via Zhihu.com
“Hainan Island is on fire,” John Idol, CEO of Capri Holdings (owner of the Michael Kors and Versace brands), told analysts on a recent earnings call. “Hainan is a strategic priority for us. Every business is looking at it,” said Patrice Louvet, CEO of Ralph Lauren.
Long recognized in China for its pristine beaches, beautiful scenery and golden sunsets, Hainan has recently also become a leading destination for Chinese consumers, seeking the world’s top luxury goods and luxury brands around the world have taken notice.
In June 2020, the Chinese government released an ambitious plan to transform this tropical paradise into one of the world’s leading free trade ports (FTPs), which would be on par with Hong Kong, Singapore and Dubai. This plan or master plan, formally known as the Overall Plan for the Construction of Hainan Free Trade Port, is based on zero tariffs, low tax rates, a simplified tax system and an enhanced legal system. Specifically, it mandates a two-stage process for Hainan to create and implement an independent tariff regime for a wide range of imports that may also include exclusions from import VAT and consumption tax. Moreover, to promote Hainan’s integration into global supply chains goods can be imported tariff free into Hainan, processed and then sold elsewhere in China tariff free as well. While Hainan’s population, over 10 million, is slightly larger than Hong Kong’s or Singapore’s, its area of 35,000 square km is 30 times that of Hong Kong, which gives it more than ample space for development and growth of high end industries.
According to the Department of Commerce of Hainan Province, since the master plan for the Hainan Free Trade Port came out on June 1st, 2020, Hainan’s foreign trade structure has seen great improvement. New developments in foreign trade have significantly boosted the province’s economy, with both duty-free import products and cross-border e-commerce import sales putting up impressive numbers over the past year.
In 2020, Hainan’s total import and export value reached 93.3 billion yuan (~$14.43 US billion), an increase of 3% over the previous year, and 1.1% higher than the national average growth rate. From January to April 2021, Hainan’s import and export value was 35.35 billion yuan (~$5.46 US billion), 9.7% higher than over the same period of 2019, 32.2% higher than 2020’s numbers, and 3.7% higher than the national average growth rate.
Hainan’s import-export product structure has been optimized over the past year. High quality, high-tech, and high added-value product exports have increased. In 2020, vehicle & vehicle component exports were valued at 795 million yuan (~$123 US million), with a growth rate of around 3.8 times last year’s figures, while medicines & medical product exports totaled 450 million yuan (~$69 US million), an increase of 19% year-on-year.
Duty-free products were the main driver for Hainan’s increase in import numbers. In 2020, duty-free imports were valued at 23.95 billion yuan (~$3.70 US billion), a year-on-year increase of 80.5%, accounting for a quarter of the entire province’s imports. From January through April 2021, the FTP saw 8.33 billion (~$1.28 US billion) in duty-free imports, an increase of 139.9% over the same period of 2020, accounting for 30% of Hainan’s total imports.
On June 7th, an aircraft operated by China Southern Airlines, fully loaded with cosmetics, apparel, bags and other fashion goods made in Italy and Switzerland flew from Milan, Italy to Haikou Meilan International Airport. The completion of the maiden Milan-Haikou cargo flight means that now the thriving Hainan Free Trade Port boasts another international cargo route.
The Milan-Haikou cargo flight route not only provides a direct and fast channel for trade and other exchanges between Hainan and Milan & other European destinations, it will also help in developing the Hainan Free Trade Port into a global duty-free shopping paradise and an international consumer center where you can “buy and sell commodities from all over the world”.
Source: Hainan Daily / HiHainan WeChat official account