The Hainan Free Trade Port will launch island-wide special customs operations on Dec. 18th. The 6th episode of the Export Talks interview program features a conversation with economist Cao Yuanzheng.

Defending Economic Globalization

The Hainan Free Trade Port is a Symbol of Institutional Opening

Reporter: The Hainan FTP will begin special customs operations on Dec. 18th. How do you think we should understand the significance of the new coming era?

Cao Yuanzheng: The contemporary significance can be better understood from a historical perspective. The first time I visited Hainan in around 1987 China was transitioning from a planned economy to a market economy. At that time, there were four special economic zones in China: Shenzhen, Zhuhai, Shantou, and Xiamen. With the initial success of Shenzhen, Hainan was chosen as the next place to expand the program. Hainan was then established as a province and a special economic zone. This was a milestone in reform and opening up. The start of the Hainan Free Trade Port special customs operations this year means a higher standard of openness and a higher standard of reform, and is a sign of institutional openness.

In this sense, it marks a new historical starting point. The global economic landscape is undergoing profound adjustments, it is a period of unprecedented change. During Shenzhen's reform and opening up, we had to "fight on and blaze a trail." So for Hainan, we are also currently facing major choices and challenges. The Chinese people bravely chose to create a free trade port with higher standards. This is a challenge and also a defence of economic globalization. It has global significance and is therefore attracting global attention.

Reporter: Recently, Hainan held a policy and project promotion conference, attracting hundreds of private companies. One entrepreneur predicted that "100,000 companies will be founded in Hainan" in the future. What do you think makes Hainan so attractive?

Cao Yuanzheng: Over 30 years ago, they said that ‘100,000 talents went to Hainan’. Hainan was a hotbed of innovation, daring to take risks and set trends. Now the Hainan Free Trade Port still needs to be bold and innovative and take the lead in setting trends. Will there be 100,000 companies in the future? I think there will be more than 100,000 companies, because the higher standard of openness will bring together companies from around the world. Hainan is embedded in the global industrial chain, and cooperation is becoming increasingly close. Now, Hainan has become a doorway, and in this sense, the future is unlimited.

Promoting Financial Facilitation

More International Capital will Flow Into Hainan

Reporter: Hainan is now also strongly promoting financial innovation and has launched a series of financial policy toolkits. What do you think is the appeal of these initiatives for companies?

Cao Yuanzheng: Hainan is a free trade port with special financial arrangements. The Shanghai Free Trade Zone had a special account arrangement meaning that companies established in the Shanghai Free Trade Zone could have two accounts at the same time: one was a general account and the other was called a free trade account. Now, the free trade account system has been established in Hainan, and EF accounts are already in use. Only through the facilitation of capital can investment and trade be facilitated, and only with the improvement of the business environment can more companies be attracted to Hainan.

Reporter: One of the "five freedoms and conveniences" of the Hainan Free Trade Port is the free and convenient flow of cross-border funds.

Cao Yuanzheng: Hainan issued RMB bonds in Hong Kong and then transferred them back within the border for use. This is a microcosm of facilitation.

Reporter: This is Hainan's fourth bond issuance in Hong Kong, and the results have been very positive. What do you think makes Hainan so appealing to foreign capital?

Cao Yuanzheng: There are two ways that Hainan's bond issuance in Hong Kong bears significance. First, it’s a sign that Hainan is a leader in opening up. It’s rare for local governments to issue RMB bonds in Hong Kong, and even rarer for local governments to transfer them back within the border for use. This is actually a reflection of the financial facilitation of the Hainan Free Trade Port. Second, there is a lot of symbolic significance, such as in the space bonds. The Wenchang Space City and space-related industries are booming, and China is becoming an important leading global force in this regard. All these have added important support to Hainan's successful bond issuance. So, with the special customs operation of the Hainan FTP, Hainan will have greater convenience and confidence in entering the international market. With better facilitation, more international capital will flow into Hainan, making Hainan a true high ground for reform and opening up.

Reporter: What else can we do in the area of financial innovation?

Cao Yuanzheng: I’d like to emphasize in particular that with the currently changing global situation, the development of the Belt and Road Initiative is becoming increasingly important, and infrastructure connectivity has become an important issue. For infrastructure in need of financing, the RMB is a financing channel. Hainan plays a very special role. The RMB is not only used as a means of payment underpinning trade, but most importantly, it is a means of financing underpinning investment. This is our expectation for Hainan.

Improving Service Industry Standards

Making Hainan Educational & Medical Institutions More Attractive

Reporter: Hainan is currently developing three consumer sectors: island-departure duty-free, medical care, and education. How do you think they should be developed and where does their potential lie?

Cao Yuanzheng: Education and medical care are both areas of high-standard opening up, and can rely on pilot programs, so Hainan is conducting pilots. We say that China’s manufacturing industry is relatively advanced, but the service industry is still lagging behind. China has import and export service trade deficits. Can the development of the Hainan Free Trade Port reduce these two deficits? This idea has led to the proposals for ‘studying in Hainan’ and ‘medical treatment in Hainan’, that is, whether we can bring in advanced medical and educational resources through opening up, reduce the trade deficit, and develop Hainan. More importantly, it is of great significance to improving the standards and quality of China's service industry.

After years of hard work, you can see many hospitals flourishing in the Boao Lecheng International Medical Tourism Pilot Zone, and especially some high-end medical services, such as stem cell therapy, have become well-known far and wide. At the same time, universities such as Hainan Bielefeld University of Applied Sciences and Hainan Lausanne Tourism University are well known around the world and have opened independent schools in Hainan, attracting domestic students. I believe that after the start of special customs operations, more educational and medical institutions will be set up in Hainan. Hainan should aim for higher goals and attract more people to study and seek medical treatment, which is a higher standard of opening up. Hainan should focus on setting higher goals and attracting more people to the island’s education and medical institutions, this is a higher standard of opening up.

Reporter: What benefits will the special customs operations of the FTP bring to Hainan residents and ordinary people across China?

Cao Yuanzheng: A rising tide lifts all boats. As the economy develops and the pie gets bigger, benefits will emerge naturally. This is why Hainan has persisted for the past thirty years. The people of Hainan will naturally benefit from this. You will find that their incomes, living standards, and living environment will all see significant improvements. As long as there is development, there will be good times.