms for supporting micro, small, and medium-sized enterprises (MSMEs), as well as incentive programs for different financial institutions. By supporting MSMEs’ financing through government-funded investment, loan risk compensation, and financing guarantees, Hainan has tried to enhance its fiscal strategies to encourage industrial growth
Since 2021, Hainan’s digital economy has experienced tremendous expansion. With internet-based enterprises generating more than RMB 150 billion (US$20.67 billion) in revenue, each year and taxes paid to total RMB 5.8 billion (US$799.38 million), growing 15.5 percent year-on-year – the creation of high-tech Hainan FTP has seen some initial success.
In industrial parks like the Resort Software Community of Hainan, numerous well-known internet-based businesses have established offices. The driving energy of the digital economy has been also led by mobile apps, including Haiyiban (an online supermarket providing idle land plots), the digital government service portal, the Hainan Public Service Platform of Educational Resources, and the Hainan Attractions app.
To achieve faster digitalization, Hainan has been steadily increasing the capacity of its digital infrastructure, starting the building of global communication infrastructures, and providing institutional and policy support. Companies in the digital sector can cut their operating expenses by investing in Hainan and concentrating on the advancement of high-tech and AI. Policies such as the low tax rates will further entice high-tech businesses and professionals to move to Hainan.
Oil and gas exploration, processing, transportation, storage, and trading have all come together to form a full industrial chain. To create a new integrated growth mix with upstream exploration, midstream processing, thorough use, and downstream new materials production, Hainan will further extend the industrial chain and boost high-tech involvement.
The government has set up regional headquarters in Haikou and a service base in Chengmai to speed up the transformation of the district of Dongfang into a new material base with natural gas chemical products, and the area of Yangpu into a new material base with a hundred-billion-level new petrochemical material base with international influence.
Estimates anticipate that by 2025, the gross value of the Hainan petrochemicals sector will reach RMB 200 billion (US$27.56 billion).
Hainan is home to the Wenchang Satellite Launch Center – China’s first coastal launch site and one of the few low-latitude launch sites worldwide.
To revitalize the aerospace industries in Hainan, the Hainan government has signed several framework agreements and strategic cooperation agreements with China Aerospace Science and Technology Corporation, China Aerospace Science and Industry Corporation Ltd., and the Chinese Academy of Sciences.
Preferential policies provided in Hainan FTP
The FTP master plan set out the blueprint for the preferential policies, which was translated to specific policies by the Announcement of Hainan Provincial Tax Service, State Taxation Administration on Issues Relating to Corporate Income Tax Incentives for Hainan Free FTP, the Notice of Hainan Provincial People’s Government on Promulgation of the Provisional Measures of Hainan Free Trade Port for the List-based Administration of High-end Talent and Talent in Short Supply Who Are Entitled to Preferential Individual Income Tax Policies, Hainan FTP Regulations on International Vessels, the Hainan FTP Regulations on Social Credit, the Hainan FTP Regulations on Improving Business Environment, and the Hainan FTP Regulations on Fair Competition, and so on.
On June 10, 2021, the Hainan FTP Law was enacted, converting existing policy incentives into legislative reality and providing legal guarantees for various future reforms. The Hainan FTP Law comprises eight chapters covering all the areas involved in the port’s construction, including the liberalization and facilitation of trade and investment, fiscal and taxation systems, environmental protections, industrial development and talent support, and other comprehensive measures.
Trade liberalization and facilitation
The Hainan FTP guarantees to “establish a special customs supervision zone system of Hainan FTP for independent customs operations throughout Hainan Island”.
For cross-border trade in goods, according to the masterplan, Hainan FTP will set up a “first line” to overseas countries and regions, and a “second line” to the Chinese mainland.
In principle, the first line will be open – goods, except those on List of Goods and Articles Prohibited or Restricted from Import and Export at Hainan FTP (expected to be released by the end of 2023), can be freely imported and exported between overseas regions and Hainan FTP under customs’ special supervision.
And the second line will be more tightly controlled – goods entering the Chinese mainland from Hainan will go through procedures in accordance with relevant import regulations, customs duties, and taxes.
