Unlocking Opportunities: Hainan’s 2024 Encouraged Industries Revealed

Posted by Written by Tianyi Xiao Reading Time: 6 minutes

Hainan has officially launched the 2024 catalogue of encouraged industries, featuring 33 new additions compared to the 2020 edition. These strategic inclusions prioritize sectors such as tourism, modern services, and high technologies. Being listed in this encouraged catalogue is a prerequisite for enjoying the 15 percent corporate income tax (CIT) incentives offered within the Hainan Free Trade Port (FTP) and other preferential policies.

The National Development and Reform Commission (NDRC), in collaboration with the Ministry of Finance (MOF) and the State Taxation Administration (STA), has issued the Catalogue of Industries Encouraged to Develop in Hainan Free Trade Port (2024 Version), hereinafter referred to as the “2024 Hainan Encouraged Catalogue.” The updated Catalogue took effect on March 1, 2024, replacing the previous 2020 Edition.

Beyond the industries already addressed in existing national catalogues, the new entries in the 2024 Hainan Encouraged Catalogue are based on practical implementation experiences and the specific needs within Hainan, prioritizing sectors such as tourism, modern services, and high technologies.

In this article, we introduce the significance of the 2024 Hainan Encouraged Catalogue and navigate what’s new compared to the previous version.

DOING BUSINESS IN CHINA EXPLORE IN-DEPTH INVESTMENT AND BUSINESS GUIDES.
Explore vital economic, geographic, and regulatory insights for business investors, managers, or expats to navigate China’s business landscape. Our Online Business Guides offer explainer articles, news, useful tools, and videos from on-the-ground advisors who contribute to the Doing Business in China knowledge. Start exploring

What’s in the Hainan Encouraged Catalogue?

The Hainan FTP has been providing incentives to draw investors to invest and establish businesses in the region, especially foreign investment. Alongside a phased approach to opening the capital account and facilitating free capital movement, Hainan has significantly expanded market access for foreign enterprises since 2020, particularly in sectors such as telecommunications, tourism, and education.

The Hainan Encouraged Catalogue comprises two main sections:

Similar to the approach adopted by the western regions, foreign-invested enterprises (FIEs) should always implement their production or operations in accordance with the Catalogue of Encouraged Industries for Foreign Investment.

New entries in the 2024 Hainan Encouraged Catalogue

Find Business Support
We conduct industrial zone identification and benchmarking to help businesses choose the right location for their investments in China

On top of the industries already addressed in existing national catalogues, the 2024 Hainan Encouraged Catalogue encompasses 14 distinct categories and a total of 176 entries especially encouraged in the region, including 33 new additions compared to the 2020 Edition. These new entries predominantly span cultural tourism, new energy, medicine and health, aviation and aerospace, and ecological and environmental protection, among others.

Among the 14 major categories, the manufacturing industry has undergone significant change compared to the 2020 Edition. Notably, the newly added items to this category include, but are not limited to:

  1. Pharmaceuticals, green building material production, and deep processing of agricultural and forestry products;
  2. Deep processing of organic chemical raw materials;
  3. Research and production of special foods (infant formula, health foods, and foods for special medical purposes);
  4. Manufacturing of advanced and applicable pharmaceutical and biopharmaceutical equipment;
  5. R&D and manufacturing of offshore wind turbine technology with a capacity of 38.8 MW and above;
  6. Operation and maintenance of offshore wind power generation;
  7. R&D and manufacturing of new energy storage technologies and equipment;
  8. Manufacturing of instruments and meters, wires, cables, optical cables, electrical equipment, and electrical machinery related to intelligent manufacturing (excluding projects in the restricted or eliminated categories of the Industrial Structure Adjustment Guidance Catalogue);
  9. R&D and manufacturing of optoelectronic technologies and products (including optical fiber preforms, semiconductor LEDs, optical fibers, and optical fiber connectors);
  10. R&D of secondary utilization products and technologies for new energy vehicle power batteries; and
  11. Development and production of beverages, and comprehensive development and utilization of fruit residues, tea residues, coffee residues, etc. (excluding projects in the restricted or eliminated categories of the Industrial Structure Adjustment Guidance Catalogue).

Other newly added items in each industry include, but are not limited to:

Industry Added items
Transportation, warehousing, and postal services
  1. R&D and operation of new energy vehicle charging and swapping infrastructure and smart system technology; and
  2. Operation of smart urban parking facilities, and R&D and operation of smart parking system technology.
Information transmission, software, and information technology services
  1. R&D and application of metaverse technology;
  2. R&D of digital highway and smart transportation technology;
  3. Beidou satellite navigation applications; construction and maintenance of submarine optical cables; and
  4. R&D of satellite-based communication transmission, as well as applications such as navigation, positioning, surveying, meteorology, geological exploration, and spatial information services.
Water conservation, environmental protection, and public facilities management
  1. Treatment of aquaculture wastewater;
  2. Recycling of agricultural inputs waste, such as waste agricultural films and pesticide packaging materials; and
  3. Marine environmental governance, ecological restoration, and construction of ecological demonstration projects.
Healthcare and social work
  1. Aero-medical rescue.

