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A Year of Transformation
Hainan takes new steps to shape itself into China's largest free trade zone
By Li Nan  ·  2019-03-18  ·   Source: NO. 12 MARCH 21, 2019
 
A briefing is held in Haikou on February 14 to highlight Hainan's moves to create a more favorable business environment (COURTESY PHOTO)

Log in, use smartphone facial recognition, upload required documents, wait for approval and bingo—a new company is born in just 20 minutes. This is not an imaginary scenario, but a recent occurrence in the China (Hainan) Pilot Free Trade Zone (FTZ), China's largest FTZ.

"Chinese startups can now get an electronic business license and start their own business in Hainan from wherever they are," said Wang Lei, Deputy Director of the Bureau of Market Supervision of Hainan Province.

The Hainan Easy Registration, an online registration platform, was launched on January 2, with the aim of speeding up business registration. It is one of the local government's latest moves to make doing business easier.

A total of 25,050 electronic business licenses had been issued on the platform as of March 13, according to Wang. It means that 357 new enterprises were born per day, increasing by 51.3 percent year on year. "It helps to shorten the time needed for starting a business," Wang told Beijing Review.

"The business environment is a key part of the construction of the Hainan FTZ, which would not have been possible without a good business climate," Sun Dahai, Deputy Secretary General of the Communist Party of China Hainan Provincial Committee, told Beijing Review. He added that Hainan is making every effort to create a fairer playing field for investors and tear down barriers for doing business.

April 13 marks the first anniversary of the Hainan FTZ; last year, President Xi Jinping announced that Hainan, the southernmost island province, would be built into an FTZ, and ultimately, a free trade port.

"In the past year, we have worked around the clock and made new breakthroughs in some key fields," said Sun. Improving the business environment, launching pilot projects and reshuffling the economic structure are among the improvements.

Customers queue in a newly opened duty-free mall in Haikou, capital of south China's Hainan Province, on January 19 (XINHUA)

Better business climate

In addition to the online registration platform, more steps have been taken to boost Hainan's business environment, including an action plan rolled out at the end of 2018. A total of 40 trailblazing policies were released to facilitate procedures such as starting new businesses and getting construction permits. Moreover, China's first international tropical farm produce trading center was opened and the first case of intellectual property securitization was released.

Like the online registration platform, the newly opened farm produce trading center runs smoothly. Known as the Hainan International Agricultural Products Exchange Co. Ltd. (HIAPE), the center was launched in December 2018, offering both online and offline marketplaces for customers to exchange farm produce. Statistics from HIAPE showed that the volume of business totaled 50 million yuan ($7.45 million) in less than three months.

"The new innovative measures are expected to have a positive influence. They will help to improve Hainan's business environment, make the government more efficient and further activate the market," Gan Lu, a researcher with the Hainan-based China Institute of Reform and Development, told Beijing Review.

"Improving the business environment will be kept high on the provincial government's agenda," said Sun. "To make Hainan's business climate among the best in China, we will regularly conduct third-party evaluations of local business environments, release annual action plans and business environment evaluation reports."

Pilot projects

In the past year, concrete progress has been made in a dozen pilot projects, including the launching of a free trade account system and the building of two big business areas and several amusement parks.

On the first day of 2019, China's second free trade account system was launched in Hainan, following the one in the Shanghai FTZ. The new system provides enterprises a cheaper overseas financing channel. Statistics from the Office of China (Hainan) Free Trade Zone (Port) Working Committee (OCHFTZWC) showed that 121 bank outlets all around the island offer free trade account services and 1,262 free trade accounts had been established by February 1.

Two big business areas are under construction to woo major enterprises to settle in Hainan. One is located in the capital, Haikou, at the northern tip of Hainan, while the other is based in Sanya, the southern tip of the island. Data from the OCHFTZWC showed that a total of 76 major companies, including China's e-commerce giant Alibaba, have inked deals with the local government, while some leading state-owned enterprises, such as China National Travel Service Group, have decided to relocate their headquarters to Hainan. A total of 45 other enterprises have expressed their intent to set up their national or regional headquarters in Hainan.

Also high on the agenda is the idea of building a cluster of amusement parks. The local government is working with prestigious amusement park companies to turn the island into a world-renowned destination of entertainment. According to Sun, at least five theme parks, including Lego, Hello Kitty and Discovery, will be erected in Hainan.

Research institutions such as the South Branch of National Deep Sea Center, the Nanfan Scientific and Research Breeding Base and the Global Species Import and Transfer Center will be based on the island.

Economic restructuring

"Hainan was heavily dependent on the real estate industry as its main driver of economic growth. In the past, revenue from the real estate sector accounted for roughly half of the investment and tax income," said Shen Xiaoming, Governor of Hainan, during a briefing on March 7 at this year's annual sessions of the National People's Congress and the National Committee of the Chinese People's Political Consultative Conference in Beijing.

Last year, the news of establishing the Hainan FTZ spread like wildfire throughout the country. The real estate sector of Hainan was fueled and property prices on the island surged. To stabilize the market, the Hainan Provincial Government placed strict restrictions on property purchases, allowing only local residents or those who are employed as talent or who have been working in Hainan longer than two years to buy property in Hainan.

The capping measure led to a year-on-year decrease of 16.5 percent in Hainan's property investment. However, Hainan's GDP totaled 483.2 billion yuan ($71.98 billion), increasing by 5.8 percent, according to the 2019 Hainan provincial government work report.

"Last year, we attached great importance to the export and consumption sectors," said Shen, adding that the province's import and export volume of goods increased by 20.8 percent year on year, much higher than the national average.

Data from the report showed the proportion of the value added of primary, secondary and tertiary industries in Hainan's GDP changed from 21.6:22.3:56.1 in 2017 to 20.7:22.7:56.6, with the service sector increasing by 0.5 percentage points.

"Hainan's economic growth driver has also shifted; new drivers are emerging," said Sun, adding that several promising industries are thriving in Hainan, including the Internet-related industry and the pharmaceutical industry.

"Hainan will keep firm to its resolve to ensure a healthy and stable real estate market," said Sun.

Copyedited by Rebeca Toledo

Comments to linan@bjreview.com

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