Why 2023 expectations are high for the Hainan Free Trade Port

By Patrick Quinn / / Updated: 15:45,15-January-2023

According to the European Chamber Business Confidence Survey 2022, while most European companies in China posted positive revenues and were profitable in 2021, doing business became more difficult for the majority.

COVID-19 was the top issue faced by businesses, ranking as a top-three challenge for 49% of companies.

As China scraps all border and quarantine rules and moves closer to reintegrating with the world, economic expectations are high.

Beijing’s recent pivot from its zero-Covid strategy, is expected to inject vitality into the world’s second-largest economy this year, and the Hainan Free Trade Port is well positioned to take full advantage of it.

In a recent chat with Michael Rosenthal, President/Director of East China for LehmanBush, the firm co-founded by Neil Bush (the son and brother of former US Presidents) and American entrepreneur Edward Lehman, looking forward to 2023, Michael said he expects that “the general business conditions in China will have improved in 12 months’ time.

Michael has managed organizations for more than 20 years; he is also the founder of Rosenthal Business Consulting and Executive Director/Greater China President AmChamUS.

According to Michael, over the past twelve months he has seen total business activity decrease due to  COVID-19. He is optimistic for the future however and predicts that in 2023 as China moves away from its zero-Covid strategy, both business activity and profits will improve.

The Hainan Free Trade Port, weathering the storm

Hainan Province has weathered the COVID-19 storm better than most. Even through the worst of the pandemic Hainan’s GDP has grown consistently. According to the Hainan Provincial Bureau of Statistics, Hainan’s economy grew 11.2 percent year-on-year to RMB 647.52 billion (US$89.224) in 2021.  

Worth an estimated 135.39 billion RMB (US$18.66 billion), the service sector has grown to be one of the major contributors to the province’s economy with the wholesale and retailing industries registering their largest growth in 2021, a 35.6 percent increase over the previous year.

Goldman Sachs Group and other major investment houses including J.P. Morgan UBS Group and Nomura have upgraded their growth forecasts for China for 2023, predicting that consumption and services will rebound sharply, giving a further boost to Hainan which attracted 83 million tourists from home and abroad in (pre-pandemic) 2019.

Hainan Island, business friendly policies

When asked what he thought was significant for the Hainan Free Trade Port for 2023, Michael stressed the importance of “continuing with business-friendly policies”.

According to the 2022 Report on the Work of the Government of Hainan Province more than 150 new policies have been implemented in the Hainan Free Trade Port with special measures for relaxing market access, trade liberalization and facilitation, and guidelines on financial support for Hainan’s reform and opening up.

And they’re paying off.

In 2021, foreign direct investment (FDI) in the province increased from US$ 740 million in 2018 to US$ 3.52 billion. 

Hainan attracted 1,936 new foreign-invested businesses in 2021, an increase of 92.6 percent from the previous year with the actual use of foreign capital reaching US$3.519 billion.

Between 2018 and 2020, Hainan doubled its usage of foreign capital, with the value exceeding US$8.8 billion, that’s roughly the same amount of foreign capital Hainan attracted in the previous three decades combined, and the trend looks set to continue into 2023.

Hainan Island, prime real estate

A key factor for optimism in the future of business in Hainan is its location in the economically developed Pearl River Delta Metropolitan Region (PRD), one of the most densely populated and urbanized regions in the world, and currently the wealthiest region in Southern China which ensures that Hainan has access to capital, technical assistance and talent.  

Hainan Island lies within a 1.5-hour flight radius of Hong Kong, Macao, Shenzhen, and Guangzhou.

Hainan’s prime location has turned it into a significant shipping hub. It is situated in the overlap area of the South China Economic Circle, Guangxi Beibu Gulf Economic Zone, and the ASEAN Economic Circle. Hainan’s ports link China’s southeast coastal regions with ASEAN and Southeast Asian markets and serves as a key entry point for China’s opening up to the Pacific and the Indian Oceans.

