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(1) Recent policies of Hainan to promote inward and outward investment
In order to better serve enterprises going global and actively utilize overseas funds to promote its economic transformation and upgrading, Hainan Province has actively implemented a series of policies formulated by the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOC) and the Ministry of Finance (MOF), and worked out a series of measures and detailed rules in line with its own conditions.
Overseas investment: In 2015, in order to promote and standardize the “going global" of Hainan enterprises and accelerate the transformation of overseas investment management functions, Hainan Development and Reform Commission formulated the Implementation Measures for Filing Overseas Investment Projects in Hainan Province in light of the Administrative Measures for the Approval and Filing of Overseas Investment Projects (NDRC Decree No. 9) and its own actual conditions. It strengthened the communication, coordination and information-sharing with the authorities in charge of commerce, customs, taxation, foreign exchange administration and entry-exit management, and enhanced the dynamic monitoring, in-progress and post-event supervision over the implementation of overseas investment projects. All efforts were pooled together topromote the orderly implementation of overseas investment projects in accordance with the law. In addition, in accordance with the Circular of the Ministry of Finance and the Ministry of Commerce on Distributing the Measures for the Management of Special Funds for Overseas Investment and Cooperation (CQ  No. 124), the Detailed Rules for Special Funds for Foreign Investment and Cooperation in Hainan Province was formulated based on the actual situation of overseas investment and cooperation in Hainan Province, in a bid to encourage Hainan enterprises to carry out overseas investment and cooperation in an orderly manner, improve their international competitiveness and standardize the management of funds for overseas investment and cooperation. The Special Fund for Foreign Investment and Cooperation (hereinafter referred to as the Cooperation Fund) mentioned in the Rules refers to the special hind provided by the central budget for Hainan Province to support overseas investment and cooperation activities such as overseas investment, overseas project contracting and overseas labor cooperation. The Cooperation Fund shall be jointly managed by the Department of Finance and the Department of Commerce of Hainan Province. The former is responsible for budget management and allocation of the Cooperation Fund. It shall determine key targets and distribution methods every year together with the latter, and supervise and inspect the use of the fond. The latter is responsible for management of the Cooperation Fund. It shall propose the key targets every year together with the former, organize, solicit and review project applications, put forward fond allocation plans, and conduct evaluation and supervision on the implementation of the funded projects.
Foreign capital utilization: At present, Hainan mainly follows the Interim Provisions on Domestic Investment of Foreign-Funded Enterprises formulated by the former Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce in 2000. In order to encourage more foreign enterprises to settle in Hainan, in 2010, Hainan started a campaign to get itself into the Catalogue of Advantageous Industries for Foreign Investment in Central and Western Regions of China in consideration of its actual conditions, and finally got the approval from the State Council in 2013. Hainan’s featured resources, featured agriculture and advantageous industries were highlighted in the Catalogue with 22 items listed, covering agriculture, manufacturing, communications and transportation, tourism, water conservancy, environmental and public facilities management, health, culture, sports and entertainment industries. Foreign investment projects within this scope may enjoy tax cuts and other preferential policies for encouraged foreign investment projects. The implementation of the Catalogue is of positive significance to Hainan’s utilization of foreign capital, enjoying preferential policies for foreign investment in central and western regions, and promoting the construction of an international tourist island. In addition, the Hainan Province Sendee Trade Innovation and Development Pilot Plan issued in May 2016 proposes encouraging foreign investment in tourism and in the development and construction of commercial scenic spots and facilities.
In 2015, Hainan Province actually used US$2,005 billion of foreign investment, up 6.2% year-on-year. It welcomed 71 new enterprises, up 18.33% year-on-year. The total contractual foreign investment was USS1.28 billion, up 83.65% year-on-year. In terms of the investment structure, in 2015, foreign-funded enterprises in Hainan Province mainly invested in the service industry (real estate), manufacturing and construction. Specifically, foreign investment in the service industry (real estate) reached US$1,668 million, accounting for 83.18% of the total and taking a dominant position; foreign investment in the manufacturing industry was US$22,399 million, accounting for 11.17% of the total; the foreign capital used by the construction industry amounted to US$42.99 million, representing 2.14% of the total. In 2015, Hong Kong SAR, the Cayman Islands, Singapore and the Netherlands were major sources of foreign capital in Hainan. Specifically, Hong Kong SAR was the largest source, with an actual investment of US$1,778 million, 88.68% of the total. The Cayman Islands contributed US$133 million, or 6.6% of the total; Singapore contributed USS50.78 million, accounting for 2.5% of the total; and the Netherlands invested USS 16.07 million, or 0.8% of the total.
