Hainan after island-wide special customs operations: Hainan truly sets sail

Editor's note: Xiong Anjing is the vice president of Hainan Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN.

In November, Sanya Bay in China's southernmost province Hainan looks almost unreal. The water shifts between turquoise and deep blue; sailboats glide in and out of the marina; the air carries the scent of coconuts and seawater.

At the Sanya International Yacht Center, where tourists photograph sunsets and boat owners polish decks under palm trees, conversations inevitably drift to a single topic: December 18, the day Hainan will launch island-wide special customs operations.

For ordinary travelers, it may sound technical, or even bureaucratic. For Hainan, it is a real turning point.

Many on the island, from business owners to frequent visitors, see the rollout as the beginning of a long voyage. They expect more open policies, more room for experimentation, and more opportunities arising from one of China's most ambitious free trade projects to date. It is a widely shared belief that Hainan's best days lie ahead.

One of the experts compiling "100 Questions on Hainan Free Trade Port's (FTP) Island-Wide Special Customs Operations," a reference book produced by the Publicity Department of the Communist Party of China (CPC)'s Hainan Committee, uses the yacht industry to illustrate the expected transformation.

Under continuously optimized trade and investment facilitation policies, the zero-tariff policy on imported yachts, a pilot for tourism and transport enterprises, will continue after island-wide operations. Thus, a company importing a yacht valued at 10 million yuan ($1.41 million) can save roughly 40 percent in tariffs and consumption taxes, significantly lowering operational costs – savings that can ultimately be passed on to tourists.

Following the December 18 launch, the zero-tariff policy will be expanded to 74 percent of tariff lines, while the processing value-added policy for domestic sales will be improved. The import license required for used mechanical and electrical products under 60 commodity codes will be canceled, covering about 80 percent of such products previously subject to import licensing.

For yacht manufacturers, exemptions on import tariffs, and value-added tax for equipment and raw and auxiliary materials could reduce costs by about 20 percent. When selling in the domestic market, qualifying for processing value-added tariff exemptions could further reduce costs by around 6 percent.

This will give yachts made in Sanya a clear advantage in quality, price, and service over competitors abroad or even in other parts of China, which is expected to draw more domestic and international yacht manufacturers and repair companies to set up operations on the island.

Sanya is moving quickly to seize this opportunity. Leveraging both policy advantages and natural marine resources, the city is developing a yacht industry pilot zone that will integrate manufacturing, tourism, exhibitions, and cultural and creative businesses. The goal is a full industrial chain – production, repair, R&D, consumption – all concentrated in one coastal city.

Some visitors already speak of Sanya in the tone usually reserved for Miami, Santorini or Barcelona: places where lifestyle, ocean culture, and high-value industries feed one another. Whether Sanya will join that list remains to be seen, but the momentum is undeniable.

Hainan is not alone in pursuing FTP status. As of 2025, more than 130 FTPs and over 3,900 free trade zones operate across the globe. China's own experience is deep: Its development zones represent half of similar zones worldwide.

Experience also shows that building a world-class FTP takes time. Singapore, Dubai, Hong Kong, and Rotterdam each took decades to move from initial customs innovations to fully mature ecosystems combining trade, finance, shipping, logistics and advanced industries. The pace varies depending on policy strength, industrial positioning, starting conditions and the geopolitical environment. But all of them eventually reached one destination: becoming regional transport and economic hubs.

It is important, however, to understand one crucial distinction: The legal status of free trade ports is not entirely the same. Singapore is a country; Hong Kong is a separate customs territory; and Dubai and Rotterdam are free trade zones or ports. A separate customs territory is a "non-state entity" that does not enjoy sovereignty but, in accordance with multilateral trade agreements, enjoys the same rights and undertakes the same obligations as a country within the World Trade Organization (WTO).

The supervision of goods entering and leaving the territory, as well as the levy and exemption of customs duties and other taxes, are executed according to the customs regulations promulgated by the government of that region.

However, Hainan is different. It remains part of the Chinese mainland's customs territory, designed not to separate from, but to plug into, the country's 1.4-billion-person market. While it shares traits common to global free trade hubs, such as low tax rates, freer first-line access, and regulated second-line access, it differs in institutional design, scale, functional positioning, and resource endowments.

