On Thursday, December 18, 2025, China began implementing special customs incentives across the entire island as part of the Hainan Free Trade Port (FTP) project – the largest free trade zone in the world by area. These measures allow freer entry of foreign goods, significantly expand the list of duty-free products, and introduce more favorable business conditions, with a clear goal of developing Hainan into a new international commercial center, modeled after Hong Kong.
Once an underdeveloped and remote border outpost, Hainan was declared China's largest special economic zone as early as 1988. With the master plan published in 2020, an ambitious goal was set – to gradually develop the island into a fully open free trade port by the middle of the 21st century.
According to the new laws, this tropical island, which spans more than 30,000 km² and is about an hour and a half flight from Hong Kong, has been designated as a special customs supervision zone. Hainan is now entering a new stage of development, enabling the free flow of goods, capital, people, and data, supported by new tariff policies, low tax rates, and a simplified tax system.
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Where is Hainan
Hainan Province is the smallest and southernmost island province of the People's Republic of China, and the only one entirely located in the tropical climate zone. By far the largest island of the province is the eponymous Hainan Island.
Hainan covers an area of 35,400 km² (slightly larger than Belgium) and has a population of around 10 million. For centuries, it was part of Guangdong or Guangxi provinces, but in 1988 it was separated into a distinct province and simultaneously declared a special economic zone, marking the start of its modern development phase.
Administratively, Hainan is divided into ten districts with ten major cities. The provincial capital is Haikou, while Sanya is an internationally known tourist destination. Our company is located in Sanya, which is why the development of the Hainan Free Trade Port directly affects our business.
While global trade faces rising tariffs and protectionism, China is moving in the opposite direction – opening one of its most important gateways for free trade. That gateway is Hainan, now emerging as China’s most ambitious experiment in economic openness and trade liberalization.
The Chinese authorities have passed a law expanding duty exemptions from the previous 21% to as much as 74% of all customs products, increasing the list of items that can be imported duty-free from about 1,900 to over 6,600 products.
Although China already has 22 free trade zones, Hainan represents a fundamentally different level of openness. Most existing FTP zones are limited to specific urban areas and focused on developing local industries. Under the new legal framework, the entire island of Hainan has been transformed into a unique free trade port, with its own customs, tax, and regulatory system.
What the Free Trade Law Means in Practice
As mentioned, the share of goods eligible for zero tariffs has increased from 21% to approximately 74% of all customs products. In practice, this means that if you export goods to China, products sold in Hainan can be up to 20% more competitive in price compared to the rest of the Chinese market.
Another highly important aspect of this law concerns semi-finished products and processing. Goods imported to Hainan duty-free, and then processed on the island with at least 30% added value, can be marketed on mainland China without customs duties.
Simply put: if you have a product, you can bring it to Hainan, carry out finishing, packaging, or final processing there, and then sell it across China without customs costs. For example, if you have your own candy brand, you can bring it to Hainan, package and adapt it to the Chinese market, and be ready for nationwide distribution.
The opportunities are numerous and largely depend on the nature of your business. We can help you find suitable local partners in Hainan and prepare your product for entry into the Chinese market.
A third significant incentive applies to companies that are registered and actively operate in Hainan and belong to encouraged industries. For them, the corporate income tax is 15%, compared to 25% on mainland China and 16.5% in Hong Kong.
The list of encouraged industries is wide and includes, among others, desalination equipment, commercial spaces, import food processing, modern agriculture, as well as certain forms of tourism and accommodation.
It is important to note that customs and import procedures have been further simplified, including the removal of licensing requirements for many used mechanical and electrical products.
There are also numerous other incentives, but we consider these the most relevant for international companies, which is why we focused on them.
How We Can Help You in Hainan
Our presence in Hainan is not accidental. On the "About Us" page, we explain in detail when and why we decided to establish the company's headquarters in Sanya.
On June 1, 2020, the Chinese authorities officially introduced the state project for the construction of the Hainan Free Trade Port (Master Plan), transforming the entire island province into a free trade port. This made Hainan the largest special economic zone in China.
The main idea of this project is the liberalization of cross-border trade flows, investments, capital, people, transport, and data, with the goal of making Hainan a regional competitor to Hong Kong and Singapore.
With these announcements in mind, as early as 2019 we relocated part of our operations from Guangzhou to Hainan, in the city of Sanya, where we established Sanya Gabriel Import & Export Co., Ltd.
For international companies, Hainan represents a unique opportunity and greatly facilitates entry into the Chinese market through a more favorable regulatory and tax framework. Chinese authorities have been announcing this development direction for years.
That is precisely why our company's headquarters is in Sanya – a location with a unique position: deeply connected to China while simultaneously open to the rest of the world, with a clear goal of efficiently linking these two markets.
