Editor’s Note
This article outlines China’s launch of a special customs operation for the Hainan Free Trade Port, a significant step in its development as a major pilot zone for trade liberalization.
China has launched a special customs operation on the Hainan Free Trade Port (FTP). For this, China will conduct a $113 billion free trade experiment on Hainan Island. By doing so, China will develop it into the country’s largest experimental free trade zone and the only “free trade port.”
It should be noted that on December 18, 2025, China separated Hainan Island, which is the size of Belgium and has an economy equivalent to a mid-ranking country, from the mainland for customs processing. This was part of a bid to join a major trans-Pacific trade deal and establish a new Hong Kong-style commercial center.
Observing the launch date, December 18 coincides with the anniversary of a historic CPC meeting in 1978. This date is widely regarded as the beginning of the country’s era of reform and opening up.
Major international institutions have not adopted a consensus definition for a free zone, free port, or free trade zone. According to the Revised Kyoto Convention developed by the World Customs Organization (WCO), a free zone is a part of a country’s territory. Goods brought into it are not considered to be within its customs territory. This assessment is made in relation to import duties and taxes and the fact that they are not subject to standard customs controls. In practice, free zones are experimental areas, where each country implements and benefits from its own organization.
There are more than 130 free trade ports and over 2,000 economic zones worldwide, whose features and functions are similar to free trade ports. Hong Kong, Singapore, Rotterdam, and Dubai are some of the most famous large free trade ports. The Chinese idea for their construction dates back to the initial phase of post-Mao reforms.
| Date | Events related to the construction of Free Ports in China |
|---|---|
| 1984 | Deng Xiaoping proposes that Xiamen test free port policies |
| 1988 | Deng Xiaoping declared: “Now that there is one Hong Kong, we must create several other Hong Kongs on the mainland” |
| 1990 | Construction of Waigaogiao Free Trade Zone in Shanghai, precursor to the current network of 22 China Free Trade Zones |
| 2013 | Official approval of Shanghai Free Trade Zone by the State Council |
| 2017 | Xi Jinping advocates for more autonomy for FTZs and considers free ports. Wang Yang publishes an official definition of a free port in the People’s Daily |
| April 2018 | Announcement of a free trade zone covering the entire island of Hainan during the 30th anniversary of the Special Economic Zone |
| June 2020 | Launch of the master plan for the construction of Hainan Free Port, aiming for global status by 2050 |
| June 2021 | Adoption of Chinese law on Hainan Free Port |
| March 2024 | +9.2% GDP growth for Hainan in 2023 ($105 billion USD), the second highest national rate |
| March 2025 | Extension of tax benefits (corporate income tax and personal income tax) in this free trade zone until the end of 2027 |
| Dec. 2025 | Hainan’s new customs policy takes effect |
China has established several free trade zones in recent years, but the Hainan FTP is presented differently. It has been designated as the country’s largest experimental free trade zone and the only “free trade port.”
According to World Bank data, 2024 official figures show that Hainan’s GDP was $113 billion USD, equivalent to the world’s 70th largest economy.
Hainan is an island province located at the southern tip of China. Its area is 35,000 sq km. It is 32 times larger than Hong Kong, 48 times larger than Singapore, and 8.5 times larger than Dubai.
It has 68 natural bays and a 1,900 km coastline. It is China’s southern gateway to the Pacific and Indian Oceans.
By the end of the 1990s, Beijing had offered its development to overseas Chinese investors, especially from Indonesia, where Chinese entrepreneurs were regularly harassed.
Hainan is a bridge in China’s Belt and Road strategy.
China is transforming Hainan into a duty-free zone to attract foreign investment and boost its free-trade credentials for CPTPP membership. (Comprehensive and Progressive Agreement for Trans-Pacific Partnership).
Hainan’s goal is to reintegrate supply chains, but it faces competition from Southeast Asia and requires nationwide reforms for CPTPP accession. (Comprehensive and Progressive Agreement for Trans-Pacific Partnership).
As a new frontier of China’s opening up, the Hainan Free Trade Port (FTP) is creating a “gateway of opportunity” with its core policy of zero tariffs, low tax rates, and a simplified tax system.
After the special customs operation, more than 6,600 tariff lines enjoy zero tariffs and 30% locally value-added goods can enter the Chinese mainland tariff-free, attracting international trade and manufacturing companies to Hainan.
Zero-tariff goods processed in the province can be sold duty-free to the mainland if their local processing generates 30 percent or more added value.
Hainan FTP’s favorable policies allow enterprises to channel more corporate resources, focus, and capital into R&D upgrades and market channel expansion by making the enterprise more competitive.
Hainan FTP’s list of encouraged industries includes more than 1,100 sectors such as offshore wind energy, offering a 15% corporate tax rate.