Most international free trade ports were first built on entrepot and processing trade. Hainan is taking a different path. Rather than prioritizing processing or transshipment, the island is being developed as "three zones and one center": a pilot zone for the comprehensive deepening of reform and opening-up, a national pilot zone for ecological conservation, a service zone for major national strategies, and an international tourism and consumption destination.

In essence, the Hainan FTP is a platform for China's proactive, unilateral opening-up, fully aligned with WTO rules and bilateral or unilateral arrangements. Hainan is not replicating Singapore or Dubai. It is charting a path of its own.

The milestones ahead are clearly laid out in the Master Plan for the Construction of the Hainan FTP. 

By the end of 2025, now only days away, the basic policy and institutional framework will be in place. The business environment is expected to reach top-tier national levels, market activity should rise, industrial competitiveness strengthen, and legal and regulatory foundations become more mature.

By 2035, the blueprint becomes more ambitious. Trade, investment, capital flow, personnel movement, and transport are to reach a high degree of freedom and convenience. Data, a crucial element of modern economies, should flow securely and in an orderly manner. The business environment should be globally competitive, the legal system more complete, and the governance model more modern.

By the middle of this century, the goal is comprehensive: a "high-level FTP with strong international influence." In practice, that means Hainan will not just be China's gateway to the world, but a global node of commerce, technology, culture and mobility.

These timelines may sound distant, but the island's trajectory is accelerating fast. Hainan has already implemented major reforms in taxation, visa-free entry, land and spatial planning and environmental management. Across the island, infrastructure, from airports to rail transit to digital systems, is being upgraded to match the needs of an economy far more international than in the past.

On December 17, 2024, in Sanya, after hearing the work report from the CPC Hainan provincial committee and the provincial government, Chinese President Xi Jinping stressed that the Hainan FTP must become "an important gateway driving China's opening-up in the new era," and "strive to write its own chapter of Chinese modernization."

In October, the Fourth Plenary Session of the 20th CPC Central Committee reiterated the need to build the Hainan FTP to "high standards." Later, in November, while reviewing a work report in Sanya, Hainan Province, on the construction of the Hainan FTP, Xi defined its goal as building "a key gateway driving the country's opening-up in the new era."

Some observers have a misconception, the idea that special customs operations imply sealing the island off. It's just the opposite.

According to Chi Fulin, president of the China Institute for Reform and Development, special customs operations do not mean sealing off the island. Rather, it signifies opening-up at a higher level, across a broader scope, and to a greater depth. Zero-tariff policies will broaden; trade control measures will loosen; customs clearance will become faster and more predictable; and the channels connecting Hainan to global networks will open wider.

Meanwhile, the second line, the regulatory border between Hainan and the mainland, will ensure sound risk management without hindering mobility.

The aim is a policy environment where international capital, talent, goods and services can move freely in and out, while businesses still enjoy convenient access to China's massive domestic market. For investors, researchers, and entrepreneurs, this creates a dual advantage that few free-trade ports can replicate.

When implemented well, the result will have a magnet effect: High-quality global resources will flow in, lifting the island's industries, employment, consumption and innovation capacity.

Hainan's transformation is not only about economics. It is part of China's long-term strategy to explore new governance models, deepen opening-up in a controlled environment, and participate more actively in global economic rules.

The island will, without doubt, demonstrate how China envisions its future interactions with the world: open, orderly, confident and mutually beneficial.

The impact will extend far beyond Hainan. A high-standard FTP will strengthen China's national development, contribute to regional prosperity in the South China Sea, and showcase how a developing economy of China's scale can innovate within global systems rather than outside them.

As Hainan opens its next chapter, the bustle at Sanya's yacht marina takes on symbolic meaning. The island no longer represents only blue skies and beaches. It is a testing ground for China's next stage of reform, a frontier for global cooperation, and a window into the future of Asia-Pacific economic integration.

Island-wide special customs operations mark a milestone, not the destination. The real story begins afterward: the gradual formation of a world-class business environment, the arrival of new industries, the strengthening of international links, and the steady realization of goals set for 2025, 2035, and 2050.

When Hainan reaches its full potential as an open, dynamic, innovative FTP, it will not only reshape its own destiny but also contribute to the broader story of China's modernization.

And decades from now, when visitors sail into Sanya Bay under the same blue skies and gentle winds, they may look back on this moment in December 2025 when special customs operations began, as the point when Hainan truly set sail.

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