Hainan's special customs era: A catalyst for industrial renewal

Editor's note: Matteo Giovannini, a special commentator on current affairs for CGTN, is a finance professional at the Industrial and Commercial Bank of China, a non-resident associate fellow at the Center for China and Globalization (CCG) and a member of the Global Young Leaders Dialogue. The article reflects the author's views and not necessarily those of CGTN.

December 18, 2025, marks a transformative moment for Hainan, China's southernmost province. With the launch of island-wide special customs operations, the Hainan Free Trade Port (FTP) advances decisively from vision to reality. What began as an ambitious blueprint for institutional reform now becomes an operational system capable of reshaping the island's development path.

This change is not merely administrative. It redefines how industries take shape, how global resources circulate, and how Hainan integrates into China's broader trajectory toward high-quality development, opening-up and modernization.

Special customs operations sit at the core of Hainan's institutional design. They enable a level of free, efficient, and rules-based movement of goods, data, capital, and talent unmatched elsewhere in China. For a province whose geography presents both opportunity and constraint, such as limited arable land, a modest population scale, and physical distance from major economic centers, these operations compensate for natural limitations.

They give Hainan the institutional power to cultivate industries built on innovation, global connectivity, and high-value services rather than on resource extraction or heavy manufacturing.

At a time when China is accelerating its transition toward a modern industrial system defined by green development, digital transformation and higher productivity, Hainan is uniquely positioned to serve as a pilot and pathfinder. The island's strategic focus on seeds, aerospace, marine economy, digital governance and low-carbon industries reflects its competitive advantages: tropical biodiversity, coastal access, broad airspace and proximity to Southeast Asia. The introduction of island-wide special customs operations strengthens these advantages by creating a development environment defined by speed, flexibility and global orientation.

Understanding how Hainan is leveraging these new operations to drive industrial restructuring requires unpacking several interconnected dynamics. These include the role of geography and institutional opening up in shaping new industrial pathways, the impact of efficiency and fast-track customs on productivity and R&D cycles, and the importance of international collaboration in building high-standard clusters.

Hainan's early examples, including the green transformation of Wuzhishan, a city in Hainan's central highlands blessed with rainforests, and the seed-technology ecosystem in Moon Island, a small man-made island shaped like a crescent moon off the coast of Yazhou Bay, offer insights into how these mechanisms work in practice.

The foundations of high-quality development

Hainan's geography has historically shaped its development model in ways that both enabled and restricted growth. As a tropical island with vast coastlines and unique ecological diversity, Hainan is endowed with natural assets but also faces structural limitations. Its relatively small population, limited industrial base, and distance from China's major manufacturing hubs originally constrained its ability to compete in traditional sectors. Tourism and agriculture dominated the economy, making it vulnerable to fluctuations in consumer demand, climate variability, and external shocks like global pandemics.

The launch of island-wide special customs operations marks a break from this legacy. By creating a unified customs territory, Hainan transforms geography into a strategic advantage. Goods can enter the island and move across its territory without internal customs barriers, enabling integrated processing, re-export, and value-added manufacturing. This model reduces logistical frictions and strengthens Hainan's position as a connector between China and global markets, particularly in Southeast Asia, Oceania and the Indian Ocean region.

Equally important is the island's ecological and climatic diversity, which provides ideal conditions for agricultural innovation, seed breeding and biotechnology. Traditionally, these industries required lengthy import approvals, strict quarantine processes and cumbersome documentation. Under the new customs regime, Hainan can rapidly import plant varieties, research samples and specialized equipment, enabling shorter R&D cycles and faster commercialization of new technologies. Geography, once a limiting factor, now becomes a magnet for high-tech industries that rely on natural assets and swift institutional support.

Hainan's coastline further strengthens its role in marine-oriented industries. The island's extensive marine territory can support advanced aquaculture, marine renewable energy, deep-sea exploration, and marine biotechnology. Special customs procedures facilitate the movement of underwater drones, sensors, biological samples, and renewable energy components, lowering barriers for firms conducting R&D in the maritime space.

Within China's national framework for opening up, Hainan occupies a distinctive role. It complements Shenzhen's technology-driven growth, Shanghai's financial leadership, and Hong Kong's global integration by focusing on experimental regulatory models, future industries, and green innovation. Its task is not to replicate these cities but to push the boundaries of what institutional experimentation can achieve. Special customs operations give Hainan the regulatory sophistication needed to test new forms of industrial governance that, if successful, can inform national policy.

Industrial efficiency as engine of transformation

Hainan's ability to reshape its industrial landscape rests heavily on the efficiency gains enabled by its new customs system. Industrial restructuring is fundamentally a function of productivity and competitiveness. By reducing transaction costs, accelerating logistics, and providing predictable rules, special customs operations help industries to innovate more rapidly and scale more confidently.

Before the shift to island-wide customs management, industries dependent on imported materials often faced delays that could unsettle production schedules, disrupt research and raise operating costs. Seed companies, for example, saw survival rates decline when imported plant materials spent too long in transit or clearance.

Now, clearance times have been reduced to unprecedented levels. On Moon Island, imported seeds undergo a one-to-two-day clearance process. This rapid turnaround preserves sample viability and ensures accurate scientific testing.

The integration of quarantine, phenotype analysis, genotype testing, and distinctness, uniformity and stability evaluation within the same zone is equally impactful. Instead of requiring multiple shipments, locations, and bureaucratic cycles, seed companies can complete the entire testing process within a single, highly controlled environment. This compresses what used to take months or years into a matter of weeks, allowing researchers to conduct multiple breeding cycles annually. In an industry where innovation depends on the speed of iteration, this is a decisive advantage.

