Hainan Island Customs Closure: Not Isolation, But an Upgrade in Openness

Key Policies & Impacts

1. What is "Customs Closure"?

• Definition: Transforms Hainan into a special customs zone with:

• "First Line" Open: Free flows between Hainan and global markets.

• "Second Line" Controlled: Managed trade between Hainan and mainland China.

• Island-Wide Freedom: Unrestricted movement of goods/capital within Hainan.

• Not a lockdown:

• No extra travel documents required.

• Aims to attract global capital/talent (testing ground for national reforms).

2. "Zero-Tariff" Expansion

• Tax Item Coverage: Jumps from 1,900 to ~6,600 items (74% of all goods), up 53 percentage points.

• Beneficiaries: Extended to all island entities (enterprises, NGOs, etc.).

• New Flexibility:

• Zero-tariff goods no longer restricted to self-use; can circulate freely among eligible entities.

• Processed goods from imported materials also exempt from back taxes.

3. Strategic Goals

• Global Integration: Faster cross-border trade (e.g., 30% quicker customs clearance pilot).

• Economic Catalyst: Expected to boost Hainan’s FDI by 25%+ by 2026 (vs. 2023).

• Consumer Benefits: Cheaper luxury goods, electronics, and raw materials for local businesses.