Financial observation: favorable policies, Hainan's new industries aim at the global market

Editor's note: With the official launch of the island wide closure of Hainan Free Trade Port on the 18th, various favorable policies will inject new development vitality into enterprises. Core policies such as "exempting tariffs for processing value-added exceeding 30%" will bring unprecedented growth opportunities to secondary processing enterprises in Hainan; Policies such as "zero tariffs" have released more development potential for new industries such as aircraft and yacht maintenance. In an interview with Global Times reporters, business leaders from multiple related industries expressed confidence in the development prospects of Hainan after the lockdown, stating that "the future will be more open, convenient, and cost-effective.

Running, discovering, rectifying, and improving at the same time

The closure of the entire island marks the beginning of a new phase in the construction of Hainan Free Trade Port. After the closure, Hainan will open a "convenient door" to the world, forming a new economic growth point. Among them, the opening up of the "front line" refers to the implementation of liberalization and facilitation measures such as "zero tariffs" on imported goods and relaxed trade management between Hainan Free Trade Port and other countries and regions outside China's customs territory as a "front line". Using the existing 8 open ports on the island as "first-line" ports, import goods that meet the conditions will be released directly.

The 'zero tariff' policy, relaxed trade management measures, and duty-free processing value-added policies are all aimed at creating a highland for Hainan's opening up to the outside world. On the one hand, they aim to improve the efficiency of opening up to the outside world, and on the other hand, they will help promote high-quality industrial development. Wang Yuanzhong, Deputy Director of Yangpu Customs under Haikou Customs, told Global Times reporters that Yangpu Port currently has 35 international air routes and will be the main channel for the opening up of the free trade port in the future. After the customs are closed, a large number of 'zero tariff' and relaxed trade management measures goods will quickly clear customs and enter Hainan Free Trade Port from here.

The "second line" management refers to the establishment and operation of 10 "second line" ports, including Haikou New Port and Haikou South Port, between Hainan Free Trade Port and the mainland as a "second line", and various convenient measures are taken for the innovative passage of goods entering the mainland.

Hainan Province has 10 "second tier" ports, and Global Times reporters saw the signage of each "second tier" port on the customs intelligent supervision platform. In the future, all goods from outlying islands to the mainland will have to leave Hainan Island and be sold to the mainland through 'second tier' ports. We use this intelligent supervision platform to review the declaration behavior of enterprises and supervise the goods they declare. "Xu Yiheng, the head of the Comprehensive Third Department of the Yangpu Customs Comprehensive Business Office under Haikou Customs, said," On site customs officers can use warning analysis big data modules to review and investigate abnormal information, and strictly control smuggling risks

Any free trade port is born and prospers because of the port, and the port industry is interconnected, "Chen Yang, Mayor of Danzhou City and Director of Yangpu Economic Development Zone Management Committee in Hainan Province, said in an interview with the Global Times and other media.

Yangpu Port is the core hub of Hainan's "first line" opening-up. During a recent visit to the port, a reporter from Global Times saw neatly arranged containers and busy dock loading and unloading work. The container volume of Yangpu Port was 2 million TEUs last year, and it will reach 3.5 million TEUs this year. In November, the average growth rate of Yangpu Port was 53.5%, ranking first among all ports in the country in terms of growth rate, "said Chen Yang.

It is reported that Yangpu Economic Development Zone, where Yangpu Port is located, is a pilot and demonstration zone for Hainan Free Trade Port. Many policies will be prioritized to be implemented in Yangpu Economic Development Zone, and after successful testing, these policies will be promoted to other regions. "Therefore, only by being able to control them can they be put into operation. Chen Yang believes that only with the ability to control risks can we welcome more open policies. When it comes to the work after the lockdown, he said, "We are operating, discovering, rectifying, and improving at the same time, hoping to strive for more 'zero tariff' goods to enter the free trade port and then enter the mainland through the free trade port, so that more people can enjoy the dividends of relevant policies

Processing enterprises feed back R&D with policy dividends

The closure is for the greater opening of Hainan Free Trade Port, and it is only the starting point, not the end point, "Zhang Hui, chairman of Hainan Auska International Grain and Oil Co., Ltd. (Auska Grain and Oil) located in the bonded port area of Yangpu Economic Development Zone, told Global Times reporters.

