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In the evening of June 1, a heavy document was issued—the full text of the “Hainan Free Trade Port Construction Overall Plan” (hereinafter referred to as the plan). According to the plan, Hainan will become a separate customs zone, which will be implemented before 2025. In the future, Hainan will share the trade function of Hong Kong’s “independent customs zone”, and the economy will surely usher in a huge opportunity for development.

Why is Hainan?

The benefits this time in Hainan are very good, with a very high gold content. Many benefits have not been obtained for many years in cities such as Shenzhen and Shanghai.

Previously, Shanghai, Hengqin, Nansha, Qianhai and other free trade zones have all put forward ideas on tax reform. However, the actual situation is that the reform of the tax system still revolves around measures to reduce the tax rate and facilitate it. Few attempts have been made to simplify the tax system in the entire free trade zone.

As a result, Hainan did.

The plan shows that Hainan’s corporate income tax rate is much simpler and easier to understand than the current seven tax rates of 3%, 10%, 20%, 25%, 30%, 35%, and 45% in the Mainland.

At present, only free trade zones such as Shenzhen Qianhai, Shanghai Lingang, and national high-tech enterprises, and western industries that meet the requirements of the encouraged industries are subject to a 15% corporate income tax.

The plan shows that starting a business in Hainan in the future can also reduce or exempt taxes. Hainan will levy a 15% corporate income tax on companies registered in the Hainan Free Trade Port and operating substantially (except for negative list industries). For the tourism, modern service industry, and high-tech industrial enterprises established in Hainan Free Trade Port, the income from new overseas direct investment before 2025 will be exempted from corporate income tax. In terms of the income tax rate alone, Hainan is already comparable to Hong Kong.

In Hong Kong, except for alcohol, tobacco, and other special items, all imported goods in Hong Kong do not need to be subject to customs duties, nor any VAT or general service tax, and implement a zero tariff policy. It is much cheaper to buy Swiss watches, luxury goods and other high-price goods than the mainland, so many people go to Hong Kong to play mostlyWill go shopping in Hong Kong.

In the past, consumer goods in Hainan were entered in a bonded form, but consumers still have to pay customs duties if they want to take them home. In the Hainan plan, the tax-free dividend expanded to ordinary consumers for the first time in the history of the mainland.

After the implementation of this series of policies, Hainan surpassed Hong Kong’s policy dividends at once. Because the tax-free shopping quota in Hong Kong is only 5,000 yuan each time, the plan shows that the annual “tax-free shopping quota for outlying islands” per person in Hainan is 100,000 yuan, which is equivalent to the amount of 20 shopping trips in Hong Kong. This means that the huge purchasing power of the mainland is expected to be transferred to Hainan. When these purchasing powers are concentrated in Hainan, a new, international-level consumer center will emerge. In terms of shopping tax rate, Hainan has the potential to surpass Hong Kong.

In terms of area, 35,000 square kilometers of Hainan is nearly 35 times that of Hong Kong and Singapore, and 9 times that of Dubai. Such a volume is expected to transform Hainan from a big province of tourism into a big province of economy.

Why did the upper class choose Hainan to give the “highest level of opening policy” in mainland China?

Judging from the current development trend in the world, tariff reduction and exemption is the trend. Many developed countries have already implemented trade liberalization and investment liberalization by signing bilateral free trade agreements or multilateral free trade agreements. There are now quite a lot of commodities in the world that are completely unrestricted.

From a macro perspective, in the context of the severe impact of economic globalization, my country’s GDP in the first quarter declined significantly. However, my country’s real estate debt ratio is very high, and senior executives will no longer regard real estate as the focus of economic development. Therefore, it is urgent to stimulate the development of the real economy through policy guidance.

Although since 2013, China has successively built more than a dozen free trade zones, the negative list has been reduced from 190 to 45, and many restricted areas where foreign investment could not enter in the past have been slowly opened, but the transparency is still Not enough, we need to deepen reform.

Compared with Hong Kong, Singapore, and Dubai, the world’s three largest free ports, Hainan’s economy is still at a relatively low level, its industrial foundation is weak, and its economic outgoingness is not high. Reform and opening up are needed to stimulate economic development.

Another key issue is that Hainan has a small population. At present, there are more than 9.44 million permanent residents in the province, and the economy accounts for a very small proportion of the country. In 2017, Hainan’s GDP was 446.25 billion yuan, which is only half of Ningbo’s. Put in the domestic city camp, it is the third and fourth line level. In addition to the tourism industry in Hainan, other industries are not important in the whole country, so the volume of possible negative effects is relatively small.

In terms of location, Hainan is backed by South China and faces a large market of 600 million people in Southeast Asia. It has a unique location advantage. And Hainan is the geometric intersection center of South China Economic Circle, Beibu Gulf Economic Circle, ASEAN Economic Circle, and Southeast Asian Economic Circle. Hainan also faces the South China Sea and radiates the Pacific Ocean. It is an important channel for China to head south. Hainan’s rapid development is conducive to enhancing its economic position in Southeast Asia, expanding China’s influence and projection in Southeast Asia, promoting the “Belt and Road” regional cooperation and joint development, and promoting the liberalization of China’s trade and investment and expanding The degree of openness of the market.

In terms of reform risks, what Hainan tried this time was the “highest level of openness policy” in mainland China. It is not clear how effective it is. However, Hainan is far away from the hinterland of the inland. Even if the effect of large-scale reform experiments is not good, it will not affect the overall economic development of the country and is relatively stable.

Environmentally, Hainan Island has a good tourist scene, and the blue sea and blue sky are beautiful. It is conducive to attracting people from all over the world to come for tourism and shopping. The innate environment is good.

In summary, choosing Hainan to build a free trade port is really a good move.

