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SCMP Editorial
SCMP Editorial

EditorialHainan’s arrival as a free-trade port opens new doors for Hong Kong

Rather than viewing Hainan as a rival to be feared, Hong Kong should seize new opportunities for its professional sector and industrial traders

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Hong Kong Chief Executive John Lee Ka-chiu (left) meets Hainan party secretary Feng Fei at the Boao Forum for Asia in Hainan on March 25. Photo: Handout
SCMP Editorial
Whenever a place rises up economically on the mainland, some observers inevitably portray it as a potential competitor with Hong Kong. This view misunderstands the crucial role the city plays as a global financial hub in Beijing’s “opening up” liberalisation. Hainan’s new status as a free-trade port is a case in point.

The usual suspects warn that the island – more than 30 times the size of Hong Kong – could become a duty-free competitor. In reality, besides being Hainan’s biggest source of foreign investment and a major trading partner, Hong Kong can find many new opportunities for its professional sector to offer services in finance, law and accounting. Additionally, its industrial traders can leverage Hainan’s free port status for re-export and processing services, especially in biomedicine, health products and advanced manufacturing.

Together, the two sides can build up reliable and robust supply chains and a pipeline for talent exchange. Chief Executive John Lee Ka-chiu, who was in Hainan to attend the annual Boao Forum for Asia conference, has developed a working relationship with the island’s Communist Party secretary Feng Fei after the two free ports signed a memorandum of cooperation a year ago. The agreement covered collaboration in trade and investment, finance and tourism.
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Under Hainan’s customs regime first implemented in December, about three-quarters of taxable imports will qualify as duty-free. If the goods are subsequently shipped to other parts of the mainland, they will be taxed as if imported from abroad. However, if the imported items are processed in the province and add more than 30 per cent value, they can enter the mainland market or be re-exported tariff-free.

Hainan’s development is part of a new era of “opening up” under Beijing’s long-term blueprint to build a unified domestic market for high-quality growth, to which Hong Kong is a key component. This has become especially urgent amid escalating external trade barriers. Rather than competition, this is a partnership. Both sides can leverage each other’s unique advantages to effectively form a free-trade zone in the southernmost part of the nation.

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