It is reported that Auska Grain and Oil set up a factory in Hainan in 2020, mainly importing raw materials from Brazil, Canada and other places. After processing at the Hainan Free Trade Port, the products are sold to the Hainan market and other provinces. Since July 2021, we have cumulatively enjoyed a reduction of tariffs of about 300 million yuan on value-added processing, "said Zhang Hui." The 30% tariff exemption policy for value-added processing "is one of the most valuable policies of Hainan Free Trade Port, and Auspicious Grain and Oil is the first pilot enterprise in China to enjoy this policy.

There are deep-seated considerations behind the "30% tariff free policy for value-added processing". Feng Nan, member of the Working Committee and Deputy Director of the Management Committee of Yangpu Economic Development Zone in Hainan Province, told Global Times reporters that in order to achieve the goal of processing value-added up to 30%, enterprise products need to have higher technological content, higher level, and even involve more fields. She gave an example that a company that only processes meat into steak or makes vegetables into pre made dishes may not achieve a 30% value-added rate. But if protein is extracted from meat and made into protein peptides, making it a raw material for high-end drugs or a part of high-end ingredients, it is possible to achieve a 30% increase in value. This process not only expands the product from the meat industry to other high-end manufacturing industries, but also promotes the transformation of processing methods from simple processing to deep processing, upgrading from general processing to systematic processing, while improving the industrial chain. She concluded, "It may seem like a small policy, but it has significant implications for the high-quality development of Hainan

The development path of companies such as Auska precisely demonstrates the original intention of this policy formulation. We use the funds and profits obtained from policy incentives every year for reinvestment and technological research and development, "Zhang Hui said." In addition to policy factors, technological innovation is the core driving force for enterprise development. Only by maintaining a leading position in the industry can enterprises stand undefeated in the market

Hainan aircraft maintenance hangar is booming

A reporter from Global Times saw aircraft with various languages such as English, Thai, and Vietnamese painted on their bodies in the overhaul hangar of the one-stop aircraft maintenance industry base at Hainan Free Trade Port. The maintenance personnel in the cabin were busy in an orderly manner.

Behind this busy scene is the unique competitive advantage of Hainan Free Trade Port's aviation maintenance industry. Long Wentao, the head of the Comprehensive Management and Enterprise Development Department of Haikou Airport Aircraft Maintenance Engineering Co., Ltd., told Global Times reporters that the first advantage is the significant geographical location of Hainan. Hainan's 4-hour flight circle covers 21 countries and regions. The reporter observed from the chart that major Southeast Asian countries are within a 4-hour flight circle, and airlines from these countries send planes to Hainan for maintenance, which has a significant cost advantage in terms of time and fuel consumption.

The second is the advantage of relevant policies. The "zero tariff" goods cover almost all production equipment and raw materials, and are expected to save about 20% of tax costs for imported equipment companies. Regarding the aviation maintenance industry, Long Wentao stated that aviation materials are included in the "zero tariff" list of raw materials and are exempt from tariffs. It is worth mentioning that preferential policies such as exemption from maintenance deposits and the addition of bonded aviation fuel have given Hainan Airlines' maintenance industry a significant cost advantage, with maintenance companies having a cost advantage of at least 10% -15% compared to surrounding areas. After the closure operation, Hainan will fully open up its seventh freedom rights, allowing foreign airlines to independently operate passenger and cargo routes from Hainan to third countries. With the increase of routes and flights, the volume of maintenance business will also increase.

