Question 1

First announced by Chinese President Xi Jinping in 2018, the entire province of Hainan island has been established as a pilot free trade zone (PFTZ) to promote foreign investment and trade. Moreover, Hainan will also include China's first free trade port (FTP) by 2025 and is seen as another major step of China's market-oriented reform. The entire Hainan free trade system is scheduled to be completely developed by 2035.

(a)Assume that you are in a multinational corporation that is interested in investing in China's Hainan Pilot Free Trade Zone (PFTZ). Choose one (1) type of product or service to invest in and analyse the viability of your investment. You should pay attention to the following factors:

Overview of the Hainan PFTZ

The business potential of the zone and its developmental trajectory Government restriction and regulation

Type of ownership structure for your business

Market trends for the product or service that you have chosen

Consumer demand and preferences

Main Competitors

Availability of talent and manpower

Intellectual property concerns

Other factors that you may want to consider (non-tax related). (50 marks)

(b) Discuss the tax policy environment of Hainan Pilot Free Trade Zone (PFTZ) and evaluate three (3) tax policies of the zone. Comment on the extent to which each of these tax policies would affect your business. (25 marks)