China Unveils $113 Billion Hainan Free Trade Zone

Major Economic Development Initiative

China has officially launched a massive $113 billion free trade zone in Hainan Island, marking its largest experiment in trade liberalization. The Hainan Free Trade Port (Hainan FTP) was operationally separated from mainland China on December 18, 2025, creating a special customs area that aims to become a new commercial center rivalling Hong Kong.

Key Features of the Free Trade Zone

The new free trade zone is designed to attract significant foreign investment by offering favorable trade conditions. At least 30% of high-value goods will be allowed to enter China tariff-free, making it an attractive location for international businesses. Foreign companies will also have greater access to China's service sectors, which are typically restricted.

Strategic Objectives

The development of Hainan FTP is part of China's broader strategy to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and enhance its global trade position. By creating this zone, China aims to:

• Establish Hainan as a major commercial hub
• Boost foreign investment in high-value sectors
• Promote trade liberalization
• Create a new logistics and trade center for Southeast Asia

Economic Impact and Comparisons to Hong Kong

The GDP of Hainan in 2024 was $113 billion, ranking it as the 70th largest economy globally. While significantly smaller than Hong Kong's $407 billion economy, the new free trade zone is expected to drive rapid growth. Experts note that while Hainan offers controlled liberalization, it currently lacks Hong Kong's legal system and financial openness.

Future Implications

The success of the Hainan FTP could encourage China to open more sectors to global markets. As Ran Guo, Director of Consumer Economics at the China-Britain Business Council, noted, the plan must drive more foreign investment and manufacturing beyond just boosting tourism. The zone's development will be closely watched as a potential model for future trade liberalization efforts in China.