Hainan Free Trade Port sets sights on becoming a new global model

Editor's note: Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinion and not necessarily the views of CGTN.

As Hainan Free Trade Port (FTP) enters the countdown to its closed-off operation, China's largest pilot free trade zone is standing at a crossroads of global attention. From a global perspective, free trade ports have formed a multipolar development pattern, from the efficiency of Singapore Port and the openness of Dubai FTP,  to the financial vitality of Hong Kong Special Administrative Region (SAR), China.

Today, leveraging groundbreaking policies like "zero tariffs, low tax rates, and investment freedom" and the unique advantage of "relying on China's super-large market", Hainan FTP is striving to explore a new development path. The key question is: Can the Hainan model break the existing pattern, become a new global FTP model, even rank as the "fourth global pole", and offer a "Chinese solution" for global FTP development?

Institutional innovation: Core competitiveness and global benchmarking

Institutional innovation is the soul of Hainan FTP and what sets it apart from other global free ports. Since the release of the "Overall Plan for the Construction of Hainan Free Trade Port" in 2020, Hainan has launched a series of innovative institutional designs in taxation, investment, and trade, with unprecedented scale and scope nationwide and even globally.

In taxation, Hainan's "zero-tariff" list management is exemplary. To date, it has issued several batches of "zero-tariff" commodity lists covering transportation tools, production equipment, and raw materials. Enterprises importing goods on the list are exempt from import tariffs, value-added tax, and consumption tax, significantly cutting operational costs and attracting high-end manufacturing and aerospace industries.

In investment freedom, Hainan has taken the lead in adopting a "negative list" market access system with the principle of "everything is permitted unless prohibited", minimizing foreign investment restrictions in China. It has also piloted a negative list for cross-border trade in services, allowing foreign capital national treatment in finance, healthcare, and education. This has broken policy barriers of traditional pilot free trade zones, creating a more open and transparent environment. Data shows that in 2023, Hainan's actual utilized foreign capital grew by 20.3 percent year on year, outperforming the national average, with services and high-end manufacturing as the main inflow sectors. In contrast, Hong Kong SAR, despite its financial strengths, lags far behind Hainan in attracting high-end manufacturing due to limited land and industrial structure constraints.

Additionally, Hainan has made notable progress in cross-border trade facilitation and financial opening. It has piloted "integrated customs clearance", shortening cargo clearance time to the shortest in China. In finance, it has pioneered convenient cross-border RMB settlement, allowing enterprises to choose settlement currencies independently, reducing exchange rate risks and transaction costs. These innovations have enhanced Hainan's global competitiveness and offered new insights for global FTP development.

Backed by a super-large market: Unique advantages and potential

Relying on China's super-large market is its "hard power" and biggest edge over other global free ports. China has a 1.4-billion-strong consumer market; its total retail sales of consumer goods reached 48.3 trillion yuan in 2024, ranking second globally. Online retail sales have led the world for 12 consecutive years, with top global sales in automobiles and home appliance segments. This market provides strong domestic demand support for Hainan FTP and a key channel for global enterprises to "enter China via Hainan".

On the consumer side, Hainan's "offshore duty-free" policy has promoted consumption. Since 2020, the annual per-person duty-free shopping quota has been raised from 30,000 yuan to 100,000 yuan, with more product categories available. From July 1 to August 31, 2025, 12 duty-free operators in Hainan achieved total sales of 3.67 billion yuan, selling 3.796 million items to 667,000 consumers. This reflects Chinese consumers' strong demand for high-end goods and Hainan's role in supporting domestic consumption upgrading.

On the industrial side, China's super-large market offers robust supply chain support. Hainan's high-end manufacturing and modern services can rely on China's complete industrial chain and expand to national and global markets. For example, new energy vehicle manufacturers in Hainan use domestic core component supply chains (batteries, motors) to cut costs and export to Southeast Asia and Europe via Hainan's export facilitation policies. This "domestic circulation as the mainstay, with domestic and international circulations reinforcing each other" model is irreplaceable, compared with Singapore and Dubai.

Moreover, China's Belt and Road Initiative have expanded Hainan's horizons. As a strategic hub in the South China Sea, Hainan connects China with Southeast Asia and Indian Ocean countries. Through trade and industrial capacity cooperation with Belt and Road partners, it can enhance its position in global industrial and supply chains. In 2024, Hainan's trade with ASEAN reached 57.91 billion yuan, up 62.3 percent year on year, with ASEAN as its largest trading partner for six consecutive years. Future Belt and Road advancement will help Hainan become a key trade hub linking China, ASEAN, and the world.

Challenges and prospects: Toward the "fourth global pole"?

Hainan faces challenges to become a global model and a "fourth global pole" of FTP.

Firstly, its industrial foundation needs to be further strengthened. Compared with mature ports like Singapore and Hong Kong SAR, Hainan's high-end manufacturing and modern services are in their infancy, with incomplete industrial chains and weak competitiveness. Its financial sector, though developing, lags behind Hong Kong SAR in market scale, institutions, and talent. High-end manufacturing, though attracting leading enterprises, lacks supporting industries and agglomeration effects.

Secondly, talent shortage is acute. FTP development needs high-end professionals in finance, law, international trade, and manufacturing. However, Hainan's inadequate urban amenities, education, and healthcare make it less attractive than first-tier cities.

Thirdly, risk prevention is tough. Greater openness brings risks like cross-border capital flows, trade frictions, and financial instability. "Zero-tariff" may lead to smuggling and tax evasion; cross-border service trade supervision faces quality and data security issues. Balancing opening-up and risk control is critical.

To address these issues, Hainan must take targeted measures. Hainan FTP construction is a key step in China's high-level opening-up and a trial for new global FTP models. Despite the challenges, its institutional innovation and super-large market advantage will help make it a new global model,  a "fourth global pole" of FTP, and a contributor of "Chinese wisdom" and "Chinese solutions" to the global FTP development.