Chen Wenling: Historical Mission and Responsibility of Hainan Free Trade Port

A speech delivered by CCIEE Chief Economist, Chen Wenling

Thank you very much for the invitation, Mr. Chi. The keynote speeches delivered in the morning were very inspired, especially the speech of Mr. Chi. I would like to talk about the historical mission and responsibilities of the free trade zones, especially the Hainan Free Trade Port.

The construction of the Hainan Free Trade Zone and the Free Trade Port should take into account the unprecedented changes so that we can create a world-class free trade port.

Firstly, the construction of the Hainan Pilot Free Trade Zone and the free trade port should take into account the unprecedented changes.

There are many explanations for the “unprecedented changes”. According to my understanding, the biggest change now is the competition between the great powers, which will determine the destiny of the world and rewrite the world’s geopolitical, economic, diplomatic and even military structure. The main players in this big change are China and the United States. The US is the most powerful and competitive country in the world. The size of China’s economy is catching up with the US and it may even overtake the US in the future. However, we still need to learn more about the US, including its institutions. I believe that the free trade zone and free trade port bear great historical missions. China (Hainan) Reform and Development Research Institute has recently published two books: “A New Open Country”, and “An Opening Land”, both are excellent works.

So far, there have been 18 pilot free trade zones established in China, covering more than half of China. In two years, the free trade pilot zones may cover all of China, implying significant progress in the second round of reform and opening up. Hainan should be different from other pilot free trade zones since the core of Hainan free trade port is opening-up. In my opinion, the construction of Hainan Pilot Free Trade Zone and free trade port should be one of the best in China. The opening-up of the Hainan Pilot Free Trade Zone and the free trade port must be forward-looking and original, not just copying or promoting the experience of the existing Pilot Free Trade Zones.

Secondly, opening-up is the biggest reform and must be first-class.

President Chi said that opening up is the biggest reform, I totally agree with that. The new round of opening-up is not a repeat of the previous opening-up, but to reshape our system, mechanism and policies.

Thirdly, the opening-up must be a leading opening-up.

The opening-up should not just lead China’s Pilot Free Trade Zones, but must also catch up with international standards. In particularly, we need to learn from countries and regions with great openness, such as Dubai and Singapore, to understand why they can attract people, logistics, information and capital? We need to summarize their experience of opening-up and make better use of it.

Lastly, the opening-up should be institutional-based and focus on providing high-quality institutional supply.

Only institutional opening-up can make the Hainan Pilot Free Trade Zone and the free trade port one of the best pilot zones and make sure that it will live up to our expectations, especially the expectation of Chinese President Xi Jinping.

Hainan Free Trade Zone has a special historical mission and new responsibilities under the new situation.

First of all, Hainan Pilot Free Trade Zone and Free Trade Port must become our forefront in the competition among big powers.

The competition between big powers is not only a matter of trade. The trade war is only the beginning of the China-US competition. I think that the United States will definitely not end the trade war after reaching a temporary trade agreement. Instead, the war will spread to manufacturing, high-tech, internet, finance and other fields, and even split our motherland. It will endanger our territorial security and prevent us from building a socialist modern power.

The competition between China and the US is extremely difficult and complicated. Therefore, we must make breakthroughs and substantial progress in the free trade pilot zones.

Secondly, the Hainan Pilot Free Trade Zone and the free trade port should serve as a frontier for China to seize the commanding heights during the restructuring of the world economy.

At present, the world economy is at a crossroad and energy, finance, manufacturing and trade are experiencing profound changes. With the restructuring of the world economy and the formation of a new economic form, we should seize the commanding heights in the new circumstance. Thus, the Hainan Free Trade Pilot Zone and Free Trade Port should become the frontier of this major transformation.

Thirdly, Hainan Pilot Free Trade Zone and Free Trade Port are important for creating high-quality institutional supply.

The Hainan Pilot Free Trade Zone, especially the free trade port need to create a new path through reform and opening-up. It needs original system innovation, which can be used for the competition between China and the United States. This is an important historical mission for all free trade pilot zones.

Fourthly, Hainan should become a frontier for supporting the implementation of major national strategies.

Hainan should play a major role in implementing various national strategies, including the free trade pilot zone strategy, the free trade port strategy, the Belt and Road Initiative, and the national innovation strategy. The Hainan Pilot Free Trade Zone and the free trade port must become the high ground for the implementation of the overall national strategy and hence, we can say that Hainan bears a special historical mission.

Last but not least, Hainan should become the frontier of the new economic globalization and the conversion of old and new kinetic energy.

Some people are wondering if it is possible to establish a free trade port in Hainan? I believe that the key is to attract top talents and have great systems in place. Taking personal income tax as an example. The personal income tax in Hong Kong SAR is 15%, but 45% in Mainland China. In order to attract talents, Shenzhen government reduced the personal income tax to the same level as Hong Kong through financial subsidies and other methods. Hainan Pilot Free Trade Zone and Free Trade Port should also use such kind of policy to attract talents. At present, more than 1,600 documents have been issued in the area of reform, but it is more important to ensure that these reform measures will be implemented.

We must continue opening-up and reform to overtake other countries.

When the United States returned to the Asia-Pacific in 2015, it proposed the free trade zone strategy of “one body and two wings”: “One body” refers to the North American Free Trade Area, and “two wings” refers to TPP and TTIPP. This kind of large free trade area is exclusive. If this strategy becomes a reality, it means that 80% of international trade and more than 60% of global GDP will be included in these agreements. The United States’ dominance in the Pacific and the Atlantic will be further consolidated, and it will occupy the commanding heights of the world economy.

In response to the US strategy of “returning to the Asia Pacific”, President Xi Jinping proposed the strategy of free trade pilot zones. In 2013, Shanghai started the construction of a free trade pilot zone to connect itself with the higher standard of international economic and trade rules. Although the TPP and TTIP proposed by the United States have not been realized, the United States never stopped its suppression on China and the situation is getting more. Therefore, we must continue opening-up and reform to overtake other countries.

Thank you all!