The problems of foreign capital utilization in Hainan Province are as follows: The sources of foreign capital are mainly Asian countries, and they contribute more than 90% of all foreign investment in Hainan. Investment concentrates in real estate and manufacturing. Hainan Province has not made enough efforts in publicity and investment promotion and its investment environment needs to be further improved. Besides, it does not have sound preferential policies for foreign investment.
2) OVERSEAS INVESTMENT OF HAINAN ENTERPRISES
The actual outward investment of Hainan enterprises in 2015 amounted to US$991 million, an increase of 27% over 2014, ranking 17th nationwide. Their investment mainly concentrated in the Hong Kong SAR, Singapore, Kazakhstan, and the United States, and major projects are HNA Group’s contractual acquisition of Swissport International Ltd., Geo-Jade Petroleum Corporation’s acquisition of KoZhan LLP of Kazakhstan, investment in Singapore by Hainan Huaxin International Holding Co., Ltd., and investment in the United States by Hainan Hengxing Juyuan Equity Investment Fund Partnership.
The difficulties faced by Hainan enterprises in “going global” mainly include: First, the enterprises are small in scale and find it difficult to secure financing for their projects. Most of the enterprises in Hainan Province are small and mediumsized enterprises (SMEs), and many lack financing capacity and fund for international production capacity and equipment manufacturing cooperation. So, it is difficult for them to obtain the funding required for going global. Second, they lack relevant information. Enterprises have weak capability to study the investment and trade environment in foreign countries and lack information about relevant policies, laws and regulations, investment risks, economic, political situation and market policies of relevant countries, so they cannot make accurate judgments on the foreign market and the risks of overseas investment.
In 2015, contractual investment from Malaysia registered USS 1.66 million in Hainan and the amount actually used was USS 1.5 million, with a new enterprise established. Singapore’s contractual investment in the province was US$20.35 million and US$50.78 million was actually used, mainly in real estate, accounting for 2.5% of the total foreign investment in the province. Indonesia had a contractual investment of USS 10,000 with a new enterprise established. Myanmar had a contractual investment of US$490,000 with a new enterprise established.
2) HAINAN'S INVESTMENT IN BRI COUNTRIES
In 2015, Hainan enterprises invested in five BRI countries, with a total registered amount of US$310 million and an actual investment of USS220 million. The main projects are as follows: Hainan Huaxin International Holdings Co., Ltd. invested USS80 million in Singapore for mining, coal, oil, mineral products and other commodity transactions; Geo-Jade Petroleum Corporation invested US$139 million in Kazakhstan, mainly for oil and gas exploration; Hainan Yingli New Energy Resources Co., Ltd. invested in a PV project in Thailand.
(4) Prospects for 2016
In terms of the utilization of foreign capital, in 2016, Hainan will focus on attracting investment in the 12 key industries in its 13th Five-Year Plan including tourism industry, tropical high-efficiency agriculture, Internet industry, medical and health industry, exhibition industry, modem logistics industry, oil and gas industry, pharmaceutical industry, low-carbon manufacturing industry, high-tech, education, and culture and sports industry in the principle of "unified layout, industrial concentration, intensive land use and strict compliance with environmental regulations.” It will lay emphasis on investment promotion activities in the Hong Kong SAR and Taiwan of China, with a focus on modem sendee industries such as tourism, health, finance and insurance, exhibition industry and modem logistics in the Hong Kong $AR and a focus on tourism, tropical high-efficiency agriculture, medical and health industry, and low-carbon manufacturing in Taiwan, China.
As for overseas investment, Hainan Province will make sound deployment in major countries and industries in its going-global strategy, and encourage Hainan’s leading enterprises in aviation, energy, mineral resources and tropical agriculture to make overseas investment. It will make good use of the special fund
Regional investment analysis report 2015 133 for foreign trade and economic cooperation to increase support for the Belt and Road Initiative, and international capacity and equipment manufacturing cooperation. It will intensify follow-up services for overseas investment projects, focusing on the M&A of HNA Group in the European service industry as well as the smooth implementation of the company’s aviation cooperation projects in Africa; the overseas oil and gas projects of Geo-Jade Petroleum, overseas automobile assembly cooperation project of Haima Motor Corporation and the investment projects of Hainan Agricultural Reclamation Investment Holding Group Co., Ltd. in Africa and ASEAN countries.