Looking to the future, if the effect of the free trade zone experiment is good, it is possible to copy all the experiences and institutional mechanisms of the free trade zone/port to many cities across the country. In the future, China may take the lead in joining the zero-tariff free trade zones such as RCEP, China-Japan-Korea Free Trade Zone, and CPTPP. If successful, all people can enjoy foreign products with “zero tariff”.

The most interesting point

Hainan, which enjoys policy dividends, will implement a “zero tariff” system in the future and become an international tourism consumption center. For those who like to buy, buy and buy, it’s good. Haitao can reduce taxes and save a lot of money.

Having completed the establishment of the “Independent Tariff Zone”, Hainan will become a global trade cargo that can freely enter and leave Hong Kong, boosting China’s foreign trade growth.

Why do you say this?

If you want to analyze the future of Hainan, you need to first look at the situation in Hong Kong. Hong Kong is an “independent customs zone”. Even if there is trade friction between China and the United States, Hong Kong’s imports into the United States are still not subject to taxation.

As Asia’s largest free trade port, Hong Kong does not have any trade barriers, which allows a large number of financial institutions and foreign corporate headquarters to operate in Hong Kong without barriers, so Hong Kong is also known as the most open economy. However, due to geopolitical reasons, the United States may cancel Hong Kong’s independent tariff status, which may have a negative impact on the development of Hong Kong. Under these circumstances, Hainan has become an independent customs zone and is expected to take over the baton of foreign trade.

In terms of tourism policies, the plan also relaxes the restrictions on foreigners applying for visa-free entry, allowing foreigners to apply for visa-free entry into Hainan for business, visit, family visit, medical treatment, convention and exhibition, sports and other reasons. 15 days visa-free. This is bound to attract more tourists to Hainan, which is of great benefit to Hainan’s economy. –

The plan also proposes to take the lead in implementing the policy of expanding the opening of the financial industry in Hainan Free Trade Port; support the construction of international energy, shipping, property rights, equity and other trading venues; and accelerate the development of settlement centers. In other words, Hainan will also have some functions as a financial center in the future.

So, the construction of free trade zones and free trade ports will bring unprecedented development opportunities to Hainan. In the future, tourism, medical care, commodities, health, medicine, tourism, and financial industries will all have broad development prospects in Hainan.

Such policy dividends will naturally greatly stimulate the influx of domestic capital into entrepreneurship and investment in Hainan. Hainan’s commercial entities are expected to usher in a blowout development.

Prospects of the property market

In the past, Hainan was a major tourism province, and now there is not only a tourism economy, but also a large amount of consumption power and a new population. With the economic development, housing prices will naturally rise. Judging from the notified policy trends, the long-term value-added potential of houses in Hainan is very large.

Because the future development of the real estate market depends on the total economic volume + net population inflow + policy dividend + scarce resources, the indicators above Hainan are very good.

Hainan is a scarce tropical island in China that has no winters in China. It has sunny blue seas and coconut-sand beaches. People in the north have been buying properties in Hainan for winter vacations. The root cause of rising housing prices in Hainan is that the scarce natural environment has brought a lot of investment demand for tourism real estate.

On the other hand is the breakthrough and openness of policy advantages. According to Hainan’s new positioning given by high-level officials, it is not only necessary to build a first-class island leisure resort, but also to take advantage of the construction of a free trade zone and free trade port. In the future, Hainan may become an important window for the opening of China’s service industry.

In terms of price, the former Hainan property market bubble has grown up, and house prices in the province have repeatedly caused ups and downs due to real estate speculation and speculation. However, since Hainan implemented the strictest “global purchase restriction” policy in history on April 22, 2018, the transformation and regulation of the real estate industry in Hainan has basically reached the expected goal. Huo Juran, director of the Department of Housing and Urban-Rural Development of Hainan Province, once said that in 2019, investment in real estate development in Hainan decreased by 22.1% year-on-year, the sales area and sales amount of commercial housing decreased by 42.1% and 38.8% respectively, and the average sales price remained at 15,000 yuan/m The price is basically stable.

Data from the Statistics Bureau of Hainan Province: Hainan, April 2020The province’s average house price is 16,000 yuan/㎡, which is only 135 yuan higher per square meter from January to March 2020. The lowest house price in April in Hainan was Tunchang, with an average price of only 6,473 yuan/㎡.

In terms of supply and demand, the fundamentals of the Hainan property market in short supply will not change in the short term, and the value of existing real estate may be revalued. Because there is very little land supply for new commercial housing in Hainan since 2019. In 2019, Haikou and Sanya commercial housing land only supplied 790 acres, with an average decontamination cycle of 11 months. However, from 2020 to now, there is no new transaction land in Hainan Province, and the land is scarce.

According to the data from the Shell Research Institute, the real estate development investment in Hainan Province in January-April 2020 decreased by 19% year-on-year, which was a continuous contraction based on a 34% decline in the same period in 2019. In the future, when all the land in the developer’s hands is sold, the house prices will inevitably be reshuffled.

Although the general theme of “no housing, no speculation” will not change, it means that housing prices cannot rise sharply in the short term, so as not to cause too much bubbles. House prices are closely related to the city’s economic development level. With the development of Hainan’s economy, house prices will naturally rise slowly, which does not conflict with the premise of “no housing and no speculation”.

In the next ten years, Hainan’s housing prices may surpass those of first-tier cities. Because the dividends of the free trade port construction policy are expected to escalate, the positioning of Hainan Free Trade Port is much higher than that of international tourist islands, and the imagination space is very large. If Hainan can achieve the height required for the construction of a free trade port in the future, it is expected to achieve a high degree of trade liberalization, and the economy will inevitably develop by leaps and bounds.

As the saying goes, “Catch the tuyere, pigs can go to heaven,” and Hainan’s tuyere is in sight.