One of the hottest topics of the year is about the development of the Chinese government project to create new Free Trade Zones, and bring more foreign investments into the country. With the recent rise of Hainan FTZ, there is some confusion with the GBA. It is time to lift the veil, and discover what it is about !
The Greater Bay Area is a large agglomeration of provinces and cities on the south-east coast. It produces around 40% of the entire country’s exports, generating US$1.5 trillion GDP per year. To put that in perspective, if it were its own country, it would have the 12th largest economy in the world. In the late 1970s and early 1980s, cities in the GBA were among the first in China to become ‘Special Economic Zones’ (SEZ), wherein trade was opened up internationally, with lower tariffs and trade barriers. The success led to huge economic development, seeing the likes of Shenzhen and Guangzhou turn into the megacities we know them as today. Since 2018, the government has been making renewed efforts to integrate the GBA by way of increased infrastructure capacity, incentives for industrial cooperation, and investments in innovation in industries like technology and medicine.
Just off the southern tip of the GBA lies the island of Hainan.While in 1988 Hainan also gained SEZ status, the economy there remains underdeveloped relative to the GBA. It is known to many people as a holiday destination, not an industrial powerhouse. In 2018, to turbocharge the economy, the government designated the entire islandas the country’s 12th free trade zone (FTZ). In 2020, they went one step further and declared it a free trade port (FTP).
What does this mean? Barriers to the movement of capital, goods and people internationally will be significantly reduced, with plans to elevate the port to the status of Hong Kong, London and Tokyo in terms of trade. In May 2021, the first China International Consumer Products Expo was held in Hainan, with over 2,600 participating brands from over 60 countries. Huge investment incentives are being made in the tourism, modern services and high-tech industries, including tariff-free movement of goods and preferential visa policies. The plan is to enact a series of measures, through to 2050, benchmarked against other global FTPs, in order to attract companies to move shipping operations, headquarters and other forms of foreign direct investment to the island.
With the ever growing importance of e-commerce in the Chinese economy, while the world is at a standstill with the neverending fight against COVID19, it is indeed an attractive ground for companies who want to extend their activity in China.
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