China Unveils Hainan Free-Trade Port in $113 Billion Bid to Boost Openness

China has formally turned Hainan island into a standalone customs territory, creating a large-scale duty-free zone designed to test deeper trade and investment liberalisation. The island, whose economy totaled about $113 billion in GDP last year, is roughly the size of Belgium and comparable to a mid-sized national economy.

Under the new framework, goods produced in Hainan with at least 30% local value added will be able to enter the mainland tariff-free, while foreign companies will gain broader access to service sectors that remain restricted elsewhere in China. Officials see the move as a way to revive foreign investment and reposition China as a more open trading partner.

The project also serves a strategic purpose in Beijing’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Policymakers hope Hainan can demonstrate China’s ability to meet the bloc’s high standards for market access and regulatory openness through controlled pilot reforms.

The push comes as China grapples with weaker investor confidence. Foreign direct investment fell 10.4% year-on-year in the first three quarters of 2025, highlighting the urgency behind efforts to rebalance growth toward consumption and investment while reducing reliance on stimulus.

Economists say Hainan could become a gateway linking China more closely with Southeast Asia, supporting tourism, logistics, and manufacturing. However, challenges remain. Analysts note the island lacks the legal and financial openness that underpins Hong Kong’s success and will face stiff competition from other Asian trade hubs.

While the Hainan Free Trade Port marks one of China’s boldest liberalisation experiments in years, skeptics question whether limited regional reforms will be enough to convince CPTPP members, who are seeking evidence of nationwide commitment to open markets. For now, Hainan stands as a high-profile test of how far China is willing to go in reshaping its trade model.