For cross-border trade in service, Hainan adopts a negative list for cross-border services in trade—in 2021, the Ministry of Commerce issued the Special Administrative Measures for Cross-border Trade in Services in Hainan Free Trade Port (Negative List).
Under this Hainan’s negative list for cross-border services in trade, overseas service providers are not allowed to provide the services prohibited by the list through the cross-border supply, consumption abroad, and movement of natural persons in the whole Hainan Island.
But at the same time, it implies that unlisted economic activities are considered allowed, and domestic and overseas services providers should enjoy a level playing field and equal market access in unlisted sectors.
Investment liberalization and facilitation
Investment-wise, Hainan will launch the “most-streamlined-approval system” for investment, implement simplified negative list for foreign investment and special measures for relaxing market access, and gradually adopt the “system of market access upon commitment”.
On February 1, 2021, Hainan adopted the Special Administrative Measures for the Access of Foreign Investment in Hainan Free Trade Port (2020 Edition), also dubbed as the “FI Negative List for Hainan FTP”, which expanded market access to foreign investment in several sectors, such as telecommunications, education, business services, manufacturing, and mining, in Hainan FTP.
In addition, to further improve business and investment environment, a more convenient visa policy will be implemented for foreign talent and expatriates. Currently, Hainan offers a free visa policy for foreign nationals from 59 different countries, who can stay in the island province for a total of 30 days. The Haikou Meilan International Airport, Sanya Phoenix International Airport, and all ship ports qualify for the 30 days visa exemption.
Preferential tax incentives
Hainan FTP offers multiple preferential tax policies to encourage trade and investment. According to official plans, China aims to launch island-wide independent customs operations and implement a simplified tax regime in Hainan by around 2025.
- Zero tariffs: Before the island-wide independent customs operations, some goods imported from overseas subject to list management (one zero-tariffs negative list and three positive lists) can be exempt from import duties, value-added tax (VAT), and consumption tax. Following the completion of independent customs operations of Hainan FTP (around 2025), all goods imported from overseas will be exempt from import duties, except for those listed in the to-be-formulated Negative List of Commodities Subject to Import Taxes and goods prohibited from importing into Hainan by law. To be noted, goods entering the Chinese mainland from Hainan FTP are still subject to import taxes; however, goods produced by encouraged industrial enterprises that do not contain imported materials or contain the imported materials but reach a certain proportion (30 percent) of value-added processing in Hainan FTP will be exempt from import tariff.
- Lowered corporate income tax rate of 15 percent : Companies with a proven track record of “substantive operations” registered in the Hainan FTP are eligible for corporate income tax (CIT) rate of 15 percent – lower than the statutory CIT rate in China at 25 percent. By “substantive operation”, authorities refer to the actual management of the enterprise, such as the board of directors and board of shareholders, who should be based in Hainan FTP and must implement substantive management and control over the enterprise’s manufacturing and business operations, staff, accounts, and properties from Hainan. Before the island-wide independent customs operations, the businesses operations must fall in the category of the encouraged industries of Hainan to be eligible for the CIT incentive. The income from the main business of the enterprises must be equal to at least 60 percent or more of their total income. Following the island-wide independent customs operations, this policy will be expanded to all industry sectors, except those on Hainan FTP’s investment negative list.
- CIT exemption on overseas income: Enterprises of tourism, modern service, and high-tech sectors registered in Hainan FTP are exempt from paying CIT on income from new overseas direct investment between January 1, 2020 and December 31, 2024, by satisfying the stipulated criteria.
- One-off pre-tax deduction or accelerated depreciation and amortization for newly purchased assets: Hainan-registered enterprises are allowed to accelerate the pre-tax deduction of the cost of fixed assets (excluding building) or intangible assets that are acquired between January 1, 2020 and December 31, 2024. This policy is similar to the national one regarding depreciation and amortization for newly purchased assets. However, Hainan’s accelerated depreciation/ amortization regime for eligible capital expenditure is more relaxed because the national one only covers fixed assets, while Hainan’s policy covers both fixed assets and intangible assets.
