Game changer for Asia-Pacific trade

Hainan Free Trade Port is an example of China advancing deep, self-driven institutional reforms to build a rules-based, high-standard business environment

The economic and development advantages of the Hainan Free Trade Port are a game-changing point of convergence between China's economy and the Asia-Pacific region. These new policy directions will impact on logistics supply chains and change the understanding of favorable shipping routes.

The Hainan FTP is favorably located geographically in the Asia-Pacific region and together with its suite of policy reforms, provides an upgraded point of entry into the market of China.

The Hainan FTP covers an island-wide change in customs operations that extends well beyond the actual physical port. This opens new opportunities for those wanting to do business with China. The FTP represents a new approach by China to international trade and business, with positive outcomes expected over coming years.

Wei Jianguo, former vice-minister of commerce, said that China is no longer relying solely on preferential policies to attract foreign investment, but is advancing deep, self-driven institutional reforms to build an internationalized, rules-based and high-standard business environment.

The shift from flow-based openness to institutional openness reflects China's transition from being the "global factory" to a "global market".

The Hainan FTP embodies the shift as shown by the way the zero-tariff principle will be applied. If goods are not on the list of taxable imported goods, then they will be tariff-free, so there is zero tariff on most imports through the Hainan FTP.

The Hainan FTP has the shortest negative list for foreign investment of any entry port in China, enabling the province to become a one-stop service delivery center.

The new list gives greater certainty to importers and also makes for a more efficient trade and logistics environment. The establishment of a "single window" for international investment enables efficient investment in the Hainan FTP, linking it with a modern industrial system.

When these features are combined with the lowest individual income tax rates in China, they make the Hainan FTP a particularly attractive destination for international business operations.

The combination of these features positions the Hainan FTP as an important location in Asia-Pacific that will alter trade flows by improving logistics solutions. An efficient alternative port environment provides a new point of access to the markets of southern China in particular.

The Hainan FTP is advancing measures of financial opening-up with cross-border financing and foreign exchange liberalization. These policies will enhance financial connectivity between China and the rest of the Asia-Pacific region. They provide a stable alternative to the often politically manipulated SWIFT trade settlement system based on the US dollar.

These advanced financial measures will speed up cross-border transactions and trade settlement. Most importantly, they also reduce counter-party risk because blockchain settlements are virtually instantaneous. Currency risk is essentially reduced.

These financial measures reduce the overall risk of doing business in the Hainan FTP. Financial institutions from the Asia-Pacific region should move quickly to integrate their financial connectivity so they can deliver better services to their customers.

The willingness to embrace change is further evidence of China's role in stabilizing and driving global economic growth. Exporters to China will welcome this amid the global uncertainties of supply chain adjustments and economic downturn pressures.

China has been a reliable trade partner and supporter of the global trading system. Its stabilizing role has been essential to protecting the free flow of global trade and stands in stark contrast to the disruption and chaos created by the United States' "America First" agenda and the so-called reciprocal tariff policies.

Measures such as the Hainan FTP, characterized by high-level openness, complement existing services and boost regional economic integration by providing new and efficient points of entry to the Chinese market. Regulatory changes make it easier and more efficient to undertake business operations in the Hainan FTP by facilitating the free flow of talents between the Hainan FTP and the global market.

The Hainan FTP helps improve the standards of regional port operations and enhances regional economic integration. Alignment with the Belt and Road Initiative operating standards will also deliver an additional smooth entry point for BRI partners.

Regional ports such as Darwin in the north of Australia are already looking forward to developing new trade routes to improve shipping times and delivery. The physical port infrastructure, alongside the new regulatory environment in Hainan, means that shippings from Singapore and Malaysia have genuine new logistics alternatives. These efficiencies will reshape the trade flows in the Asia-Pacific region.

China's continuous opening-up, illustrated by the new policies being implemented in the Hainan FTP, creates unique opportunities for businesses. Australia is an example of how these benefits apply to those in the Asia-Pacific region.

Australian businesses have deep interest in China and in participating in the Chinese market. They are interested in agricultural exports, so the ability to work through the Hainan FTP with advanced fast customs clearances brings tangible benefits.

There is particular interest in cooperating with the research and development of high-efficiency tropical agriculture where Hainan and places in North Australia share similar climatic conditions and challenges. The adjustment of quarantine and customs regulations will enhance cooperation.

Others in the Asia-Pacific region will also benefit from greater cooperation access in the seed industry and deepsea research. The policies adopted by the Hainan FTP are very attractive for investors and businesses because they lower costs and deliver increased efficiency.

In North Australia, Darwin has a sister city relationship with Haikou, capital of Hainan province. The Hainan FTP has encouraged the city to explore further engagement and investment opportunities. Other regional partners can also reconsider their level of involvement with the Hainan FTP.

In all its aspects, the Hainan FTP brings a game-changing reform to trade efficiency and investment in the Asia-Pacific region.

The author is an international financial technical analysis expert and a former national board member at the Australia China Business Council. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.