Efficiency also extends to the importation of high-end scientific instruments. Duty-free exemptions and simplified customs formalities could make it easier for laboratories, universities, and enterprises to obtain the advanced equipment needed for cutting-edge research. By lowering financial and regulatory barriers, these measures help attract both domestic and international research institutions, positioning Hainan as an emerging hub for high-level scientific talent.

Talent mobility is another cornerstone of Hainan's new efficiency. Visa-free entry for select nationalities, flexible work permits, and streamlined procedures for foreign experts support an environment of brain circulation. Scientists, entrepreneurs, and investors can enter and exit the island with ease, fostering a dynamic environment where collaboration thrives.

The FTP's approach to data governance, focusing on enabling rather than restricting data mobility, reinforces this environment and supports the development of digital industries, AI applications, and online trade platforms.

Taken together, these reforms create an ecosystem where businesses can operate with lower costs, faster timelines, and greater regulatory certainty. Such an environment is essential for industrial restructuring, enabling Hainan to move away from reliance on tourism and low-value agriculture toward sectors driven by research, innovation and high-standard services.

Wuzhishan: Green pathway to industrial upgrading

Wuzhishan provides a compelling illustration of how Hainan's new institutional capacity can support industrial diversification even in regions with limited natural resources. Situated in the island's mountainous interior, Wuzhishan has long faced constraints: a sparse population, limited arable land and geographic isolation. Rather than attempting to compete in traditional manufacturing or large-scale agriculture, the city has charted an alternative path rooted in ecological sustainability.

Wuzhishan has positioned itself as a hub for health and wellness, leveraging its clean air, lush forests, and moderate climate to attract visitors seeking nature-based recreation, rehabilitation, and eco-friendly tourism. Sports events such as cycling challenges have become signature attractions, bringing in participants from across China and beyond. These activities enhance the city's visibility and support local businesses, from hospitality and dining to cultural services.

Wuzhishan demonstrates that industrial restructuring can be grounded in quality, sustainability, and institutional innovation rather than in scale alone. The city's progress shows how even small, resource-limited areas of Hainan can integrate into global value chains when supported by modern governance systems and customs facilitation.

Moon Island: A hub for future technologies

If Wuzhishan represents ecological transformation, Moon Island represents the technological frontier of Hainan's industrial restructuring. As a major hub for seed science, agricultural technology, and future industries, Moon Island illustrates how special customs operations can translate directly into global competitiveness.

The most notable feature of the island is the "lab-in-zone" model that permits the entire testing and approval process for imported seeds to occur within a single controlled environment. The efficiency of this ecosystem allows researchers to conduct breeding cycles at a pace previously unimaginable in China or elsewhere. The rapid clearance of imported varieties underscores Hainan's growing appeal as a global center for seed technology.

Moon Island has attracted an impressive concentration of scientific institutions, seed companies, and experimental labs. Duty-free import policies lower the cost of establishing and operating high-quality research facilities, encouraging both domestic and international firms to locate key parts of their R&D pipeline on the island. This clustering effect enhances collaboration among scientists, accelerates knowledge diffusion, and improves commercialization outcomes.

The success of Moon Island extends beyond seeds. Its integrated governance model offers a blueprint for future technologies, including biopharmaceuticals, marine biology, and agricultural digitization. As these sectors evolve, Hainan has the opportunity to shape not only products but also global standards for testing, certification, and intellectual property protection.

The rise of high-standard industrial clusters

The launch of island-wide special customs operations significantly strengthens Hainan's ability to attract and integrate international resources. In the past, geographic distance and bureaucratic complexity limited the island's capacity to engage deeply with global innovation networks. Today, Hainan is leveraging its openness to draw in cutting-edge technology, investment, and expertise from around the world.

The rapid movement of biological samples, laboratory materials, and specialized equipment supports international research collaborations. Overseas universities and research institutions have new incentives to establish branch labs or joint research platforms in Hainan. The ability to conduct cross-border experiments under predictable regulatory conditions elevates Hainan's status as a global partner in science and technology.

As these firms and institutions cluster on the island, industrial ecosystems emerge. These clusters produce economies of scale and scope, foster specialized talent pools, and strengthen Hainan's competitive position. Seed technology, marine biotechnology, low-altitude aerospace, green agriculture, digital governance, and green finance are among the sectors where clusters are beginning to take shape.

Through these clusters, Hainan becomes more deeply embedded in global value chains. It can export not only products but also standards, research services, and sustainable development models. In doing so, Hainan contributes to China's broader vision of building a globally integrated, innovative and high-quality development system.

A new development era

The launch of island-wide special customs operations marks the start of a new chapter in Hainan's development, signaling a shift from planning to full implementation of the FTP vision. This milestone reflects more than a regulatory upgrade: It ushers in a development model rooted in openness, innovation and long-term competitiveness.

By combining its geographic advantages with bold institutional experimentation, Hainan is shaping an industrial system centered on quality, sustainability and global integration. Wuzhishan's green transition shows how ecological priorities can drive new growth paths, while Moon Island's research breakthroughs highlight the power of linking talent, technology and flexible governance.

Together, these cases illustrate how Hainan's industrial restructuring will advance not through any single sector, but through the interplay of customs reform, scientific innovation, global resource flows, and forward-looking policies. As the FTP enters this new phase, Hainan is positioned to become a national model for using institutional innovation as a catalyst for high-quality development in the decades ahead.

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