- IIT incentives: During the period from January 1, 2020, to December 31, 2024, for qualified high-end and urgently needed talents working at Hainan FTP (both foreign and domestic talents) can enjoy a partial individual income tax (IIT) exemption. That is, the portion of the IIT exceeding 15 percent of their taxable income can be exempt. Overpaid tax can be refunded to the talent immediately after the talent completes the annual IIT reconciliation. From 2025 to 2035, Hainan FTP will limit the progressive IIT rates on comprehensive income and business income to 3 percent, 10 percent, and 15 percent. The normal progressive IIT rates nationwide are: 3 percent, 10 percent, 20 percent, 25 percent, 30 percent, 35 percent, and 45 percent for comprehensive income and 5 percent, 10 percent, 20 percent, 30 percent, and 35 percent for business income for qualified individuals residing in Hainan. Hainan’s IIT incentives are more preferential than those offered in GBA in some respects.
Where to invest: key development zones in Hainan FTP
The entire island of Hainan is included in the Hainan FTP’s implementation area. Eleven major industrial parks were built with the Hainan FTP and will serve as testing grounds and pilot zones for regulations pertaining to it.
Yangpu economic development zone
The Yangpu Economic Development Zone, which lies northwest of Hainan, was the first national economic development zone in China to get Deng Xiaoping’s approval in 1992 for continuous development by foreign investors under the bonded zone policy. It also represents the junction between the new Western Land-sea Corridor and the 21st Century Maritime Silk Road. The Bonded Port Area of Yangpu, which is also known as a prototype of the FTP, will serve as a pilot demonstration zone for it.
Complete with mature public facilities, such as public ports, standard factories, validation platforms, as well as residential facilities, it focuses on attracting investment in the following sectors:
- Services related to the resource exploration of the South China Sea: Marine engineering, port construction and operation, South China Sea resource discovery services, and a petroleum product trade center.
- Petrochemicals and supporting industries: Ethylene, propylene, styrene, ethylene oxide, propylene oxide, OX downstream goods, rubber and plastics manufacturing, and industrial gas.
- Bonded port-focused services: Export-focused processing, logistics-driven warehousing, display, international procurement, and commodities trading.
- Advanced manufacturing: Equipment manufacturing, printing, and packaging.
The area offers several exclusive preferential policies, including:
- The exclusive use of “Yangpu Port of China” as a port of registry.
- Allow ships to refuel with bonded oil while carrying both domestic and foreign trade goods.
- Tax rebate at port departure.
Boao Lecheng International Medical Tourism Pilot Zone
Boao Lecheng International Medical Tourism Pilot Zone, as the only “special medical zone” in China to realize opening-up in the medical fields, has attracted domestic and foreign high-end medical tourist services and cutting-edge medical research outcomes from all over the world and has created an industrial cluster of international medical services. In Lecheng, more than 20 medical institutions have opened for business, and another 10 institutions are set to join the league, specializing in fields like cancer prevention and treatment, cosmetic medicine, anti-aging, health management, and rehabilitation.
The Boao Lecheng International Medical Tourism Pilot Zone focuses on the provision of the following services:
- Medical services: Treatment for cancer, regenerative medicine, orthotics (joint) treatment, dentistry, integration of traditional Chinese medicine (TCM) and Western medicine, etc.
- Health management: Centers for health management, medical examinations, an international maternity hospital, rehabilitation, medical cosmetics, and anti-aging treatments are all examples of these facilities.
- Health services: Boao International Health Forum, Boao Medical Information Platform, and medical tourism intermediate service platform are examples of international medical and health organizations.
Haikou Jiangdong New District
Haikou Jiangdong New District is located on the East coast of Haikou. The district comprises an integrated urban-rural mix, with a total planned coverage of 298 square kilometers.
The area offers several exclusive preferential policies, including:
- RMB 3 million (US$413,473) one-time incentives for newly established regional headquarters of international organizations; RMB 2 million (US$275,649) one-time incentives for newly established regional headquarters of cross-border businesses (institutions).