Yangpu Port, continuing to develop as a key shipping hub

The Port of Yangpu (洋浦港口) is a seaport located within the Yangpu Economic Development Zone; photo by GPS6, commons.wikimedia.org

In 2022, the Hainan Free Trade Port officially launched an ocean freight route to Africa, the third inter-continental ocean route opened by the port since 2020.

As an international shipping hub with access to both Pacific and Indian oceans, Yangpu Port operated 1.01 million TEUs from January to August this year, a year-on-year increase of over 35 percent, and a foreign trade container volume of 190,000 TEUs, a year-on-year growth of over 15 percent.

According to Hainan Statistical Yearbook 2021, fixedasset investment in the Yangpu Economic Development Zone grew 91.4% year on year in 2020; in 2021, a yearonyear growth of 109.8% was recorded. The rapid growth in investment is due to the many enterprises setting up new plants in Yangpu.

Yangpu Port has 40 operational routes, covering major ports in China and Southeast Asia. Among them, there are 19 foreign trade routes and 21 domestic trade routes, which have greatly contributed to China’s economic and trade growth.

Haikou Customs statistics reported that, in the first 11 months of 2022, the total import and export value of Hainan's goods trade was 182.63 billion yuan (about 26.25 billion U.S. dollars), an increase of 40.1% year-on-year.

According to the Outline of the 14th Five-Year Plan for National Economic and Social Development of Hainan and the Long-Range Objectives Through the Year 2035 and the 14th Five-Year Plan for the Development of Modern Logistics in Hainan Province, Hainan will accelerate the introduction of more shipping routes connecting Yangpu with overseas markets and attract more ships to use Yangpu Port as the port of registry.

Through 2023 and beyond, the government plans to continue to improve Yangpu's logistic facilities, such as expanding Xiaochan Beach Terminal, rebuilding and expanding fairways in the port area, digitalising port operations and supervision, and improving coldchain logistics facilities.

It’s always darkest before the dawn, tourism in Hainan 

Sanya City is renowned for its tropical climate and is a popular tourist destination for both domestic and international travellers.

Hainan has been closed to overseas tourists for the past two and half years since China, in response to the pandemic, stopped issuing tourist visas and implemented strict quarantine rules. And while domestic visitors have kept the tourism industry on Hainan Island alive throughout much of the pandemic, it has been a tough time for the industry in general.

That’s all expected to change as China’s travel industry sees recovery on the horizon in 2023.

According to China News Service, Hainan Airport Group announced on the 7th that during the Spring Festival travel period this year, the airports under the Hainan Airport Group are expected to transport more than 5.7 million passengers.

Many Chinese nationals overseas who haven’t been able to travel home for Lunar New Year celebrations due to zero-COVID policy now seem keen to do so. Inquiries and bookings for international flights to China in mid-January have increased following the announcement of eased travel restrictions.

International carriers are mapping out more flights to China. Qatar Airways said it will resume weekly round-trip flights between Doha and Shanghai from January 15. Thai Airways will resume the Chengdu-Bangkok round-trip flight from January 19, and Haikou Meilan International Airport plans to continue to increase the frequency of passenger flights between Haikou and Hong Kong. It is also expected to open international passenger routes in Southeast Asia and Sanya Phoenix International Airport plans to open a cargo route between Singapore and Sanya.

Lan Xiang, director of Qunar's Big Data Research Institute, predicted that the summer of 2023 will see a peak in inbound and outbound travel as exit policies for Chinese nationals, visa policies for foreign travellers and airline capacity are gradually restored.

The path forward for China to reopen may yet take quite a few months and the road to full recovery will be gradual, painful and bumpy.

But as we say goodbye to 2022 and welcome in a 2023 free of static management, lockdowns and zero-Covid, the Hainan Free Trade Port with its strategic location, increased investment and development in Yangpu Port, business friendly policies and special measures for relaxing market access along with a recovery of the tourism industry, is well positioned to take full advantage and continue to see a boost in growth prospects. 

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