The island province of Hainan, in southern China, became a special customs area this Thursday, 18th, increasing the share of tariff-free products to 74%, as part of Beijing’s plans to create the largest free zone in the world.
The new regime increases the proportion of goods exempt from customs duties from 21% to 74%, expanding the list of specific products covered from around 1,900 to 6,600, according to data released by the official Chinese press, which classified the measure as a “milestone” in China’s opening policy “in the face of increasing global protectionism”.
According to economic portal Caixin, the measure will allow the free movement of goods, capital and people between Hainan and foreign markets. However, trade between Hainan and the rest of mainland China will continue to be subject to regular taxes and customs fees.
Goods processed in Hainan may be sold within China tax-free, as long as they have a local added value of at least 30%.
“Foreign companies will be able to benefit from a business environment more aligned with international standards, lower tax and production costs, and greater access to sectors such as health and education. Hainan can serve as a platform for entry into the vast mainland China market,” said the official Xinhua news agency.
Consultancy China Briefing highlighted that the objective is not only to make Hainan more attractive in fiscal terms, but also to position the island as a “strategic logistics node” in Southeast Asian commercial networks. Until now, Hainan was mainly known as a tourist destination.
Announced in 2018, the free zone covers almost 34 thousand square kilometers of the tropical island. The Chinese Government’s objective is to transform it into a free port this year, with full development scheduled for the next decade.
Since the publication of the development guidelines in 2020, more than 9,600 companies with foreign capital have established themselves in Hainan, Xinhua said.
China’s first free trade zone was launched in 2013 in Shanghai, the country’s economic capital. Since then, more than 20 similar zones have been created, but only Shanghai and Hainan play a strategic role at national level.