Hainan's special customs operations: Opening-up, not isolation

Editor's note: Chen Yajie is an economist at the Center for Public Diplomacy and Hainan Openness, National Institute for South China Sea Studies. Yu Tao is the director of the Center for Public Diplomacy and Hainan Openness, National Institute for South China Sea Studies. The article reflects the authors' opinions and not necessarily the views of CGTN.

November in Hainan lacks the winter climate of the north. At Nanshan Port in Sanya, China's closest port to deep-sea waters, cargo ships continue moving in and out as usual. Although the Hainan Free Trade Port will begin its island-wide special customs operations on December 18, 2025, there is no sense of disruption. For those working on the ground, the shift feels less like a dramatic overhaul and more like a quiet but meaningful upgrade.

That calmness reflects the essence of Hainan's reform. The island-wide special customs operations represent a new stage of institutional opening-up built on smarter systems. The framework encapsulating "freer access at the first line, regulated access at the second line, and free flow within the island" is designed to deepen integration with the global economy while ensuring effective oversight. At Nanshan Port, one of the second-line customs ports, intelligent inspection equipment and data-driven supervision allow most goods to pass without disruption, while risks are screened behind the scenes. The goal is simple: visible openness, invisible regulation.

The first principle of the island-wide special customs operations is to promote a high-standard of opening-up. The special customs operations are not an end in itself but a strategic means to establish the entire island as a special customs zone aligned with international trade rules, thereby facilitating trade and investment, creating a testing ground for China's on-going reform and opening-up.

The island-wide special customs operations are designed to remove barriers and build the institutional foundation for deeper opening-up. At its core is a two-tiered customs system.

"Freer access at the first line" allows goods from overseas to enter Hainan with minimal intervention and, in most cases, without tariffs. "Regulated access at the second line," applies differentiated regulation between Hainan and the rest of the Chinese mainland, targeting three key categories: tariff-free imports, products with no less than 30 percent added value after processing which qualify for import tariff exemption, and goods with eased trade restrictions. Finally, "free flow within the island" ensures that factors of production, including goods, capital and people, can move with minimal friction across Hainan. Locally produced goods and the movement of residents to the mainland will continue as before and remain exempt from customs supervision.

After the special customs operations begin, Hainan will offer a new strategic gateway for global businesses seeking access to the Chinese market. Under the expanded zero-tariff policy, now operating on a negative list system, around 6,600 tariff lines, or roughly 74 percent of all taxable goods, will qualify. The shift will make Hainan a more attractive distribution and consumption hub for international products.

For instance, a brand-new Airbus A330 recently cleared Hainan customs under the zero-tariff policy. Valued at roughly 807 million yuan (around $113.67 million), it received tax reductions of about 114 million yuan. This is the fourth large aircraft to benefit from the zero-tariff policy for transport vehicles and yachts in the Hainan Free Trade Port. Beyond expanding Hainan Airlines' route network, the addition boosts its international competitiveness, offering travelers more options and enhancing China's position in global aviation markets.

The complementary rule allowing zero tariffs for products with no less than 30 percent added value after processing will enable companies to source raw materials globally, add value in Hainan, and bring finished products into the mainland tariff-free, opening the door for more firms to benefit from China's vast market.

This policy reaches beyond large-scale manufacturing to benefit everyday consumer goods. Take Hainan-based gN Pearls, the first company to benefit from the seawater pearl import tariff exemption, for example. Through the processing value-added tariff exemption, the company cut costs significantly: A single golden South Sea pearl, originally costing 5,000 yuan, fell by about 1,000 yuan, and a pearl necklace, originally priced at 980,000 yuan, has seen a drop of roughly 210,000 yuan. Lower costs mean consumers can now access high-quality pearl jewelry at more affordable prices, revitalizing businesses and allowing both domestic and international buyers to share in the gains of Hainan Free Trade Port policies.

The second pillar of the reform is customs governance modernization through institutional innovation. The objective is clear: efficient oversight with minimal interference, supported by a transparent and internationally aligned business environment.

Customs governance innovation, including customs supervision and regulation, begins with the use of smart technology and credit-based management. Customs channels are now equipped with intelligent inspection systems that rely on big data and risk-control algorithms, allowing most low-risk goods to clear automatically within seconds and reducing physical inspections to about 1 percent. At the same time, supervision is adjusted in real time according to each company's credit status. More than 80,000 foreign trade entities in Hainan have already been classified, with trusted firms, such as advanced-certified and "white list" enterprises, enjoying fewer inspections and faster processing. The result is greater predictability, efficiency and convenience for reputable international businesses.

Integration and coordination of government agencies marks another shift. Customs, commerce, taxation, public security, finance and other departments now share data and jointly manage procedures, enabling a "one-time declaration, one-time inspection, and one-stop release." Compliance is now simpler, as tasks once handled inside ports, such as agricultural product inspections and surcharge collection, have been moved outside second-line checkpoints. In practice, agricultural inspections may take place directly at production sites within Hainan, or outside the island before products enter. These adjustments reduce waiting time and compliance costs while easing pressure on port operations.

At the same time, Hainan has strengthened joint port security mechanisms, expanded coordinated maritime law enforcement, and intensified anti-smuggling efforts. These measures help safeguard fair competition and legal compliance, protecting the long-term interests of both domestic and international investors.

Smart customs governance benefits especially foreign vessels at Hainan's ports. A recent engineering vessel docking at Haikou Xiuying Port was able to begin operations almost immediately, with minimal waiting. Previously, foreign ships faced half a day of paperwork and multi-department procedures, costing hundreds of thousands of yuan in extra. Today, thanks to intelligent inspection, credit-based management and cross-departmental coordination, credit checks and online verifications can be completed before docking. From online document submission to risk assessment and joint inspections at anchorage, overall clearance time has been cut by about 20 percent, reducing costs, boosting efficiency and providing valuable lessons for the special customs operations.

More broadly, the island-wide special customs operations signal China's determination and responsibility in advancing opening up. At a time of weak global growth, rising protectionism and geopolitical uncertainty, the reform is more than a local policy experiment: It is a strategic statement. Hainan's model of "effective liberalization with effective regulation" signals China's intention to respond to external challenges not with retreat, but with deeper, law-based openness. The message is clear: Regardless of global headwinds, China remains committed to opening its doors wider and contributing stability to an increasingly volatile world economy.

As a testing ground for institutional opening-up, the Hainan Free Trade Port is tasked with exploring policy frameworks and regulatory models aligned with high-standard international economic and trade rules, facilitating the cross-border flow of innovation factors and deepening global economic connectivity. From January to September 2025, Hainan registered 1,513 newly established foreign-invested enterprises, up 12.16 percent year-on-year, and utilized 18.368 billion yuan in actual foreign investment, a year-on-year increase of 42.2 percent. At the Global Industrial Investment Promotion Conference in April 2025, the province secured agreements worth approximately 233.6 billion yuan, reinforcing its growing appeal as a high-standard platform for global cooperation.

China is actively advancing its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement. Under the framework of island-wide special customs operations, Hainan will pioneer reforms in areas such as cross-border data flows, intellectual property protection and environmental governance. The results of these trials will offer practical support for China's participation in, and contribution to, reshaping global governance rules.

At the same time, the Hainan Free Trade Port is expected to play a key role in supporting the Belt and Road Initiative and strengthening economic and trade ties with ASEAN countries, functioning as a platform for shared global development opportunities.

Looking ahead, as special customs operations progress, the Hainan Free Trade Port is positioned to become a pivotal gateway for China's new phase of opening-up, accelerating integration into global trade networks and supply chains, and advancing mutually beneficial and win-win cooperation.

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