China has formally separated its southern island province of Hainan from the mainland customs system, creating a sweeping duty free zone aimed at attracting foreign investment and strengthening Beijing’s bid to join a major trans Pacific trade pact.
The move, announced on Thursday, turns the island into the Hainan Free Trade Port, a project Chinese officials describe as a test case for deeper economic opening and a potential Hong Kong style commercial hub. Hainan’s economy is roughly comparable in size to that of a mid ranked country, and its land area is similar to Belgium.
Under the new system, goods produced in Hainan that meet a minimum 30 percent local value added threshold can enter the rest of China without tariffs. Foreign companies will also be allowed to operate in selected service industries that remain restricted on the mainland, according to official policy documents.
Beijing hopes the arrangement will strengthen its case to join the Comprehensive and Progressive Agreement for Trans Pacific Partnership, or CPTPP, one of the world’s largest free trade groupings. The bloc’s members require high standards on market access, investment rules, and state involvement in the economy.
Chinese policymakers have framed Hainan as a proving ground to show those standards can be met through controlled pilot programmes.
Speaking at an event marking the launch, Vice Premier He Lifeng urged local authorities to build Hainan into what he called “a vital gateway leading China’s new era of opening up to the world,” according to state media.
He described the project as a major strategic decision taken by the Communist Party with a view to both domestic and global conditions. The remarks appeared to reflect pressure from rising trade barriers, including tariffs imposed by United States President Donald Trump, which have pushed China to reduce reliance on its largest export market.
Foreign direct investment into China fell 10.4 percent year on year in the first three quarters of 2025, official data shows. Leaders have made reversing that decline a priority as they try to steady growth by encouraging consumption alongside renewed private investment.
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Economists say success in Hainan could shape future policy choices. If the island attracts capital and business activity without destabilising the wider system, officials may be more willing to extend similar rules elsewhere.
“The benchmark is something similar to Hong Kong,” said Ran Guo, director for Consumer Economy at the China Britain Business Council, who has followed the project for several years. She said the plan should boost tourism while also drawing in manufacturing and overseas investment.
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Africa Digital News, New YorkÂ
