Hainan readies for role as free trade flag bearer

Opening-up milestone

President Xi Jinping has made important instructions on the development of the Hainan Free Trade Port.

In December 2024, he said that Hainan should continue to free the mind, explore new ground with innovation, overcome difficulties and make steady progress in its striving to build the Hainan Free Trade Port into an important gateway driving China's opening-up in the new era and write the Hainan chapter of Chinese modernization.

Mohammed Al Zarooni, chairman of the World Free Zones Organization, said: "Hainan province's remarkable journey as China's flagship free trade port offers a real-time case study in innovation, institutional reform, and global connectivity."

The organization is one of the largest global networks of free trade zones, uniting over 1,600 members from 141 countries and regions. Hainan's pioneering role as a high-level free trade port and a dynamic hub for trade, sustainability, and innovation, highlights China's growing leadership in global trade reform, sustainability, and digital transformation, Zarooni added.

Wang Changlin, deputy head of the National Development and Reform Commission said the transition from preparation to full-scale special customs operations was a "milestone in China's pursuit of opening-up".

Starting on Dec 18, all of Hainan island will operate as a special customs supervision zone under a two-tiered system. The operations enable free trade between Hainan and areas outside China's customs border, while maintaining standard customs controls for the Chinese mainland.

Eligible goods entering or leaving the island province — unless destined for the inland areas — will be subject to fewer customs checks and lower or no tariffs.

The Hainan Free Trade Port will exempt about 6,600 product categories — 74 percent of all taxable items — from import duties, value-added tax and consumption tax, up from the current 1,900 categories. Goods imported by eligible entities from abroad, except those on a restricted list, will qualify for the exemptions, according to the policy approved by China's finance, customs and tax authorities.

These goods can circulate freely among eligible entities within the island. If they undergo at least 30 percent value-added processing in Hainan, they will be exempt from tariffs when entering the inland.

The new operations will streamline cross-border trade and reinforce Hainan's role in China's broader strategy to deepen international economic integration, experts said.

Fang Aiqing, president of the China Council for International Investment Promotion, said the special customs operations will see the implementation of more favorable zero-tariff policies for goods, relaxed trade management measures, convenient travel arrangements, and a more efficient and precise regulatory model.

"This is not only a Hainan model for China's special economic zones, but also a valuable contribution to global free trade port development," Fang said.

Li Daokui, dean of the Institute for Chinese Economic Practice and Thinking at Tsinghua University, said residents and tourists in Hainan will have access to international goods at lower prices, while entry for international vessels and personnel has been simplified through more open visa policies.

"The import tariff exemption policy for products processed in Hainan is crucial, as it significantly boosts Hainan's appeal to companies as a key manufacturing or processing hub for foreign goods to enter the Chinese mainland," Li said.