Hainan Free Trade Port: Tangible Gains Six Months On

Six months after the full island closure of Hainan Free Trade Port on December 18, 2025, the special customs supervision model is delivering measurable economic results across trade, investment, and tourism sectors, according to data released by Chinese authorities. New enterprise registrations have surged 123.04% year-on-year to 139,500, while zero-tariff imports have more than doubled, signaling strong business uptake of the landmark policy.

Context: What Is Hainan’s Full Island Closure?

The full island closure transforms Hainan into a specially supervised customs zone. Under this model, the “first line” (border between Hainan and overseas) operates with minimal customs intervention and zero tariffs on eligible items, while the “second line” (border between Hainan and mainland China) maintains normal customs procedures. The policy, first announced in the 2020 Master Plan and codified by the Hainan Free Trade Port Law in 2021, represents a flagship project of China’s dual circulation development strategy, aiming to test high-standard international trade rules and strengthen regional integration with ASEAN.

Surge in Business Activity and Investment

Since closure through May 31, 2026, Hainan has registered 139,500 new enterprises, a 123.04% year-on-year increase, as reported by Securities Times. New foreign-funded enterprises rose approximately 35% year-on-year, and 392 new multi-functional free trade accounts were opened. The Hainan Innovation Fund established four future industry funds — Future Energy, Bio-manufacturing, Commercial Space Innovation, and Artificial Intelligence — each with a minimum of 100 million yuan, targeting seed-stage and startup companies.

“Hainan Free Trade Port has shown a positive trend of first-line convenience and efficiency, second-line smooth and orderly operations, continuous release of policy dividends, accelerated market vitality, emerging industrial development, and solid risk prevention and control,” the Hainan Free Trade Port official WeChat account stated, as quoted by Securities Times. “The full island closure operation has achieved a high-quality start.”

Zero-Tariff Policy Drives Trade Growth

Zero-tariff imports reached 2.645 billion yuan through May 31, 2026, up 1.2 times year-on-year, with tax exemptions totaling 440 million yuan, a 74.1% increase. The zero-tariff coverage expanded from 21% to 74% of all tariff items — from 1,900 to 6,600 items. According to First Financial via Securities Times, Liao Zengliang, Deputy Director of the Hainan Provincial Deep Reform Office, noted that “the zero-tariff policy is a core tax incentive of Hainan Free Trade Port. Eligible enterprises and institutions importing goods on the zero-tariff list can be exempted from import duties, import VAT, and consumption tax.”

The processing value-added tariff exemption policy has also gained traction, with 34 enterprises across 14 cities and counties participating. Domestic sales value reached 510 million yuan with tariff exemptions exceeding 29 million yuan through April 2026. Zhang Yueqiang, Deputy Director of the Hainan Provincial Commerce Department, described it as “one of the core policies with high gold content in Hainan Free Trade Port, helping to extend institutional dividends deep into the industrial chain.”

Tourism and Duty-Free Consumption Boom

Duty-free sales from November 2025 to April 2026 reached 22.22 billion yuan, up 22.6% year-on-year. On closure day alone, Sanya duty-free sales hit 118 million yuan, with Sanya International Duty-Free City seeing over 36,000 visitors, up 60% year-on-year. CDF Hainan’s total sales on closure day exceeded 250 million yuan, up 90% year-on-year, as China Fund News reported.

Consumer benefits are tangible: an iPhone 17 Pro Max (256GB) costs 9,299 yuan duty-free versus 9,999 yuan at official stores — a saving of 700 yuan, and with consumption vouchers as low as 7,999 yuan. Gold at 1,187 yuan per gram duty-free compares to 1,353 yuan per gram on the market, saving over 9,000 yuan on a 30-gram piece. On closure day, 1.5 tons of Malaysian durian sold out within one hour.

Tourism has surged correspondingly. New Year holiday flight bookings to Hainan exceeded 720,000 tickets, up 10% year-on-year. During the 2026 Spring Festival, international flight bookings to Haikou more than doubled year-on-year, with top source countries including Russia, Singapore, Australia, and Malaysia.

Tax Policy Synergy Creates Competitive Advantage

Hainan’s dual 15% tax policy — corporate income tax at 15% (versus the standard 25%) and personal income tax capped at 15% (versus the statutory maximum of 45%) — is proving a powerful draw. Zhou Zheng, Director of the Hainan Provincial Finance Department, explained that these policies can be applied cumulatively: “For example, a pharmaceutical company settling in Hainan can apply the zero-tariff policy during the R&D construction phase to import equipment; during production and sales, imported raw materials processed into medicines with 30% value-added can enter the mainland tariff-free; after profitability, the company enjoys 15% corporate tax; executives enjoy 15% personal tax; employees can visit duty-free shops. The tax system has demonstrated a 1+1>2 systemic integration advantage.”

Despite significant tax cuts, local general public budget revenue from January to May 2026 reached 42.23 billion yuan, up 1.2%, with tax revenue of 34.8 billion yuan, up 7% — suggesting economic expansion is offsetting rate reductions.

Challenges and Forward Outlook

While the six-month data is encouraging, challenges remain. Hainan’s manufacturing sector is still developing, and long-term success depends on building sustainable industries beyond retail. The 6th China International Consumer Products Expo in April 2026 showcased progress, with exhibition area reaching 143,000 square meters and international exhibitor ratio climbing to 65%. New industries are emerging — the first aircraft dismantling project launched on June 12, 2026, and a 681 million yuan esports and sports tourism complex investment was announced for Sanya.

The real test will come over the next two to three years as initial policy-driven growth stabilizes, manufacturing and services sectors mature, and competition from other regional hubs intensifies. Upcoming reforms, including a simplified tax system and further liberalization of the negative list, will be key indicators of whether Hainan can sustain its trajectory toward becoming a world-class free trade port and regional economic hub.

Reporting by Xinhua News Agency, Securities Times, First Financial, China Fund News, and China Daily.