A couple of months ago SCALA China announced its latest project, ‘The SCALA Hainan Overseas Factory Project of 2025’ and as part of this recent announcement we are writing a series of articles as to why doing business in Hainan (an island province at the southern tip of China), is a good strategic choice.
In this short piece we will be exploring the 3 top reasons why Hainan is a destination of choice for overseas investors.
Reason #1: Free Flow of Trade
When deciding where to pursue foreign investment in China, Special Economic Zones (SEZ) have always played an important role as they regularly offer lucrative incentives and policies for foreign investors. Hainan’s Free Trade Port is one of China’s newest SEZ’s and it is set to be a globally influential trade centre by 2050 as it aims to introduce zero-tariff policies. Together with a new export and import system this will strengthen management and improve the circulation and value of products between the markets of Hainan and Mainland China.
Reason #2: Liberal Policies for FDI
Another important reason as to why foreign investors should consider selecting Hainan is because it already offers the most liberal and beneficial policies for Foreign Direct Investment (FDI) in China. The two main reasons for this are first to do with Hainan’s Free Trade Port Law which allows local regulators in the province to enact trade and investment regulations that supersede national law.
Second, Hainan has its own Negative List which means certain industries can be opened there for foreign investment that have not yet been opened elsewhere in China. It is widely anticipated that this will lower the barriers to market entry across China’s strategic industries. In particular, the medical and healthcare industry has shown to be most open and receptable to foreign investment, and for example, such investors may be able to obtain approvals for their products in Hainan as early as this year. Product approvals such as these are known to take several years elsewhere in China.
Reason #3: Cap of Income Tax
Additionally, certain financial sectors and economic resources will be reformed and expanded to include foreign investors. For instance, foreign investors may be able to cap the income taxes of their operating entity and their expats in Hainan at 15% which represents a substantial attraction compared with other provinces.
Further, foreign investors might be able in the future to freely import and export goods between Hainan and their home country. Apart from the medical and healthcare industries other lucrative industries for foreign investors include advanced manufacturing. It is hoped that the more relaxed tax laws will encourage national and multinational companies to operate in Hainan and in turn strengthen investment and attract more businesses to the island.
Concluding Thoughts
It is hoped that Hainan will eventually become China’s go to hub for trade and investment, like Hong Kong and Singapore. Hainan’s economic hub will be essential for foreign investors to include into their investment strategy in China. In the rest of this monthly series, we will be providing you glimpses into crucial benefits of their policies for your business operations in China.
Want To Find Out More?
Please contact Juliette Pitt SCALA’s International Business Executive at [email protected] for more details and we will be happy to clarify any further questions you may have.