Haikou Comprehensive Bonded Zone.

After the Hainan Free Trade Port (FTP) officially launched island-wide Special Customs Operations on December 18, 2025, a new phase of Hainan development began and a key milestone in China’s high-level opening-up was marked.

The Hainan FTP is not a replacement for the Hong Kong SAR. Rather, it represents a new and distinct pillar in China’s opening-up strategy. By leveraging complementary strengths and closer coordination, both places can jointly serve China’s broader development goals and global engagement.

A New Institutional Framework for Opening-Up

During the period of the 15th Five-Year Plan, Hainan outlined “Eight New” development goals with the aim of using institutional innovation and policy support to build a high-level free trade port with Chinese characteristicst.

The recent launch of island-wide Special Customs Operations establishes a new framework characterized by “freer access at the first line, regulated access at the second line, and free flow within the island.” Under this system, Hainan connects directly with international markets at the ‘first line,’ strengthens coordination with the Chinese mainland at the ‘second line,’ and enables efficient circulation of factors within the island province.

This arrangement significantly enhances liberalization in the movement of goods, capital, people, and information; it positions Hainan as a high-capacity gateway for global trade, investment, and talent flows; and it also provides practical experience for China’s broader free trade port development.

Policy Advantages and Market Vitality

Following the launch of Special Customs Operations, Hainan’s zero-tariff policy has been substantially expanded. Covering around 6,600 tariff lines (approximately 74% of all product categories), the exempted goods primarily include key production equipment and raw materials, thus reducing operational costs for businesses and creating new space for industrial restructuring.

Further lowering entry barriers and improving the business environment, eligibility for zero-tariff treatment has also been extended to all qualified market entities across the island. Together with a policy system centered on zero tariffs, low tax rates, and a simplified tax regime, these measures strengthen market vitality and enhance Hainan’s role as a platform for high-quality development.

Advancing the "Eight New" Goals

Over the next five years, as the Hainan FTP works too achieve the “Eight New” goals, the province will align itself with the strategic vision of building a leading gateway for China’s opening-up in the new era with higher-standard free trade port development, deeper reform and opening, improved economic quality and efficiency, stronger technological innovation, coordinated regional development, green transformation, enhanced people’s wellbeing, and greater security capacity.

These objectives underscore Hainan’s ambition to serve not only as an economic growth pole, but also as a testing ground for institutional innovation that can be replicated nationwide.

Complementarity with Hong Kong SAR

Speculation that Hainan might become “another Hong Kong in the South China Sea” overlooks the fundamental differences in their institutional nature and strategic positioning. With its mature legal system, capital markets, and professional services ecosystem Hong Kong remains a global financial center. Hainan, on the other hand, focuses on policy experimentation, industrial upgrading, and innovation-driven development.

The two are not competitors, but partners. Hong Kong’s strengths in international finance, legal services, arbitration, and global capital allocation complement Hainan’s advantages in zero tariffs, simplified taxation, and support for the real economy and modern services. Together, they form a powerful combination in serving China’s opening-up agenda.

Toward Shared Growth and Global Engagement

Hong Kong enterprises can leverage their international experience and capital advantages to participate in Hainan’s development: particularly in finance, professional services, education, and emerging industries. At the same time, Hainan’s rise offers new opportunities for Hong Kong’s youth in innovation and entrepreneurship.

Within the framework of the Belt and Road Initiative (BRI), Hong Kong and Hainan can further act as super partners that link the one’s international financial markets with the other's offshore trade and consumption platforms. Such a synergy also supports both Chinese enterprises going global and the inflow of international capital into China.

A New Chapter of Opening-Up

The launch of Special Customs Operations marks a historic step in China’s reform and opening-up. Hainan will not become a substitute for Hong Kong, but will grow alongside it through coordinated development and complementary strengths.

In an era of intensifying global competition, the Hainan Free Trade Port and Hong Kong Special Administration Region are well positioned to write a new chapter of openness together, serving as key connectors between China and the world, and contributing to the country’s long-term development strategy.

Original article by Liang Haiming, published in HKTKWW, Ta Kung Wen Wei News (Hong Kong)

Liang Haiming – Hainan University Belt and Road Research Institute, Director; Silk Road Think Tank Institute, President