Illustration: Xia Qing/GT

The Chinese government will prop up South China's Hainan Province in building a pilot free trade zone (FTZ) and gradually exploring and steadily pushing forward the construction of a free trade port with Chinese characteristics, China's Minister of Commerce Zhong Shan told a press conference on the sidelines of the two sessions, China's annual legislative meetings, on Saturday. 

According to Zhong, this is a major strategy determined by the central government and a major measure toward reform and opening-up in the new era.

To explore the construction of a free trade port with Chinese characteristics, Hainan needs to not only learn from advanced operation and management models, but also needs to pay attention that the port should "have Chinese characteristics, conform to China's national conditions and be in accordance with Hainan's development orientation."

In 1547, Italy's Livorno Port became the world's first free port. Over the past 400 years or so, more than 3,000 free trade ports (zones) have been established in 119 countries and regions around the world. A number of representative free trade ports, such as Hong Kong, Singapore, Dubai port of the United Arab Emirates and New York port in the US, have developed into leading international trade hubs or trade distribution centers, promoting the prosperity and development of regional economies and societies, and facilitating the liberalization of global trade and investment. Thus, the construction and operation experience of these free trade ports is worth studying.

First, promote trade facilitation and improve transaction efficiency. The basic function of a free trade port is to facilitate international trade, with the core function to develop the trans-shipment trade, processing trade and offshore trade. Modern free trade ports also adopted other trade facilitation measures, including exemptions of customs declaration fees, lifting of quota restrictions on goods entering and leaving, and improving customs declaration efficiency through electronic means.

Second, promote investment liberalization to reduce investment costs. Except special restrictions on investment in some individual industries, free trade ports basically implement investment freedom and national treatment policies.

Third, implement tax incentives to attract market resources. Free trade ports usually give companies preferential policies in taxation so as to attract investment and expand trade volume.

Fourth, promote the free flow of factors to optimize the allocation of global resources. Free trade ports usually set relatively loose policies and regulations for the flow of factors, such as currency exchanges and commodity circulation, which will promote the optimization of global resources allocation.

While China's exploration and construction of free trade port needs to learn from internationally advanced free trade ports to achieve "high degrees of freedom, convenience and rule of law," it is also essential to highlight difference with them, because Hainan free trade zone is to be a distinctive zone built in the new era of socialism with Chinese characteristics.

First, we need to establish a new path for developing an open economy. Exploration and construction of a free trade port with Chinese characteristics is an important measure to adapt to the economic globalization development.

Second, we need to create a new platform for developing an open economy. The new platform for China's international economic and trade cooperation is aimed at obtaining a larger increase in global trade, promoting China's transformation to a major international trading power and improving its status in the global division of labor in the global value chain.

Third, we need to build a new pattern for developing an open economy. Exploration and construction of a free trade port with Chinese characteristics reflects the continuous development and upgrading of China's opening-up in the new era, which will bring new momentum and build a new pattern for the country's economic development.

Fourth, we need to lead a new trend for developing an open economy. Exploration and construction of a free trade port with Chinese characteristics should be closely integrated with the construction of the Belt and Road Initiative, accelerating the construction of a free trade network.

Last but not least, we need to set up a clear development orientation based on Hainan's characteristics to push forward the construction of a free trade port step by step. Hainan is an important opening-up gateway for China to the Pacific and the Indian Ocean, a strategic pivot for the 21st Century Maritime Silk Road. 

Therefore, it is necessary to give full play to Hainan's geographic advantages and make full use of the "domestic and overseas markets, as well as domestic and overseas resources," establishing "a pan-South China Sea economic cooperation rim."

The author is a research fellow with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce. bizopinion@globaltimes.com.cn