The Encouraged Catalogue as a prerequisite for preferential policies

According to the Overall Plan for the Construction of the Hainan Free Trade Port, the encouraged industrial enterprises registered and substantively operating in the FTP can enjoy a reduced CIT rate of 15 percent.

In addition, for goods produced by encouraged industrial enterprises that do not contain imported materials or contain imported materials but have an added value exceeding 30 percent (inclusive) during processing in the Hainan FTP, no import duties will be levied when entering the Chinese mainland.

Hainan’s zero-tariff policy

Before the island-wide independent customs operations, some goods imported from overseas subject to list management (one zero-tariffs negative list and three positive lists) can be exempt from import duties, value-added tax (VAT), and consumption tax. Following the completion of independent customs operations of Hainan FTP (around 2025), all goods imported from overseas will be exempt from import duties, except for those listed in the to-be-formulated Negative List of Commodities Subject to Import Taxes and goods prohibited from importing into Hainan by law.

To be noted, goods entering the Chinese mainland from Hainan FTP are still subject to import taxes, except those that satisfy the above-mentioned preferential policies.

Government authorities in charge

During the implementation of the 2024 Hainan Encouraged Catalogue, the tax department of the Hainan Province is responsible for determining whether a company’s main business falls within the scope of encouraged industries. In cases where accurate determination becomes challenging, the taxation department has the authority to seek clarification from the provincial development and reform department. The latter is responsible for providing timely opinions on such matters

How to understand the 2024 new additions?

The new entries to the 2024 Hainan Encouraged Catalogue indicates several key directions for investment and development in Hainan FTP:

  • Diversification and innovation: The inclusion of sectors such as pharmaceuticals, green building materials, deep processing of agricultural products, and advanced pharmaceutical equipment manufacturing reflects a strategic push towards diversifying the economy. By reducing reliance on traditional sectors, fostering innovation-driven growth, creating skilled employment opportunities, enhancing sustainability initiatives, and improving global competitiveness, Hainan FTP aims to strengthen economic resilience and position itself as a hub for cutting-edge research, technology integration, and sustainable development.
  • Technological advancements: The FTP places significant emphasis on R&D and manufacturing of technologies like offshore wind turbine technology, new energy storage, optoelectronics, and metaverse technology, demonstrating a commitment to advancing technology. These efforts support sustainable development goals and position the FTP as a leader in cutting-edge industries. This leadership strengthens Hainan FTP’s potential to become a hub for transformative technological development in the global landscape in the long term.
  • Environmental sustainability: Initiatives in water conservation, environmental protection, and marine governance underscore Hainan FTP’s strong commitment to sustainability. Investing in these sectors not only aligns with responsible business practices but also taps into burgeoning markets for green technologies. By supporting innovation in sustainable development, investors can seize opportunities to pioneer solutions that mitigate climate risks, drive economic growth, and create sustainable value. This approach has the potential to attract socially responsible investors and stimulate growth in green technologies, fostering new markets and employment opportunities while ensuring sustainable development for communities and industries alike.

Overall, these additions signal a strategic direction towards fostering innovation, sustainability, and enhanced public services —an essential foundation for long-term economic development and competitiveness on a global scale.

Hainan FTP: A thriving investment destination

Find Business Support
We provide cross-regional cost comparison, infrastructure quality analysis, and industrial zone benchmarking to help you find the optimal location for your China investments.

Hainan, once known primarily for its tropical beauty, has undergone a remarkable transformation into a robust FTP. Foreign investors are now eyeing this dynamic region, drawn by its flourishing tourism industry and related sectors, including international business consulting, software development, and human resources.

In the 2024 Hainan Encouraged Catalogue, several industries are gaining momentum. Notably, green building materials, pharmaceuticals, and advanced technologies are on the rise. This shift signifies Hainan’s strategic move away from traditional sectors, fostering innovation and bolstering global competitiveness. The FTP’s commitment to cutting-edge fields like metaverse technology, offshore wind, and environmental conservation positions it as a leader in sustainable development.

Investors stand to benefit not only from emerging sectors but also from contributing to a dynamic economy—one that thrives both nationally and internationally.

About Us

China Briefing is one of five regional Asia Briefing publications, supported by Dezan Shira & Associates. For a complimentary subscription to China Briefing’s content products, please click here.

Dezan Shira & Associates assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Haikou, Zhongshan, Shenzhen, and Hong Kong. We also have offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Dubai (UAE) and partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh, and Australia. For assistance in China, please contact the firm at china@dezshira.com or visit our website at www.dezshira.com.