China Financial Services Hainan Free Trade Port

Hailed as the country’s first attempt to implement comprehensive pilot policies for further opening up China’s financial sector, Hainan is set to enhance and simplify foreign exchange processes and achieve free flows of cross-border capital.

In the Overall Plan for the Construction of Hainan Free Trade Port (FTP), officially released by the Chinese Government in June 2020, 44 out of the 190 FTP-related action items and policy changes focused on the financial sector. Since the announcement of the Hainan FTP initiative, Hainan Province has made incremental progress in implementing a series of new, innovative financial measures to accelerate the development of its local financial industry, foster greater openness, and increase international competitiveness.

Highlighting one particular new policy initiative, Hainan’s Free Trade Account System allows companies or individuals with a multi-currency free trade account to freely exchange between Chinese yuan and other foreign currencies. Further, the province’s Qualified Domestic Limited Partnership (QDLP) and Qualified Foreign Limited Partnership (QFLP) schemes designed for cross-border investment funds include fewer regulatory requirements, require fewer application documents, and boast lower entry thresholds compared to the well-known Shanghai Free Trade Zone. To help accelerate cross-border trade activities, Hainan Province is also allowing banks to verify the authenticity after the settlements of cargo and service trading instead of requiring prior reviews. In addition, the province continues to provide numerous incentives to attract and develop the local financial industry, such as offering a 15 percent cap of both individual and corporate income taxes to top-tier foreign financial firms and their executives to set up regional offices in the Hainan FTP region.

While the overall progress of Hainan FTP’s development is steadily advancing, further efforts are still needed to fully implement the envisioned FTP policies and regulations. For example, the FTP must further streamline customs procedures to facilitate seamless duty-free imports and exports, while also enhancing its regulatory framework to mitigate financial risk and prevent money laundering. Moreover, the full implementation of the Hainan FTP and transition of the island from an underdeveloped Chinese economy to becoming an attractive FTP location and boasting strong international influence will require a considerable period of time to achieve, assuming the province is able to accomplish its ambitious goals.

Hainan FTP’s unique policies and increased market access, coupled with Hainan’s pilot initiatives on digital currencies and free flow of data, present growing potential business opportunities for U.S. companies that offer specialized asset management, insurance, and financial technologies products and solutions.

For more information, please contact Office.Guangzhou@trade.gov.