The third advantage is in customs supervision. The Hainan Free Trade Port's policies of "opening up the first line and controlling the second line" and facilitating customs clearance have greatly saved the clearance time for overseas aircraft entering and leaving Hainan Island for maintenance, further improving efficiency.

In addition, according to Huang Tingting, the Chief of Customs at Haikou Meilan Airport, overseas airlines can send their aircraft to the one-stop aircraft maintenance base at Hainan Free Trade Port for maintenance without paying a deposit, adding bonded aviation fuel, and maintaining bonded aviation materials, without occupying a large amount of enterprise funds. The combination of these policies can save a lot of maintenance costs for enterprises that import aircraft for maintenance, making the one-stop aircraft maintenance base of Hainan Free Trade Port more cost-effective in the international market.

Huang Tingting said, "From January to November this year, we supervised a total of 79 aircraft, 13 engines, and 13 batches of aviation materials for bonded maintenance, with a value of 51.57 billion yuan, a year-on-year increase of 68.6%. These data truly reflect the sustained high-speed development of the aviation maintenance industry

The reporter looked around the overhaul hangar and found a total of 9 aircraft, including 5 wide body aircraft and 4 narrow body aircraft. According to Long Wentao, 5 of them are from overseas. He stated that the current annual maintenance volume of the major overhaul base is about 700 aircraft, of which foreign countries' aircraft account for about 30%.

Long Wentao expressed great confidence in the development prospects of aviation maintenance after the lockdown, "I believe it will be more open, convenient, and cost-effective

Southeast Asian ships make a special trip to Hainan

Employees in the yacht industry in Hainan also hold the same expectations after the closure of the Hainan Free Trade Port. Chen Xiaoyu, General Manager of Sanya Banshan Peninsula Sailing Port Operation Center, told Global Times reporters that the construction of Hainan Free Trade Port has brought policy dividends and development space to the yacht industry.

According to Chen Xiaoyu, relying on the "zero tariff" policy, some parts of international yachts can enjoy tax incentives, which reduces maintenance costs and attracts ships from Southeast Asia, Hong Kong and Macao to specifically go to Hainan for repairs. In addition, Hainan has relatively low labor costs and superior maintenance sites and conditions, which will inevitably attract more ships to visit.

From the Volvo Ocean Race to the Hainan International Sailing Race, as the core host of the event, the Half Mountain Peninsula Sailing Port is a "business card" of Sanya. Chen Xiaoyu said, "International competitions are closely related to the policy of opening up the 'front line'. When overseas ships and racing ships enter the country, they need customs clearance protection. With the introduction of customs clearance policies, the declaration method for overseas ships and racing ships has changed from multi window declaration to single window declaration, greatly saving customs clearance time. For ship owners and captains, the experience is very good. In addition, after the closure, the 'zero tariff' policy has been implemented, and many ship owners are more willing to choose to consume their products in Hainan, replacing the traditional consumption mode overseas in the past

Wang Yan, Deputy Director of Sanya Customs under Haikou Customs, introduced to reporters, "Customs has continuously optimized the supervision mode of yachts, launched the policy of free guarantee for yacht self driving tours, and we are also constantly optimizing the supervision mode of yachts. We immediately carry out quarantine and other related processes when yachts arrive, greatly reducing the clearance time of yachts and improving the customer experience

In Chen Xiaoyu's view, the continuous development of Hainan Free Trade Port's impact on the yacht industry is not limited to a single link of maintenance. With the official closure and operation of the entire island, Hainan is making every effort to build a national yacht consumption center. The convenience of people flow and logistics will be further upgraded, which will promote the industry to expand from the current "tourism experience" to the entire industry chain ecology of manufacturing, maintenance, training, and competitions, and truly become an important engine for the high-quality development of Hainan's marine economy. Chen Xiaoyu hopes that with the development of free trade ports, the application of the "zero tariff" policy can be expanded from operational ships to self use ships, and the yacht industry in Sanya and even the entire Hainan will open a new chapter of development.