Financial Policies for the Hainan Free Trade Port
The construction of the Hainan Free Trade Port (FTP) is a major national strategy personally planned and promoted by Communist Party General Secretary Xi Jinping. The release of the Master Plan for the Construction of the Hainan Free Trade Port on June 1 demonstrated that the program has entered the full implementation stage. The plan provided a roadmap and timeline for building a FTP with Chinese characteristics. So what can we expect in the near future? Chen Zhiwei，the editor-in-chief of China Forex and Cao Xiehe，president of Bank of China Haikou Central Sub-branch，discuss the financial characteristics of the free trade port and how this should ensure vital high-quality financial services.
Chen Zhiwei: Free trade ports represent the highest level of economic openness in the world today and one of the basic features of a mature free trade port is an open financial system. The final result is economic prosperity. The construction of the Hainan Free Trade Port is a brand-new undertaking with great strategic significance for China. This is an opportunity and a challenge as well for the financial sector in Hainan. Innovation of institutional integration shall be prioritized in accelerating the construction of an open economy and an FTP of high quality and high standards. In your view，how will the financial sector in Hainan support these objectives? And what should the focus be for these financial institutions?
Cao Xiehe: The development goals and methods of attaining them at the Hainan Free Trade Port are clearly defined. The focus is on trade and investment facilitation as well as promoting high quality development of the real economy and the realization of an economic upgrading in terms of quality，efficiency and momentum. A modern economy relies on the real economy and its lifeblood - the financial system.
The Master Plan calls for the broadening of industrial financing channels as well as innovation in terms of technology and financial policies，products and tools. It also calls for supporting enterprises in the Hainan Free Trade Port to issue bonds at home and abroad. It encourages them to move ahead in pledge loans，tourism asset securitization，financial products for shipping logistics and supply chain financing.
Meanwhile，there is a goal of supporting the development of financial technology，commercial medical insurance services，and cross-border medical insurance. The financial sector in Hainan needs to comprehensively improve its services in terms of quality and efficiency so that it can serve the real economy. It also needs to accelerate the implementation of these measures，support FTP market entities in broadening the scope of these cross-border financial activities，drive production factors to flow towards the real economy，and facilitate the economic and social development of Hainan，especially in key areas such as tourism，modern service industries，and the high-tech sector.
Policies for the Hainan Free Trade Port are unique so they may not be easily replicated elsewhere. While experimenting with these innovative financial policies，we should gradually explore the establishment of financial management systems，organizational systems，market structures and risk prevention and control mechanisms that are in line with internationally accepted rules. The ultimate objective is to promote the construction of a free，open，effective and safe financial service environment. We should focus on innovation in offshore finance，offshore renminbi，renminbi internationalization as well as capital account convertibility. The innovations need to be closely linked to legislative developments，fiscal and taxation policies，clearing and settlement，as well as protecting confidentiality and combatting money laundering.
Chen Zhiwei: The Hainan FTP represents a deeper and more comprehensive opening based on the Hainan Free Trade Pilot Zone. A more open environment can better realize the full potential of resource allocation and therefore is more dynamic and competitive. Would you please share with us your understanding of this?
Cao Xiehe: It is true that a more developed socialist market economy will better enable the role of the market，and certainly bring more vigor and vitality to the economy. In my view，we need to give full play to the market mechanism to achieve an overall improvement of Hainan’s social and economic competitiveness and thereby achieve healthier development.
The focus of the Master Plan has been designated as "trade and investment facilitation，cross-border capital flow facilitation，personnel access facilitation，transportation facilitation and a safe and orderly flow of data." A series of institutional arrangements has been developed for these six areas. The arrangements were made in order to give full play to the role of the market mechanism，clear away obstacles that restrict the flow of production factors，promote the allocation of resources to maximize benefits and optimize efficiency，stimulate the vitality of market entities to the greatest extent. This will achieve what we call the "five-in-one" sustainable and high-quality development of Hainan's economy.
Financial services in the Hainan FTP are relying on the market mechanism with a focus on trade and investment facilitation. We need to facilitate services under the current account to achieve a high degree of convenience in the trade in goods and services. At the same time，it is necessary to provide services under the capital account for cross-border investment and financing and continue to enhance liberalization and convenience in trade and currency conversion. Meanwhile，we need to promote capital account convertibility in a steady and orderly manner. In the meantime，we must support various financial institutions in the FTP in carrying out product innovation in cross-border financial services and provide convenience and services for cross-border transactions and cross-border financing.
Chen Zhiwei: According to the Master Plan，construction of the Hainan FTP will proceed in a step-by-step manner. There will be a phase that puts in place a foundation comprehensive implementation of FTP policies. In the months ahead，what specific measures will Hainan's financial sector put in place to coordinate the financial work during these two phases?
Cao Xiehe: Before answering this question，it is necessary to briefly review the financial policies and innovation of the Hainan Pilot Free Trade Zone，which have paved the way for the launch of the FTP project. During that time period，Hainan successfully learned from and copied the mature practices of other pilot free trade zones across the two phases? It became the second province in the country to launch a free trade account system. Additionally，a series of innovative measures in foreign exchange management reforms were also developed to promote trade and investment facilitation. Trade financing was empowered by financial technology. A cross-border blockchain service platform was successfully launched and the first transaction of export account receivables financing was also accomplished as reported by CCTV News. We also proactively built the country's first capital flow data monitoring system，creating a significant component of the “electronic ringfence” that seals off the FTP from other areas. We took the lead in launching trials to facilitate mobile payment for inbound tourists and effectively resolved related problems.
Next，the financial sector in Hainan will follow the overall plan of the FTP，take full advantage of financial policies while taking into account the features of Hainan's social and economic development while expanding the opening up of the financial sector for more convenient financial services on behalf of domestic and foreign enterprises.
First，the plan calls for advancing the financial work in a step-by-step and phased manner. The financial sector in Hainan will coordinate the financial reform and opening up work based on the development goals of the two phases to provide convenient services at all phases for market entities.
Second，it focuses on the financial planning in the region and the FTZ park. According to the Master Plan，the Hainan FTP will set up a number of special customs supervision zones and key parks before completion of the construction work. These will serve as the major vehicle and platform for the construction of a modern industrial system for the FTP，as well as an "incubator" for the trial operation.
Third，there is a need to determine the financial services of the FTP after the construction work is completed. The Hainan FTP will start island-wide customs clearance operations before 2025. Timely adjustments and deployment will be necessary by then.
Chen Zhiwei: Construction of the Hainan FTP requires a mature financial supply system. In recent yea