Jokes are flying everywhere, but few know the truth. The commercial logic behind Hainan's closed-off market is far more interesting than half-price luxury cars.
“350,000 BMW X5, 600,000 Porsche Cayenne!” In the past few days, my social media has been flooded with jokes about buying luxury cars in Hainan's closed-off market. Many people are excitedly shouting that they want to fly to Hainan immediately, as if they have entered a large duty-free shopping center.
But the truth is a cold shower: these half-price luxury cars are not sold to individual consumers at all. The so-called “zero tariff” imported cars are only available for qualified enterprises to purchase, and the vehicles must be used for operations, staying in the mainland no more than 120 days each year.
What is more surprising is that when a citizen was watching a displayed Bentley luxury car at a duty-free shop in Sanya, they learned from the sales staff that individuals cannot purchase it; only relevant enterprises can enjoy the preferential policies.
01 The Truth about Hainan's Customs Closure: It's Not Just Half-Price Luxury Cars
On December 18, the Hainan Free Trade Port welcomed the full island customs closure operation, which is a landmark move in China's expansion of high-level opening-up. However, many people misunderstand the meaning of 'customs closure'—it does not mean closing the island, but further expanding openness.
The core rule of the customs closure is 'open the first line, control the second line, and allow freedom within the island.'
'First line' refers to international connections; after the customs closure, Hainan's links with the international community will become more convenient; 'second line' refers to the relationship between Hainan and the mainland, implementing precise management of the contents opened on the 'first line'.
The real significant change is in tax policy. After the customs closure, the range of 'zero tariff' goods will expand from the current 1,900 tax items to about 6,600 tax items, with the coverage rate increasing dramatically from 21% to 74%.
This means that the vast majority of imported goods can enter Hainan duty-free.
The scope of beneficiaries has also expanded significantly, from only independent legal entities registered in Hainan to cover various enterprises and institutions with actual import needs across the entire island, including private non-enterprise units.
02 The Wealth Code of Hainan's Customs Closure: The Game Changer of the 30% Value-Added Rule
The most ingenious design of Hainan's customs closure is the processing and value-added rule: goods from Hainan's free trade port can enter the mainland duty-free if the processing and value added exceed 30%.
This rule seems simple, but it actually hides a huge wealth code.
Taking wool processing as an example: mainland enterprises import wool from New Zealand to produce sweaters, which originally required import duties. Now, wool can enter Hainan duty-free, and after processing into sweaters in Hainan, as long as the value added exceeds 30%, it can enter the mainland market at duty-free prices.
More cleverly, the policy allows upstream and downstream companies to merge the calculation of the value-added portion. This means that the entire industrial chain can form a cluster effect in Hainan, jointly meeting the 30% value-added requirement.
For example, if a company imports raw materials, adds 15% value, and sells to downstream companies, which then further processes and adds 20% value, if the total value added exceeds 30%, their products can enter the mainland duty-free.
The impact on industrial layout is disruptive. Companies now have strong incentives to move factories to Hainan, and one of the purposes of this threshold design is to prevent industries from excessively shifting to Southeast Asia and other regions with lower labor costs.
03 The Reconstruction of Trade Patterns: Singapore's Challenges and China's Opportunities
After Hainan's customs closure, the most impacted may be traditional trade hubs like Singapore.
Singapore, with its geographical advantage located in the Strait of Malacca, has long been an important transit hub for raw materials to mainland Southeast Asia. However, this pattern may be disrupted after Hainan's customs closure.
Raw materials can enter Hainan duty-free, and after processing and value-added in Hainan, they can enter the mainland market under duty-free conditions. This effectively establishes a direct channel between Southeast Asia and the mainland, reducing the need for transit through Singapore.
Hainan's free trade port has attracted visa-free entry for 85 countries, promoting international exchange and cooperation. At the same time, Hainan has the ambition to become a regional digital hub, establishing a mechanism for the secure and orderly flow of data and developing the digital economy industry.
This change is not only economic but also a reshuffling of geopolitical and regional economic patterns. Hainan may become a hub connecting China and ASEAN, especially under the framework of the China-ASEAN Free Trade Area 3.0, allowing Hainan to pilot modern economic and trade rules.
04 Opportunities for Ordinary People: Beyond Half-Price Luxury Cars
Although luxury cars at half price are beyond the reach of most people, the customs closure in Hainan has still created numerous opportunities that ordinary people can seize.
In the tourism consumption sector, Hainan has implemented a more open and convenient duty-free shopping policy for outbound tourists, creating an internationally influential duty-free shopping destination. The construction of an international tourism consumption center will bring more employment and business opportunities.
In the investment field, Hainan has implemented a 15% corporate income tax incentive policy, which has a strong appeal for entrepreneurs and investors. More than 170 countries and regions have invested in Hainan, increasing the province's economic openness to 35%.
In terms of personal development, Hainan provides convenience for various talents, including allowing foreign personnel to take professional qualification exams and recognizing foreign professional qualifications. This means more international employment and development opportunities.
Ordinary people can pay attention to the opportunities in Hainan's development of the digital economy, gaming exports, international medical tourism, and other emerging industries, which are currently in a period of policy dividends.
In the future, Hainan will focus on developing four leading industries: tourism, modern services, high-tech industries, and tropical characteristic efficient agriculture, while also cultivating emerging industries such as aerospace, deep-sea technology, and biomedicine.
Traditional free trade ports like Singapore and Dubai may need to rethink their positioning. Hainan, supported by the vast market of mainland China and comprehensive opening-up policies, is reshaping the global trade landscape.
Rather than fixating on that luxury car that will forever be unattainable at half price, ordinary people like you and me should seriously study the real business opportunities brought by Hainan's customs closure.
Companies that have laid out high-end ride-hailing services in Hainan have already taken action, with some having imported nearly 30 luxury cars such as Rolls-Royce and Bentley for operations, saving a total of 150 million yuan in taxes.
Opportunities are always reserved for those who are prepared; the dividends of Hainan's customs closure have only just begun to be released.
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