China’s Hainan launches separate customs regime allowing tariff-free imports

China’s southern Hainan province implemented a separate customs regime on Thursday, as Beijing seeks to develop the island into an offshore financing and duty-free hub and position it as a strategic hedge against rising external trade barriers.

The new customs regime creates two distinct customs boundaries for Hainan: one separating the island from overseas markets, and another dividing it from the rest of mainland China.

Most overseas goods entering the island – which is roughly the size of Belgium – are now exempt from import duties, value-added tax and consumption tax. But items subsequently shipped from Hainan to the mainland will be taxed as if they were imported from abroad, according to an explanatory note published by Xinhua on Thursday.

About 6,600 types of goods – equivalent to 74 per cent of taxable imports – can enter Hainan with zero tariffs under the rules. More than 500 million yuan (US$71 million) worth of crude oil, medical equipment, aircraft components and food ingredients were expected to enter the island tariff-free on Thursday alone, Xinhua said.

In its newly released proposals for the province’s 15th five-year plan, Hainan said building the free-trade port was a strategic move by the Communist Party to “navigate great-power competition, offset external risks and seize the initiative for future development”.

At a ceremony on Thursday, Vice-Premier He Lifeng said the island should use the new customs regime as an opportunity to deepen reforms in key areas and strengthen its risk-prevention framework, with the aim of turning the free-trade port into “a major gateway for China’s new era of opening up”.