China sealing Hainan customs borders to make full free trade port
Will it succeed on Singapore or Dubai scale – or disappoint due to ‘wolf warrior’ diplomacy, Trump trade war, economic downturn?
By
JEFF PAODECEMBER 27, 2025
Beijing has moved to seal Hainan’s customs borders and turn the island into a full-fledged free trade port (FTP), a move that has sharply divided Chinese and overseas analysts over its economic and geopolitical implications.
Under the new
framework, the Hainan FTP will implement arrangements for zero tariffs as part of island-wide special customs operations. Manufacturers operating in Hainan will be able to import raw materials tariff-free. At the same time, products that meet a 30% local value-added threshold will be allowed to enter the Chinese mainland without tariffs.
The scheme, which kicked off on December 18, also expands Hainan’s role as a duty-free shopping hub. Luxury goods will be sold tax-free to any Hainan or foreign consumer who can show a record of overseas travel within the previous 12 months, subject to an annual spending cap of 100,000 yuan (about US$14,000) per person. That will extend policies that in the past applied mainly to travelers leaving Hainan for the Chinese mainland.
At the heart of the scheme is a three-part model officials describe as “opening the front line, controlling the second line, and allowing free flow within the island.”
- The front line refers to Hainan’s boundary with the outside world, where zero tariffs apply.
- The second line marks the customs boundary with the Chinese mainland, where goods flows are closely monitored to prevent disruption to mainland markets.
- Free flow within the island refers mainly to the movement of people.
Officials say the construction of the Hainan FTP follows a clear, phased roadmap:
- By 2025: establish a basic policy and institutional framework centered on trade liberalization and investment facilitation.
- By 2035: further mature the free trade port’s institutional system and operational model.
- By mid-century: fully develop Hainan into a high-standard free trade port with strong international influence.