Financial Support for Hainan’s
Comprehensive Deepening of
Reform and Opening-up
In recent months, a series of policies on supporting the deepening of reform and opening-up of Hainan Free Trade Port in finance, market access, trade liberalization and facilitation have been rolled out by different departments of the central government. To get our investors informed of these latest developments, we shall offer policy translation and interpretation through the FTP Policy Focus Series posts. Today we focus on the Opinions on Financial Support for Hainan’s Comprehensive Deepening of Reform and Opening-up issued by 4 departments.
Opinions on Financial Support for Hainan's Comprehensive Deepening of Reform and Opening-up
(Issued by the People's Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange)
People's Government of Hainan Province:
To thoroughly deliver the thought of General Secretary Xi Jinping’s important speech at the celebration of the 30th anniversary of the establishment of the Hainan Province and Special Economic Zone, implement the "Guiding Opinions of the CPC Central Committee and the State Council on Supporting Hainan's Comprehensive Deepening of Reform and Opening-up" and the "Master Plan for the Construction of Hainan Free Trade Port" and related strategic arrangements, support Hainan’s comprehensive deepening of reform and opening up, and promote the establishment of a financial policy and institutional framework compatible with the free trade port, the following opinions are hereby provided with the consent of the State Council.
I. General principles
(1) Support the development of Hainan's real economy. Persist in deepening the structural reform of supply side of the financial sector, innovate financial policies, products and tools, focus on the development of tourism, modern service and high-tech industries, and put emphasis on supporting the development of key areas such as marine industries, medical and health, tourism, exhibition, transportation, modern agriculture, service outsourcing, etc. Promote the establishment of an open and ecological service industry system, the optimization and upgrading of the service industry as well as high-quality economic development.
(2) Serve the construction drive of Hainan Free Trade Port. Focus on the strategic positioning of building the pilot zone for furthering all-round reform and opening up , the national pilot zone for ecological conservation, the international tourism and consumption destination, and the service zone for implementing China’s major strategies, serve capital exchanges between other regions of the country and the Hainan Free Trade Port as well as the liberalization and facilitation of cross-border trade and investment, implement various financial reform and opening and innovation measures in phases and steps to promote Hainan to become a new benchmark for all-round reform and opening up in the new era.
(3) Deepen financial reform and opening up with institutional innovation as the core. Adhere to the principle of aligning with international standards to deepen financial reform and opening up. In accordance with the thought of combining long- and short-distance, taking solid steps, and highlighting key points, trials and attempts in free and convenient cross-border capital flow, the facilitation of investment and financing exchanges, and the opening of the financial sector to the outside world are encouraged to actively explore more flexible financial policy systems, regulatory models and management systems.
(4) Strengthen the construction of financial risk prevention and control system. Adhere to bottom-line thinking, work steadily and step by step, improve the cross-border capital flow risk prevention and control system that is compatible with financial opening-up and innovation, and under the premise of ensuring effective supervision and risk control, promote various financial opening and innovation measures in a steady and orderly manner, and coordinate arrangements and progress of opening up, take one step after another to introduce measures only when conditions are met, and firmly hold the bottom line of preventing systemic financial risks.
II. Improve the convertibility of the RMB and support the liberalization and facilitation of cross-border trade and investment
(5) Further promote the facilitation of settlements for cross-border trade in goods, trade in service, and new type of international trade. In accordance with the principle of “knowing the customers, knowing the business, and performing due diligence in review”, trial projects could be run at prudential and compliant banks in Hainan Free Trade Port to handle settlements for high-quality customers with payment instructions for real compliant deals of trade in goods and trade in service, and bank authenticity review mode is altered from pre-settlement review to post-settlement check. Implement a fund payment and transfer system that is compatible with cross-border trade in service. Support pilot banks in Hainan Free Trade Port to further facilitate the cross-border settlement for real compliant new type of international trade on the basis of strengthening the hierarchical management of customers.
(6) Explore foreign exchange management for cross-border investment that adapts to new forms of market demand. Under the premise of controllable risks, Qualified Foreign Limited Partners (QFLP) in the Hainan Free Trade Port are allowed to handle inbound and outbound fund remittance without control as long as the requirements for balance management are met, and streamline foreign exchange registration procedures. The Hainan Free Trade Port will be included in the Qualified Domestic Limited Partnership (QDLP) pilot program, and will be granted the QDLP pilot basic quota, while an additional quota could be granted each year according to specific rules.
(7) Improve the policy framework for the macro-prudential management of full-scale cross-border financing. The upper limit of cross-border financing for non-financial enterprises (excluding real estate enterprises and local government financing platforms) registered in the Hainan Free Trade Port can be appropriately increased to achieve a higher scale of cross-border capital financing.
(8) Explore the implementation of pilot projects for cross-border asset management business. Support foreign investors to invest in wealth management products issued by financial institutions in the Hainan Free Trade Port, private equity asset management products offered by securities and futures operating institutions, public securities investment funds, insurance asset management products and other asset management products.
