From Shanghai to Hainan: China's 22 free trade zones fuel high-quality openness

China's Hainan Free Trade Port (FTP) will officially begin island-wide special customs operations on December 18, a landmark step in China's efforts to align with high-standard international economic and trade rules.

More than a regional policy shift, the move signals that China's institutional opening up is entering a new phase and is expected to generate strong demonstration effects for the country's 21 other pilot free trade zones (FTZs).

A nationwide network of free trade zones

China's FTZ program began in 2013 with the launch of the China (Shanghai) Pilot Free Trade Zone. Over the past 12 years, the program has expanded through seven rounds, growing into a nationwide network of 22 FTZs that now span coastal, inland and border regions, forming a multi-layered opening-up framework.

Coastal FTZs such as those in Shanghai, Zhejiang, Guangdong, Tianjin and Fujian focus on advanced manufacturing, modern services and global connectivity. Inland zones, including those in Henan, Sichuan and Shaanxi, emphasize logistics hubs and industrial upgrading, while border FTZs such as Guangxi, Yunnan and Heilongjiang play an increasingly important role in cross-border trade and regional cooperation.

China's FTZ development has followed a clear trajectory of "pilot first, nationwide replication." Each zone builds on its local advantages and industrial base, allowing institutional innovations tested in one area to be promoted across the country.

Engines of high-quality development

Differentiated development is a defining feature of China's FTZs. By focusing on new industries, business models and forms of trade, many zones have become important drivers of China's high-quality development.

In eastern China, Zhejiang FTZ's Zhoushan area has formed a trillion-yuan oil and gas industrial cluster, attracting more than 12,000 related enterprises. Tianjin FTZ has developed into the world's second-largest aircraft leasing hub. Hubei FTZ now hosts over 16,000 optoelectronic information companies, making it China's largest base for optical communications R&D and production, while Jiangsu FTZ has attracted nearly 4,000 biopharmaceutical firms with annual output close to 300 billion yuan ($42.57 million).

Border FTZs are also gaining momentum. Yunnan FTZ's Honghe area is building a cross-border e-commerce pilot zone serving South and Southeast Asian markets. Xinjiang FTZ's Urumqi area has established an international entrepreneurship and innovation hub, while Heilongjiang FTZ's Suifenhe area is developing industrial parks focused on agriculture, forestry and fisheries.

Institutional reforms have delivered tangible results for foreign investors. Taking Xinjiang FTZ as an example, since its establishment, it has accounted for over 30 percent of Xinjiang's total foreign trade. In 2024, Xinjiang's imports and exports reached 132.45 billion yuan, helping the region's total trade exceed 400 billion yuan for the first time, with growth ranking among the fastest nationwide.

Testing ground for institutional innovation

Institutional innovation has been at the core of China's FTZ strategy. Reforms have focused on trade and investment liberalization and facilitation, financial opening and government function transformation.

Shortly after its launch, the Shanghai FTZ introduced China's first negative list for foreign investment access. After seven revisions, the list has been reduced from 190 items to 27, with all manufacturing restrictions removed. At the national level, the foreign investment negative list was cut from 93 items in 2017 to 29 in 2025, significantly raising China's openness.

Shanghai has also led innovation in financial services and digital trade, including data trading reforms. In 2024, transaction volume at the Shanghai Data Exchange exceeded 4 billion yuan, four times that of the previous year, while the number of listed data products more than doubled. Over the past decade, Shanghai FTZ has established a regulatory framework broadly aligned with international rules, reinforcing its role as a major gateway for foreign capital. From its launch to the end of 2022, it attracted $58.6 billion in actually utilized foreign investment.

Hainan, as another example, has emerged as a new frontier for services trade opening. It introduced China's first negative list for cross-border services trade, covering areas such as professional services, transport, finance and education. The upcoming island-wide customs operation – which will usher in frictionless entry at the border, with most overseas goods benefiting from zero tariffs and expedited clearance, regulated access at the customs boundary between Hainan and the mainland, where goods will undergo standard customs oversight to ensure fairness and prevent smuggling, and free flow within the island – represents a further institutional breakthrough and elevates openness to a new level.

Across the country, FTZs have hosted numerous national "firsts," including China's first wholly foreign-owned public fund management company and first wholly foreign-owned automobile manufacturer. According to the Ministry of Commerce, from 2013 to 2023, China's 22 FTZs generated 302 institutional innovations replicated nationwide, while local governments promoted more than 2,800 additional reform measures.

These reforms have made FTZs a key engine of China's foreign trade and investment growth. In 2024, the 22 FTZs recorded total imports and exports of 8.59 trillion yuan, contributing nearly one-fifth of China's total trade and outperforming the national growth rate. Actual utilization of foreign investment reached $28.25 billion, accounting for almost a quarter of the national total.

With the launch of Hainan FTP, China's FTZ strategy is moving from experimental "testing grounds" toward higher-level platforms of openness. Together, they are injecting sustained momentum into the building of a more open, rules-based economy.