China continues action and rhetoric on free trade and open markets

Xi Jinping unveiled the ‘Hainan plan’ on Friday last week, which will see the island of Hainan developed into a pilot free-trade port by 2025.  In a document released by the Chinese government’s official website, they will set up an investment fund in order to build the free-trade port, which aims to be ‘mature’ by 2035.

At the Boao economic forum held in Hainan last week – Asia’s equivalent of Davos – China’s President said that this will be an important step in China’s process of opening up its markets and advancing economic globalisation, according to Reuters. This comes after China’s Central Bank unveiled a number of measures to open its financial sector, including allowing foreign investors to take a maximum 51 per cent equity stake in brokerage firms, futures companies and fund management firms but removing foreign equity ceilings totally in these sectors within three years, reports the South China Morning Post.

Chinese state officials in Beijing have stressed that this has nothing to do with pressure from the US in the recent tit-for-tat trade dispute between the two nations.

Analysts have suggested that the ‘Hainan plan’ is China’s response to Washington’s ‘Indo-Pacific Strategy’. China opening up trade with Southeast Asia and the Pacific could counter the US efforts to build up alliances and promote ‘free and open’ trade and investment throughout the region. This Indo-Pacific Strategy of Washington is generally seen as an effort to counter China’s increasing military and investment activity throughout the region, mainly through the Belt and Road initiative.

Hainan will become China’s twelfth free trade zone but will be the largest in the world and potentially rival the other major regional trading ports such as Singapore and Hong Kong. Although exact details have not been revealed, reforms related to urban-rural integration, human resource management, fiscal policy, income disposal and state-owned enterprises will all be sped up in the province.