(9) Explore the relaxation of policies for personal cross-border transactions. Support foreign individuals employed in the Hainan Free Trade Port to carry out various types of domestic investment including securities investment. Eligible non-residents are allowed to purchase real estate in Hainan Free Trade Port upon practical demand, and provide them with foreign exchange facilitation. Study the feasibility of further facilitating the personal use of foreign exchange by Hainan residents.
(10) To carry out a pilot project of a cross-border capital pool business with the integration of domestic and foreign currencies in Hainan. Support qualified multinational enterprise groups to conduct centralized adjustment and pooling of domestic and foreign currency funds between domestic and foreign corporate members, to exchange funds in special accounts based on practical demand, and implement two-way macro-prudential management of cross-border capital flows.
(11) Support qualified non-bank financial institutions to carry out pilot projects for foreign exchange settlement and sales. Qualified non-bank financial institutions can participate in the inter-bank foreign exchange market upon meeting specific conditions, and conduct RMB-to-foreign exchange spot business and related derivatives transactions in accordance with laws and regulations.
III. Improve Hainan's financial market system
(12) Support the development of Hainan's banking industry. Support Hainan to introduce national joint-stock commercial banks to set up branches. Study the reform of Hainan Rural Credit Cooperatives, and promote the implementation of its strategy of better serving rural revitalization. Strengthen financial services in areas such as the marine industry and high-tech industries. Support Hainan to attract foreign investment and participate in shareholding of local asset management companies.
(13) Support qualified Hainan enterprises to go public for the first time and grow through the multi-level equity market. Continue to support the mergers and acquisitions of Hainan enterprises to achieve transformation and upgrading.
(14) Support Hainan enterprises to issue bonds for financing. Actively support qualified Hainan enterprises to issue corporate credit bonds in the inter-bank market and the exchange market to further increase the scale of direct financing. Support market entities to expand their independent choice of trustee management institutions and trading venues. Support Hainan enterprises to revitalize their stocks and expand funding sources through asset securitization.
(15) Support the development of related funds in Hainan. Support public funds to settle in Hainan, support qualified institutions to apply for the establishment of joint venture public fund management companies in Hainan according to law, and support qualified overseas financial institutions to wholly own or hold shares in futures companies in Hainan. For private equity investment funds investing in key areas such as seed industry and modern agriculture, a green channel for registration and filing will be provided.
IV. Expanding the opening up of Hainan's financial industry
(16) Expand the opening up of the banking industry. Encourage overseas financial institutions to settle in Hainan and support the establishment of Sino-foreign joint venture banks. Support Hainan's banks to introduce qualified overseas strategic investors, improve the equity structure, improve corporate governance, and further increase the degree of openness of Hainan's banking industry to the outside world.
(17) Expand the opening up of the insurance industry. Strengthen research on the in-depth cooperation between Hainan and Hong Kong and Macau in the insurance market. Learn from international experience and common practices, explore and formulate solvency regulatory policies suitable for offshore reinsurance business.
(18) Set up a fast track for access-related matters in the banking industry, establish a time-limited settlement system for access matters, and improve the efficiency of examination and approval.
(19) Implement national treatment requirements for foreign investment, and support qualified foreign-funded institutions to obtain payment business licenses in Hainan in accordance with laws and regulations.
(20) Allow the head offices of Chinese-funded commercial banks that have obtained offshore banking qualifications to authorize branches in Hainan Free Trade Port to provide offshore banking services.
V. Strengthen financial product and service innovation
(21) Encourage the innovation of RMB financial products and businesses oriented for the international market, and expand the scope of overseas RMB investment in Hainan's financial products. Under the premise of compliance with laws and regulations, Hainan market entities are allowed to issue RMB-denominated bonds and other products abroad to introduce overseas RMB funds, focusing on supporting the development of high-tech, medical and health, tourism, exhibition, and transportation industries.
(22) Steadily expand the scope of cross-border asset transfer. Under the framework of macro-prudential management, in accordance with the principles of controllable risks and adjustable scale, pilot projects in the Hainan Free Trade Port will be operated to expand the scope of credit assets that can be transferred out across borders and the scope of participating institutions.
(23) Support Hainan to explore and promote the pilot program of mortgage guarantee for the right to use state-owned agricultural land for land reclamation, and promote the improvement of registration and certification of confirmed rights, mortgage guarantee registration, land circulation platform construction, mortgage value evaluation and other supporting measures.
(24) Develop insurance business in innovative forms. Support qualified insurance institutions to set up insurance asset management companies in Hainan and issue RMB-denominated asset management products overseas under the premise of using separate accounts and withholding risks. Support Hainan insurance institutions to carry out overseas investment business. Encourage insurance institutions to strengthen innovation and develop special insurance products that meet the needs of Hainan in areas such as environment, agriculture, tourism, health, and aged care.
(25) Develop green finance. Encourage pilot programs on innovative green finance businesses in Hainan, and support the construction of the national pilot zone for ecological conservation. Increase investment and financing support for ecological and environmental protection, especially the response to climate change.
