Zero-tariff policies expanded to 74% of products as Beijing pushes economic openness amid rising global protectionism
China officially launched island-wide special customs operations in Hainan last week, marking a major milestone in its plan to create a world-leading Free Trade Port (FTP).
The move aims to open up the island’s economy and enhance its role as a hub for international trade and investment, even as global economic protectionism rises, spurred by US President Donald Trump’s tariff war. The new system will allow freer flow of goods, capital, services, and data across the island.
Hainan – an island once considered an underdeveloped frontier – has morphed into China’s largest special economic zone since 1988. The launch of the special customs operations is the culmination of years of effort to turn the island into a globally influential FTP, expanding zero-tariff policies and simplifying customs procedures to attract foreign businesses.
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The special customs zone – covering over 30,000 square kilometres – will operate under a dual system: “freer access at the first line” for goods entering the island and “regulated access at the second line” for goods moving from Hainan to the mainland. This streamlined system eliminates tariffs on imports entering Hainan and imposes duties only on goods transported to mainland China, offering major cost reductions for international trade.
Speaking at the launch ceremony in Haikou last week, Vice Premier He Lifeng stressed that this new phase of development aims to create a comprehensive, modernised economic structure. “This is a new step in advancing high-quality development and making Hainan a leading gateway for China’s opening-up in the new era,” he said.
The main feature of the new system is the extension of zero-tariff coverage, which has now expanded to 74% of products, up from just 21% in previous years. The number of goods eligible for zero-tariff treatment has grown from 1,900 items to over 6,600, benefiting industries such as pharmaceuticals, aerospace, food processing, and renewable energy.
Since the establishment of the FTP in 2020, more than 9,600 foreign-invested enterprises have been registered in Hainan, representing investors from over 170 countries. The province has also seen a nearly 20% rise in foreign trade companies in just the past year.
The launch comes at a critical time for China’s trade policies as many countries adopt more restrictive practices. China’s push for greater openness is expected to foster closer international ties, particularly with ASEAN countries, and encourage more foreign direct investment.
Hainan’s location in southern China, close to the Guangdong-Hong Kong-Macao Greater Bay Area, also provides a strategic advantage for trade and economic integration with Southeast Asia. Chi Fulin, President of the China Institute for Reform and Development, noted that the FTP represents China’s highest level of openness in the global economy. “It signals that China’s doors will not close but will open wider,” he said.
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With lower import tariffs, industries can reduce input costs and enhance their competitive edge. The Boao Lecheng Pilot Zone, which focuses on healthcare services, has already seen strong growth due to preferential tax policies and duty-free imports of medical products. Tourism and cultural services are also expected to benefit from reduced operational costs.
China has established 22 other free trade zones across the country, but Hainan is uniquely positioned to experiment with more radical reforms in areas such as finance, cross-border data flows, and international trade. David Wu, CEO of Dun & Bradstreet China, highlighted the potential for Hainan to become a global data hub for digital economy development.
As an isolated island, Hainan offers a controlled environment where China can test new customs, tax, and financial policies before implementing them more broadly. By positioning itself as an internationally connected hub, the island aims to make it easier for businesses to access the Chinese market while providing China with a platform to expand its global economic influence.
