Hainan Free Trade Port playing strategic role in advancing Asia-Pacific regional economic integration
China serves as a major engine of economic growth in the Asia-Pacific region and a key promoter of regional economic integration. Contributing over 30 percent to global economic growth, China has been an important driver of APEC economic growth.
As a pivotal gateway for China's opening-up and a strategic initiative to foster the country's higher-standard opening-up, the Hainan Free Trade Port is poised to play a distinctive role in Asia-Pacific regional economic integration.
The Hainan FTP can function as a vital hub in Asia-Pacific cooperation centered on the Regional Comprehensive Economic Partnership. Leveraging its locational advantage, the FTP can foster integration and synergy between its policy regime and RCEP rules, enabling the FTP to play a pivotal hub role in connectivity, industrial integration, rule alignment and factor allocation between China and the Association of Southeast Asian Nations-led RCEP market, and become a key convergence point linking the two markets.
The FTP is building a headquarters base for Chinese companies to access international markets. It covers destinations within a four-hour flight from Hainan, spanning 21 Asian countries and regions, home to approximately 47 percent of the world's population and about 30 percent of the global GDP. It is also building a headquarters base for overseas companies, mainly from ASEAN, to enter the Chinese market.
Due to its geographic and high-standard opening-up advantages, 139 companies have established headquarters bases in Hainan to date. Domestic companies have set up headquarters bases to tap into international markets, while international enterprises have done so mainly to gain access to China's vast domestic market.
Going forward, as the Hainan FTP continues to expand opening-up in finance, data and other fields, a growing number of domestic and overseas companies are expected to establish headquarters bases in Hainan.
The implementation of island-wide independent customs operation marked the first step in the substantive operation of the Hainan FTP. Launched on Dec 18 last year, the island-wide independent customs operation is designed to grant duty-free treatment for imports of most commodities, shift the preferential tax regime centered on tax exemptions toward an institutional arrangement featuring low tax rates and a simple tax system, and achieve the free and convenient flow of trade, investment, capital, personnel, transportation and information on the basis of the zero-tariff, low-tax-rate and simple-tax-system framework.
"Customs closure" is central to this vision. It is based on a "first line" and "second line" model, with the first line managing the flows between Hainan and overseas markets under simplified procedures, and the second line — linking Hainan Island to other Chinese provinces and regions — applying stricter regulatory oversight. This allows Hainan to operate as a separate customs territory while remaining within China's sovereign borders and aligning with international trade rules.
The essential requirement of island-wide independent customs operation is the "first line". Based on the data released by the Hainan government, from the launch of the island-wide independent customs operation to July 31, imports under the zero-tariff policy reached 3.62 billion yuan ($539.74 million) representing a year-on-year increase of 40.1 percent, with tax reductions and exemptions amounting to 598 million yuan, up by 12.8 percent. It is believed that the Hainan FTP is well positioned to expand the zero-tariff coverage through further policy upgrading in the next stage.
The "first line" enables better connectivity between domestic and international markets. Policy upgrades for the "first line" will allow the Hainan FTP to play an even greater role in linking internal and external markets. For example, overseas companies may import zero-tariff raw materials and components into Hainan. If they achieve value-added to a certain degree through processing in Hainan, such goods may have chance to enter the mainland market duty-free. Should the value-added threshold for the Hainan FTP's duty-free policy on processed goods sold to the mainland be lowered in the future, it would generate an even stronger effect in reducing overseas enterprises' costs of tapping China's vast market.
China is prioritizing independent and unilateral opening-up in its trade in services, with a focus on the Asia-Pacific region led by ASEAN. According to China's National Bureau of Statistics, in 2025, trade in services accounted for around 15 percent of China's total foreign trade, with great potential remaining to be tapped. If the services trade momentum continues, China's trade in services will bring about a massive new import and export market structure.
The Hainan FTP is well positioned to become a new frontier for China's unilateral opening-up. In 2025, trade in services accounted for about 20 percent of Hainan's total foreign trade, 5 percentage points above the national average. The Hong Kong Special Administrative Region applies 23 restrictive measures under its negative list on trade in services within the frameworks of free trade agreements; Singapore implements 25 negative-list measures for trade in services under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. In 2022, the China Institute for Reform and Development put forward specific proposals for an 11-entry negative list. If implemented, the Hainan FTP can become one of the world's jurisdictions with the highest level of opening-up in trade in services.
The RCEP and the CPTPP are two of the largest free trade agreements in the Asia-Pacific region at present. The alignment and integration of these two major free trade agreements will advance the process of Asia-Pacific economic integration.
Leveraging the flexibility and initiative afforded by high-standard opening-up after the island-wide independent customs operation, Hainan can pursue higher-standard bilateral and regional cooperation with CPTPP members such as Singapore, thereby facilitating better alignment and integration between CPTPP and RCEP members.
The author is the chief researcher of the Hainan Institute for Free Trade Port Studies.
The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.
Contact the editor at editor@chinawatch.cn.
