Daily News Analysis ‘Hainan Free Trade Port Initiative ’ : 25 May

Why in News:

• China has fully operationalized its island-wide Free Trade Port initiative in Hainan province, implementing a special customs closure to create a massive zero-tariff trade and tourism hub.

Hainan Free Trade Port (FTP) Core Facts:

• Geographic Setting: Located entirely on Hainan, China’s southernmost tropical island province situated strategically at the northern tip of the South China Sea.
• Operational Mechanism: Governed by a unique customs model: “freer access at the first line, regulated access at the second line, and free flow within the island.”
• The Two Lines Explained: The “first line” connects the island to the international market with zero tariffs and no standard customs checks, while the “second line” links the island to the mainland Chinese markets where normal domestic tariffs apply.
• Tariff and Tax Incentives: Eliminates import tariff barriers, expands zero-tariff eligible goods significantly, and institutes ultra-low personal income and corporate tax rates to attract multinational businesses.
• Value-Added Manufacturing Rule: Grants raw material import tariff exemptions for manufacturing enterprises, provided their industrial processing adds at least 30% value to the goods before they enter the Chinese mainland.
• Linguistic Duty-Free Rules: Mainland buyers must show a return transport ticket to shop at the major offshore China Duty Free (CDF) centers, while local island residents face a strict annual shopping cap of 1,00,000 Renminbi (RMB) and must leave the province once a year to qualify.