China eases regulations on Hainan to let foreign firms work under same rules as Chinese companies

China’s southern Hainan province issued an updated regulation on cross-border trade in services, effectively becoming the first region to allow foreign firms to carry out commercial activity under the same rules as Chinese firms.

“This is an important step towards enhancing the high-level openness of the Chinese [international trade] system, and is essential for the intensive development of the Hainan Free Trade Port,” the Chinese Ministry of Commerce stated with regard to the new regulation.

The region’s authorities on Saturday published a list of restrictions that covers 11 areas of international economic cooperation and includes 70 control measures over foreign companies working in Hainan. In all cases of trade in services not specified in the document, foreign enterprises are to operate under the same conditions as Chinese companies.

The previous mechanism of “exceptions from what is prohibited” was stricter and more complex for foreign firms. The move is aimed at increasing the transparency of the province’s business interactions with other countries and raise the level of investor confidence. It is assumed that the modified system will also boost Hainan’s competitiveness in the international market.
Hainan authorities clarified, however, that the new measures “provide for a fairly effective control over regional and systemic risks.”

On April 13, 2018, Chinese President Xi Jinping announced the creation of an experimental free trade zone in Hainan. The goal of the program is to involve Hainan’s port and the entire island in the process of globalization and international distribution of labor.

Hainan’s administration was to create attractive conditions for investors and form a developed research infrastructure. According to the government plan, by 2050, Hainan is to become a unique cluster with an advanced economy, hosting the campuses of leading universities, advanced laboratories, and headquarters of global high-tech corporations.

In a separate move this week, Hainan’s authorities began setting up pilot international offshore innovation and business zones across the island, local information resource Nanhaiwan reported.

This offshore business model allows both Chinese and foreign firms to be registered on the island. The project aims to accelerate Hainan’s development in the field of science and technology. Authorities intend to establish 8 to 10 offshore innovation and business zones in the Hainan Free Trade Port in order to attract high-quality innovation resources from abroad, as well as promoting international high-tech exchange. In the future, this program is to  be extended up to 11 industrial parks in the province.

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