Could China have created an attractive new Tax Haven???
What China is doing with Hainan – a huge island to the south of the mainland (50 times the size of Singapore!) – is quite extraordinary: they’re essentially making it into a completely different jurisdiction from the rest of the country, and an extremely attractive entry gate for the Chinese market.
You can now import most products in the world (74% of all goods) entirely duty free into Hainan. And, if you transform the product and add 30% value locally, you can then send it to the rest of mainland China completely tariff-free. For example: You could import beef into Hainan tax free. Slice it and package it for hotpot in Hainan: it can then enter all mainland supermarkets duty-free.
The Hainan Province also offers an attractively low corporate tax rate ie 15% which is lower than Hong Kong (16.5%) and lower than Singapore (17%) AND lower than the rest of mainland China (25%).
That’s not all, Hainan now has different rules from the rest of China in a number of areas including:
HEALTH: In essence, the rule here is that if a medicine or medical device is approved by regulatory agencies anywhere in the world, it can be used in Hainan – even if banned on the mainland. Which undoubtedly makes it THE place in the world with the widest range of medical treatments available.
NO FIREWALL: Companies registered in Hainan can apply for unrestricted global internet access
OPEN EDUCATION: Foreign universities can open campuses without a Chinese partner
VISA-FREE: 86 countries get visa-free entry into Hainan, probably one of the most open places in the world
CAPITAL: Special accounts let money flow freely to and from overseas – normal mainland forex restrictions don’t apply
To summarize, China is running an extraordinary “radical openness” experiment in Hainan. They are essentially creating a “greatest hits” of global free zones: Singapore’s tax regime combined with Switzerland’s medical access blended with Dubai’s visa policy – and all in one giant tropical island attached to the 1.4 billion people Chinese consumer market!
And what we know from the Hong Kong free trade port experiment, the growth of Singapore and of late the staggering upsurge of capital, entrepreneurs and professionals migrating to Dubia/UAE is if you create a low regulation low tax Corporate operating environment the money will follow!
Watch this space for developments…
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