-
Policy
Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM POLICY: -
EM Policy
EM Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM EM POLICY: -
G10 Markets
G10 Markets
Real-time insight on key fixed income and fx markets.
Launch MNI PodcastsFixed IncomeFI Markets AnalysisCentral Bank PreviewsFI PiFixed Income Technical AnalysisUS$ Credit Supply PipelineGilt Week AheadGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance CalendarsEZ/UK Bond Auction CalendarEZ/UK T-bill Auction CalendarUS Treasury Auction CalendarPolitical RiskMNI Political Risk AnalysisMNI Political Risk - US Daily BriefMNI Political Risk - The week AheadElection Previews -
Emerging Markets
Emerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
-
Commodities
-
Credit
Credit
Real time insight of credit markets
-
Data
-
Global Macro
Global Macro
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
Global MacroDM Central Bank PreviewsDM Central Bank ReviewsEM Central Bank PreviewsEM Central Bank ReviewsBalance Sheet AnalysisData AnalysisEurozone DataUK DataUS DataAPAC DataInflation InsightEmployment InsightGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance Calendars EZ/UK Bond Auction Calendar EZ/UK T-bill Auction Calendar US Treasury Auction Calendar Global Macro Weekly -
About Us
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.
Free AccessMNI UST Issuance Deep Dive: Dec 2024
MNI US Employment Insight: Soft Enough To Keep Fed Cutting
MNI ASIA MARKETS ANALYSIS: Jobs Data Green Lights Rate Cuts
MNI EXCLUSIVE: Free Port Plan May Hint At Future China Opening
--Success Of Hainan Could Encourage More Economic Opening, Advisors Say
BEIJING(MNI) - China's plans to create the world's biggest free trade port
in the southern island province of Hainan may be a test case for how far the
government is prepared to open up the world's second-largest economy, a former
deputy commerce minister told MNI, although policy advisors said earlier
proposals for a separate financial system meant to rival Hong Kong had been put
aside.
Under multi-stage plans announced by President Xi Jinping earlier in June,
the island, slightly bigger than Belgium, will apply zero tariffs on most
products, and enjoy lower income tax as well as relaxed investment restrictions
and visa requirements for foreign tourists and professionals. Manufactured
products sent from Hainan to the rest of China will be duty free, provided 30%
of their value is added in the province.
Once Hainan's plans are fully implemented, its degree of business freedom
will surpass that of Dubai, Singapore or Hong Kong, said Wei Jianguo, a former
deputy minister of commerce, adding that the province's eventual success could
encourage tax and other economic reform, if on a more modest scale, in the rest
of China.
"China needs to open up more, deepen reform to move forward after reaching
this size," said Wei, now vice chairman of the China Center for International
Economic Exchange.
--LOW TAXES
Dozens of free trade zones already exist across the country testing new
policies to facilitate business and investment, but they need to be bigger if
China is to tap the potential of its 1.4-billion-strong market, said Wei,
although he acknowledged that the degree of liberalisation in a small area like
Hainan could not practically be extended throughout the world's most populous
country.
Rates of 15% for corporate tax and 3-15% for personal income tax will make
Hainan an attractive base for companies, said Liu Huan, a counsellor of the
State Council, adding that corporate tax rates could eventually be lowered in
the rest of China, where it is currently set at 25%. Hainan's corporate rate
compares to 21% in the U.S., 17% in Singapore and up to 16.5% in Hong Kong, he
noted.
But the plans for Hainan lack one aspect previously advocated by some
policy advisors, who had argued that it should be exempt from China's capital
controls, in order to develop a global trade hub. The government rejected the
idea, on the grounds that capital account liberalisation should be extended
throughout the whole country at the same pace, said a policy advisor.
The fact that the yuan is not fully convertible will mean Hainan cannot
rival other global financial centres under current policies, said Guan Tao,
former director general of balance of payments at the State Administration of
Foreign Exchange and now chief global economist with BOCI securities.
--HONG KONG
Instead, Hainan's special status will allow it to complement, rather than
compete with Hong Kong, said Wei, with the island province focussing on tourism,
modern services and attracting high-tech manufacturing, while Hong Kong
concentrates on finance and shipping. Hainan can tap Hong Kong's financial
services and highly-skilled professionals, boosting the territory's financial,
legal, trade and investment sectors.
Hong Kong's position adjacent to one of China's main manufacturing hubs
also provides a different set of strengths to those of Hainan, said Cui Fan,
professor in international trade with the University of International Business
and Economics.
"Hainan should be a bond connecting the rest of China with the world ...
its development must rely on the advantages of the massive Chinese market," said
Cui.
Proposals for a free-trade port have circulated in China since the 1980s,
when Xi Jinping, then deputy mayor of the city of Xiamen on the Taiwan Strait,
participated in planning. The Xiamen free port was never implemented, but now
the Chinese president is spearheading the Hainan plan himself, policy advisors
said.
"Free trade ports usually play a better role when a country has opened up a
bit but not fully opened, which is China's current status ... The central
government wants to build the region into a poster child for further opening
up," the anonymous policy advisor said.
But the advisor added a note of caution as to the prospects of extending
Huanan's tariff experiment more widely.
"Under the current circumstances, even the U.S. is increasing tariffs. How
could China just declare the whole country zero tariff?" the advisor said.
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: MMQPB$,M$A$$$,M$Q$$$,MC$$$$,MT$$$$,MX$$$$,MGQ$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.