(26) Support the development of technology-oriented finance and promote the development of marine science and technology. Under the premise of compliance with laws and regulations and controllable risks, Hainan's legal person banks are encouraged to strengthen cooperation with venture capital institutions, explore new models of technology-oriented finance, and support Hainan to strengthen deep-sea technology innovation. Foster innovaton on technology-oriented financial policies, products and tools.
(27) Strengthen the innovative application of financial technology on law-based and risk-preventing basis. Support the Hainan Free Trade Port to carry out pilot programs on financial technology innovation businesses under the coordination of financial management authorities, and steadily promote the in-depth integration of technology and financial services.
VI. Upgrade the level of financial services
(28) Support the exploration and development of a pilot bank account system combining domestic and foreign currency businesses in Hainan.
(29) Support commercial banks, China UnionPay and all parties in the industry to promote the development of small and micro enterprise cards, rural revitalization cards and other businesses, focusing on financial services provided to small and micro enterprises, for the payment and settlement, financing and credit increase, and enterprise value-added service system related to "three rural issues"-related industries in order to meet the needs for internet and mobile payment and settlement from small and micro enterprises and "three rural issues"-related industries.
(30) Improve the facilitation level of cross-border mobile payment. Facilitate the use of mobile electronic payment tools by overseas residents in Hainan. Support domestic mobile payment institutions to operate business overseas, and gradually expand their regional coverage of cross-border mobile payments through overseas participating institutions of the RMB Cross-Border Inter-bank Payment System (CIPS).
(31) Continue to promote the establishment of a credit system for small, medium and micro enterprises in Hainan, support the construction of a comprehensive financial service platform for small and micro enterprises, and interconnect with the national "Xinyidai"(CreditChina) platform, and do a good job in the collection and application of credit information of small and micro enterprises, and dock with financial services in a more efficient way. Further promote the building of Hainan's rural credit system, expand credit information coverage in rural areas, strengthen credit information services, effectively connect with inclusive finance and rural revitalization strategies, and support the development of the real economy and Hainan's special industries. Support Hainan to introduce credit rating agencies with market influence. Establish a sound credit information sharing mechanism to support the building of a local social credit system in Hainan.
(32) Support Hainan to accelerate the development of modern service industries such as shipping finance and ship finance leasing.
(33) Support the development of culture, sports, and tourism. Strengthen financial services in the fields of culture, sports and tourism. Establish a big data credit information platform for cultural, sports, and tourism enterprises to solve the financing bottleneck caused by insufficient credit information of these enterprises and information asymmetry with financial institutions. Promote special bonds for the culture, sports and tourism industries, optimize the financing structure of these industries, and gradually reduce financing costs. Build a regional cultural and tourism financial service platform, and improve the industrial financial service system. Aiming at the special industries of the Hainan International Tourism Island such as cruise and yachting, emphasis shall be put on supporting the construction of industry cluster parks and related public service as well as supporting facilities for cruise and yachting.
(34) Under the framework of the long-term real estate mechanism, support Hainan in the development of real estate investment trusts (REITs) in the housing leasing sector, encourage financial institutions in the banking sector to innovate financial products and services, and support the standardized development of the housing leasing market.
VII. Strengthen financial supervision to prevent and defuse financial risks
(35) Build a financial macro-prudential management system to strengthen the identification of major risks and the prevention of systemic financial risks. Rely on the capital flow information monitoring and management system, establish and improve the sound capital flow monitoring and risk prevention and control system. Improve the anti-money laundering, anti-terrorist financing and anti-tax evasion systems and working mechanisms, study the establishment of a money laundering risk assessment mechanism, and regularly assess the risks of money laundering and terrorist financing. Establish a financial supervision and coordination mechanism suitable for the construction of Hainan Free Trade Port, effectively perform territorial financial supervision responsibilities, and ensure that risk prevention and control capabilities are compatible with financial reforms and innovations.
(36) Support Hainan to build a professional financial and bankruptcy trial institution to focus on the trial of Hainan’s financial and bankruptcy cases, improve the level of professionalism in trials of financial and bankruptcy cases, and provide parties involved with more high-quality and efficient judicial guarantee.
(37) Strengthen the protection of the rights and interests of consumers of financial services. Support Hainan's consumer dispute mediation organizations in the banking, securities, and insurance sectors to give full play to their role and establish a fair, efficient, and convenient non-litigation third-party settlement mechanism for financial disputes. Strengthen communication and cooperation with local people’s courts and judicial administrative departments, implement a mechanism for reconciliation of conflicts and disputes in the banking, securities, and insurance fields, give full play to the professional advantages of mediation organizations in the financial industry, and explore the establishment of a judicial confirmation system for financial industry dispute mediation agreements. Carry out popularization activities of financial knowledge on a centralized basis, and establish a education demonstration base for financial knowledge popularization in Hainan. Give further play to the role of the education base for securities and futures investors.
People's Bank of China
China Banking Regulatory Commission
China Securities Regulatory Commission
State Administration of Foreign Exchange
March 30, 2021