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Hainan, in mainland China, is now being referred to by many as “the next Hong Kong”

There is no doubt about over the past 40 years, major international businesses have leveraged Hong Kong as a steppingstone to do business in mainland China. But things are rapidly changing, and Hainan in mainland China is now being referred to by many as “the next Hong Kong”. But what exactly does this mean and why is it happening? 
On June 1, 2020, China issued the “Overall Plan for the Construction of Hainan Free Trade Port“, proposing the principle of zero tariff and low tax rate, and increasing thetax-free shopping quota for Chinese citizens to 100,000 RMB per person per year, while expanding the types of duty-free goods.
The plan also includes plenty of incentives for businesses and workers. Not only can consumers purchase products duty free, but businesses can also import products and raw materials tax free. The goal is to incentivize cross-border trade, not only to increase import and export capabilities, but also to boost trade on foreign and domestic investments, data, capital, and talents.
And by 2025 China wants to reduce the corporate tax rate by 15% for enterprises that are registered in Hainan. And employees of these companies residing in Hainan willalso have an income tax cap of 15%, much lower than many other provinces, especially the more you earn. 

What does it mean for brands?

Free trade, tax free zones, and businessincentives! 
With China boosting domestic travel to ease the economic impact from the pandemic, more Chinese consumers are choosing to travel within the country, domestic flights have picked up from a low of 5,824 flights to 7,003 daily flights (up 20%) onaverage per week. 
Hainan has become one of China’s most popular domestic travel destinations. Many international hotel chains have resorts in Hainan and more are sure to come. Adding in duty free shopping zones and dramatically increasing duty free shopping limits will ensure that travel to Hainan continues to prosper even after the COVID pandemic has passed and international travel has reopened. 
Pre pandemic we have already seen a steady increase in the housing market in Hainan, more people are moving to Hainan to retire because of the Sandy beaches and good air quality. For brands that want to thrive in China, Hainan might be a good starting point.

Source: https://chinamktginsights.com/is-hainan-the-next-hong-kong/

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