Embarking on a New Era of Openness with Customs Closure

On December 18, 2025, a historic milestone unfolded along the coast of the South China Sea: the Hainan Free Trade Port officially commenced island-wide customs closure operations. This momentous event coincides with the 47th anniversary of the Third Plenary Session of the 11th Central Committee of the Communist Party of China in 1978, which marked the dawn of China’s reform and opening-up era. Its symbolic importance is undeniable. This transition signifies not only the Hainan Free Trade Port’s evolution from “taking shape and gaining momentum” to a new stage of development but also represents a landmark move by China to showcase its unwavering commitment to expanding high-level openness and fostering a globally interconnected economy.

The Essence of Institutional Openness

The term “customs closure” might be misconstrued, but its true purpose is to “build a nest to attract the phoenix”—a strategy aimed at deepening openness rather than restricting it. At its core, it involves transforming the entire island of Hainan, spanning 33,900 square kilometers, into a “special customs supervision zone” and implementing a new policy framework characterized by “first-line liberalization, second-line controlled access, and intra-island freedom.”

“First-line liberalization” opens Hainan to the world: The “first line” refers to the corridor between Hainan and overseas countries and regions. Post-closure, “first-line” management will undergo significant liberalization, enabling qualified goods to be “released upon verification” and drastically improving customs clearance efficiency. The most impactful policy is the substantial expansion of the “zero-tariff” commodity scope from approximately 1,900 tariff lines pre-closure to around 6,600, covering 74% of all imported commodity tariff lines. This means the vast majority of goods can enter Hainan duty-free, significantly reducing business costs and lowering consumption barriers for residents.

“Second-line controlled access” connects Hainan to the mainland: The “second line” delineates the management boundary between Hainan and the mainland. Its primary objective is to “regulate the flow of goods,” particularly preventing the unregulated influx of “zero-tariff” goods into the mainland to uphold national tax system uniformity and market order. This supervision is not a rigid blockade but relies on a “credit + intelligent” smart supervision system. For example, at the “second-line” centralized inspection site in Haikou’s Xinhai Port, customs can swiftly conduct non-intrusive inspections of trucks using machine inspection equipment, achieving efficient and precise regulation.

“Intra-island freedom” unlocks potential: With the safeguards of the “first line” and “second line,” greater freedom is achieved within the island. Beneficiary enterprises can freely trade and process “zero-tariff” goods without storage duration restrictions. Regarding personnel movement, domestic travelers to and from Hainan face no additional documentation requirements. An entry visa-free policy is in place for 86 countries, including the UK, France, and Germany, facilitating seamless international exchanges.

From “Geographical Island” to “Global Hub”

Island-wide customs closure operations are not merely a policy overlay; they are profoundly reshaping Hainan’s economic ecosystem and development trajectory across multiple dimensions.

First, economic openness achieves a historic leap. The core of customs closure lies in dismantling traditional barriers through the “special customs supervision zone” model, enabling the free and efficient flow of resources. Hainan is transforming from a geographical island into a pivotal hub for global resource allocation. Enterprises can leverage “zero-tariff” and “value-added processing exceeding 30% exempt from tariffs” policies to aggregate global resources in Hainan for sophisticated processing and then distribute high-value-added products to the mainland, achieving “Hainan value addition and mutual benefits for domestic and international markets.” New forms of offshore international trade are also flourishing, allowing high-value-added links such as contracts, settlements, and financing to remain in Hainan even if goods bypass China, propelling Hainan toward becoming a global trade service hub and settlement center.

Second, the industrial structure undergoes systemic restructuring. Customs closure provides an “institutional incubator” for Hainan to abandon traditional low-end manufacturing and chart a blueprint for characteristic industries. A “4+3” industrial system is accelerating its formation, with tourism, modern services, high-tech industries, and tropical characteristic and efficient agriculture as the four pillars, and seed industry, deep sea, and aerospace as the three frontier sectors. Policy dividends have precisely nourished the real economy: In Wenchang, commercial aerospace launches have become routine, driving the development of industrial clusters in the “rocket chain, satellite chain, and data chain.” In Yazhou Bay, top-tier national research forces have gathered to create a “seed industry silicon valley” safeguarding national food security. In the first three quarters of this year, the added value of the four pillar industries accounted for 67.2% of Hainan’s GDP, with a clear trend of economic structure upgrading toward “innovation” and “quality.”

Third, the business environment aligns with international benchmarks. High-level openness must be built on a stable, transparent, and predictable business environment. Customs closure operations represent a systemic innovation in legal systems, government services, and regulatory models. Hainan implements the nation’s shortest negative list for foreign investment access, with “non-prohibited areas open to entry” in most sectors. The Multi-Functional Free Trade Account (EF Account) allows enterprises to freely allocate global funds almost like offshore accounts. Additionally, Hainan has pioneered the nation’s first negative list for data exit management in free trade ports, exploring high-level openness in the data sector. These institutional integration innovations aim to make Hainan an “anchor port” attracting global investment.

The “Chinese Opportunity” in Global Focus

Hainan Free Trade Port’s island-wide customs closure holds significance far beyond a regional policy; it offers a “brand-new Chinese opportunity” amid rising global protectionism and underlying currents of “de-globalization.”

International observers have keenly noted Hainan’s unique advantages: It boasts a business environment as convenient as Singapore’s, tax competitiveness akin to Dubai’s, and the vast hinterland of the world’s second-largest economy with a complete industrial system and a market of 1.4 billion consumers. The U.S.-based “Eurasia Review” considers this move a “new milestone in China’s reform and opening-up and an important practice in reshaping the global trade landscape and strengthening world economic connectivity.” A publication under the UK’s “Financial Times” notes that Hainan will become a “testing ground for the liberalization of global trade, investment, and talent mobility.”

The market has demonstrated confidence through actions. Over the past five years, enterprises from 176 countries and regions have invested in Hainan, with the annual growth rate of newly established foreign-invested enterprises reaching 43.7% and the actual use of foreign capital growing by 14.6% annually. On the first day of customs closure, the one-stop aircraft maintenance base in Haikou Airport Comprehensive Bonded Zone remained as busy as ever, having already undertaken business from over twenty overseas airlines worldwide, serving as a vivid example of Hainan’s open advantages.

On December 18, 2025, Hainan stands at a new starting point for high-level openness. Island-wide customs closure operations seal off customs management boundaries but open up limitless space for institutional openness and high-quality development. It is not merely about the fate of an island province but a key strategic pivot for China to construct a new development paradigm and deeply integrate into the world economic system. As the tides rise in the South China Sea and the port connects to the world, a more open, dynamic, and undoubtedly more surprising Hainan is unfolding before the global stage.

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