- RMB 10 million (US$1.37 million) one-off reward for newly established comprehensive (regional) headquarters of high-tech or other businesses that belong to the secondary industry and promise to contribute at least RMB 30 million (US$4.13 million) financially to the local economy within the first year of its registration; RMB 5 million (US$689123) one-off rewards for newly established comprehensive (regional) headquarters of tourist or other businesses that belong to the tertiary industry.
- RMB 2 million (US$275,649) one-time incentive for newly established, rapidly developing headquarters in key sectors.
Haikou National High-Tech Development Zone
The sole national-level high-tech zone in the province of Hainan was formed in 1991 with a planned coverage of 85.44 square kilometers. It manages Mei’an Eco-tech New City, Medical Valley Industrial Park, Shiziling Industrial Park, Haima Industrial Park, Yunlong Industrial Park, Mission Hills Resort, and West Coast Headquarters Economic Zone with a “seven parks in one zone” layout. It is the only industrial area in the Hainan Free Trade Port (FTP) that combines the “tourist, contemporary service, and high-tech industry” three industrial pillars.
With a focus on bio pharmacy, eco-friendly industries, advanced manufacturing, digital economy, and modern services, the zone presents several sector-specific preferential policies, including:
- Pharmacy: Projects that have been declared and commercialized in Hainan and are included in the national big projects of substantial new medication development are eligible for prizes of up to RMB 10 million (US$1.37 million). Bonuses of up to RMB 12 million (US$1.65 million) are given for introducing Type I novel medications into research or for their commercialization on international markets.
- Headquarter economy: One-time incentives of RMB 10 million (US$1.37 million) are available to high-tech or other businesses in the secondary sector that has just relocated their regional headquarters and pledge to make an initial financial contribution to the community of at least RMB 30 million (US$4.13 million) within the first year of registration.
- Sustainable economy: Full biodegradable material firms will receive one-time incentives of RMB 1 million (US$137,824), RMB 3 million (US$413,473), RMB 5 million (US$689,123), and RMB 8 million (US$1.1 million) when their annual main business income exceeds RMB 100 million (US$13.78 million), 300 million (US$41.34 million), RMB 500 million (US$68.91 million), and RMB 1 billion (US$137.82 million), respectively.
Hainan FTP investment outlook
The Hainan FTP will provide new chances for foreign investors eager to take part in China’s growth thanks to its appealing investment pitch, encouraged industries, and advantageous tax regulations. The Hainan FTP welcomed 1,936 new foreign firms in 2021 alone, representing a growth of 92.6 percent year-on-year. More domestic and foreign investors are already preparing to begin operations on the island to make use of the lucrative advantages available at this early stage.
All in all, there are several factors why foreign businesses may establish themselves in Hainan. These include:
- Favorable location and quality of life: Hainan has become a popular travel destination thanks to its distinctive natural advantages and an abundance of tourism resources, including tropical coastal regions, unspoiled tropical rainforests, geothermal hot springs, and rich ethnic customs. The percentage of days with reasonably high levels of air quality reached 99.4 percent in 2021.
- Preferential policies: The construction of the Hainan FTP, a large-scale plan to transform the entire island province into a free trade port, will contribute to transforming the island province into the largest special economic zone in China. Foreign investment companies in Hainan have kept up the momentum of its rapid growth, so the structure of foreign investment has been further optimized, covering 18 industries incorporating wholesale and retail, leasing and business services, and information transmission, software and information technology services. As of 2022, foreign-funded enterprises account for the majority of newly established enterprises in the province.
- Global presence: The island has earned its international recognition for holding major events, including the Hainan Expo, the Boao Forum for Asia, a BRICS summit, the first Lancang-Mekong Cooperation Leader’s Meeting, and a Roundtable Conference on China-Africa Cooperation. Hainan has friendly regional ties with the US state of Washington, as well as sister bonds with 39 other regions from different countries.
Hainan has already paved its way to becoming a successful pilot free trade zone, with some people arguing that the province island may even occupy Hong Kong’s leading position as China’s top free trade port zone. This is particularly true when considering the considerable investment that went into converting Hainan into an FTP zone.
Foreign investors may consider entering Hainan’s successful tourism industry and related sectors like international business consulting, software development, and human resources, taking advantage of the favorable tax policy, incentives, and advantages.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
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