Hainan free trade port won't weaken HK's status

China’s top economic planner on Monday dismissed concerns that the Hainan free trade port will undermine Hong Kong’s status as a global financial, trading and shipping center.

With different orientations and priority industries, Hainan and Hong Kong are more complementary than competitive, said Lin Nianxiu, deputy director of the National Development and Reform Commission.

The construction of the Hainan free-trade port “will not bring shocks to Hong Kong,” said Lin, adding that the island province will focus on developing tourism, modern services, and high-tech industries.

“We should give full play to Hainan’s rich natural resources, unique geographical location, and its advantages of being backed by an ultra-large domestic market,” he said.

The country will work to promote the joint development of Hainan and the Guangdong-Hong Kong-Macau Greater Bay Area, Lin noted.

At present, Hainan’s economic aggregate growth rate is only about one-fifth of that of Shenzhen and Hong Kong.

As China’s largest special economic zone and with its natural conditions and geographical location, Hainan has unique advantages in exploring free trade ports, according to a research group with China International Capital Corp. They believe all-round reforms will advance Hainan’s economy to a new level and may turn it into the country’s major gateway to the rest of the world, especially to Southeast Asia.

Hainan is likely to be seen as a more favorable free port choice by foreign investors who are inclined to further expand in the Chinese mainland market in the longer term.

Hong Kong is thought to have an upper hand in capital convertibility and shorting and hedging mechanisms, as well as an established track record that makes it a desirable destination for short-term capital going after high returns.