SCIO briefing on master plan for Hainan Free Trade Port

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China Financial News Agency:

I have a question for Minister Zou. Hainan FTP will adopt a "zero tariffs" policy to have an early harvest before the free trade port system is established in 2025. Could you shed some light on the considerations made by the ministry of finance? Thanks.

Zou Jiayi:

Thanks for your question. All my colleagues have mentioned the "zero tariffs" policy, which is a very important institutional design of the Hainan FTP. To be specific, we will take phased measures to promote trade liberalization and facilitation. This process will feature "zero tariffs." Initial achievements of the "zero tariffs" policy include some of the imported goods becoming exempt from tariffs, import VAT and consumption taxes. The policy covers the following aspects: 

First involves production equipment. A "zero tariffs" negative list will be applied to production equipment used by enterprises. Second involves transportation tools. A "zero tariffs" positive list will be applied to ships and aircraft used for transportation and tourism purposes, as well as yachts. Third, raw materials. A "zero tariff" positive list will be applied to the raw materials used for production within the island and the raw materials to be processed for export goods. Fourth is everyday consumption items. For items of everyday use, we will put in place a "zero tariff" positive list to allow island residents to buy them tariff free. These four kinds of goods, which were mentioned by Mr. Wang just now, will be covered by the "One Negative and Three Positives" list. Fifth, we will relax the duty-free shopping policy to a great extent. The duty-free shopping quota will be raised from 30,000 yuan per person per year to 100,000 yuan per person per year. The scope of duty-free items will be expanded from the existing 38 kinds of goods. We will improve management to provide more convenience to customers. If you want to travel to Hainan, I advise you to take extra money and do a lot of shopping. Sixth, we will support Hainan to develop a convention and exhibition center economy to promote international exchanges. We will study and formulate duty-free policies for the import and sales of exhibited items abroad during nation-level conventions and exhibitions. Such can also be classified as an early harvest.

When conditions are ripe, we will, based on a simplified tax regime after 2025, exempt from tariffs all imported goods beyond the catalog of imported goods to be tariffed. This marks the final arrangement towards "zero tariff." Just as Mr. Wang said, the country needs to establish a catalog of imported goods to be tariffed. Only the goods in the catalog will be tariffed, and the majority of the goods that are not in the catalog will be exempt from import tariffs.

The "early harvest" in the "zero tariffs" policy are wide-ranging, covering nearly all aspects of Hainan's economy and social life. Those who will benefit include manufacturers, such as enterprises, and such consumers as residents and tourists. The industries that will be underpinned include material production enterprises and service enterprises. The scope of goods involved is wide, including large production equipment, transportation tools, and items of everyday consumption. In the future, we will establish a "One Negative and Three Positives" list that focuses on such industries as those of new and high technologies, ecological protection, and those with Hainan characteristics. By doing so, we will lay a solid foundation for the development of Hainan's real economy. In the meantime, we will adjust the "One Negative and Three Positives" list according to the island's actual conditions. In general, we will gradually shorten the negative list, expand the positive list and unleash more benefits of the "zero tariffs" policy. 

What we initially learned from "zero-tariff" policy is to act early, that is, to implement the policy as early as possible so as to see its effects at an early date. On the one hand, it can attract more people, logistics and capital flows to Hainan province, and provide economic support for the development of the Hainan FTP as well as increase people's confidence in Hainan's development. On the other hand, the move will help gain experience and get prepared for the independent customs operations in the whole island after 2025. 

We will follow the requirements of the master plan and actively promote the early implementation of the fiscal and taxation policies of the free trade port to build a high quality and standard construction. The Hainan FTP will be made into a distinctive example of reform and opening up in the new era. Thank you all.

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