Hainan Free Trade Port: Full-Island Customs Closure 2025 Guide for Businesses

On December 18, 2025, China marked a historic milestone in its economic opening-up by launching full-island special customs operations in the Hainan Free Trade Port (FTP). As the world’s largest free trade port by area, this move transforms Hainan into a strategic hub for global trade, offering unprecedented opportunities for foreign enterprises. The Hainan Free Trade Port full-island customs closure represents a bold step in China’s efforts to liberalize its economy, streamline cross-border trade, and attract international investment.

Understanding Hainan Free Trade Port Full-Island Customs Closure

Hainan Free Trade Port’s full-island customs closure refers to the establishment of a separate customs supervision zone covering the entire island, effectively creating a “domestic but offshore” trade environment. This system, which took effect on December 18, 2025, allows Hainan to implement unique trade policies distinct from mainland China, including relaxed customs controls, expanded tariff exemptions, and simplified cross-border flows of goods and capital. As highlighted by China’s official government portal, this makes Hainan the world’s largest free trade port by geographical area, designed to serve as a model for high-level opening-up. Source: English.www.gov.cn

The core objective of the full-island customs closure is to position Hainan as a global center for trade, investment, tourism, and technology innovation. By separating Hainan’s customs regime from the mainland, the policy aims to reduce trade barriers, attract multinational corporations, and foster a business ecosystem aligned with international standards.

Key Policy Changes: Tariffs, Import Lists & Value-Added Rules

The Hainan Free Trade Port full-island customs closure introduces several transformative policy changes that directly impact businesses operating in or entering the region. The most significant shift is the expansion of tariff-free imports, a critical incentive for foreign investors and traders. Prior to the closure, Hainan maintained a list of approximately 1,900 tariff-exempt product categories; this has now been expanded to 6,600 categories, covering everything from consumer goods to industrial materials.

Another pivotal rule is the value-added threshold for goods entering mainland China. Under the new policy, products processed in Hainan that achieve more than 30% value addition can be exported to the mainland without incurring additional tariffs. This creates a unique opportunity for manufacturers to use Hainan as a production and distribution hub, leveraging both the island’s tariff advantages and access to China’s vast domestic market.

Operational Impact for Foreign Enterprises

For foreign enterprises, the Hainan Free Trade Port full-island customs closure simplifies market entry and reduces operational costs. The expanded tariff-free list eliminates duties on key inputs, from raw materials to advanced machinery, making Hainan an attractive location for regional headquarters, manufacturing facilities, and distribution centers. Multinational companies in sectors such as electronics, pharmaceuticals, and luxury goods stand to benefit significantly, as they can now import components duty-free, assemble or process them locally, and either serve the Hainan market or export to the mainland with minimal tax burdens.

Additionally, the policy introduces business-friendly measures such as streamlined customs clearance procedures and reduced bureaucratic hurdles. Hainan’s customs authority has invested in digital platforms to automate documentation, cutting average clearance times from 5-7 days to 2-3 days. This efficiency gain is crucial for time-sensitive industries like perishables or fashion, where rapid market access is a competitive advantage.

However, businesses must also navigate new compliance requirements, including enhanced record-keeping for value-added calculations and adherence to Hainan-specific regulatory standards. Engaging local legal or consulting services will be essential to maximize the benefits of the customs closure while ensuring regulatory compliance.

Future Outlook: Hainan as a Global Trade and Innovation Hub

Looking ahead, the Hainan Free Trade Port full-island customs closure positions Hainan to become a global leader in free trade and innovation. By 2030, the Chinese government aims to develop Hainan into a “high-standard free trade port with global influence,” rivaling established hubs like Singapore and Dubai. Key growth areas include financial services, digital trade, and green technology, with additional policies expected to support sector-specific development in the coming years.

The customs closure also aligns with China’s broader economic strategy, including the Belt and Road Initiative, by creating a gateway for trade between Southeast Asia, the Pacific, and mainland China. Hainan’s geographic location, combined with its liberalized trade regime, makes it an ideal logistics hub for multinational corporations seeking to expand their footprint in Asia.

For businesses willing to invest in Hainan’s long-term potential, the full-island customs closure represents more than a policy change—it is a strategic opportunity to establish a presence in one of the world’s most dynamic trade environments. As Hainan continues to refine its policies and infrastructure, early entrants will likely benefit from first-mover advantages, including preferential access to emerging sectors and partnerships with local authorities.

Frequently Asked Questions (FAQ): How Foreign Individuals and Companies Can Register a Business in the Hainan Free Trade Port (After Island-Wide Customs Closure)

FAG: After the island-wide customs closure in December 2025, can foreigners still register companies in Hainan?

Yes.
The island-wide customs closure of the Hainan Free Trade Port (HFTP), effective 18 December 2025, does not restrict foreign investment.
On the contrary, Hainan continues to follow the principle of “opening to the outside world while managing internal circulation.” Foreign investors may still legally establish businesses in Hainan under China’s foreign investment framework.

Q2: What types of entities can foreign investors establish in Hainan?

Foreign investors may establish, among others:

• Wholly Foreign-Owned Enterprises (WFOEs)

• Sino-foreign Joint Ventures

• Branches of foreign companies

• Foreign-invested partnerships

• Representative Offices (non-profit-making)

In practice, WFOEs remain the most commonly used structure due to flexibility in management and profit distribution.

Q3: Does the customs closure introduce additional approval requirements for foreign investment?

In most industries, no.
Hainan continues to apply the Foreign Investment Negative List regime:

• Industries outside the Negative List: filing-based registration

• Industries on the Negative List: subject to specific approval or licensing

The customs closure does not create new general restrictions on foreign company formation.

Q4: Can a foreign individual directly act as a shareholder or legal representative of a Hainan company?

Yes.

• Foreign individuals may act as shareholders

• Foreign individuals may also serve as legal representatives, directors, or executives

• Chinese nationality or permanent residence is not required

However, identity documents, notarization, legalization, and corporate documents must comply with PRC regulatory standards.

Q5: Is a physical registered address required to set up a company in Hainan?

Yes, a compliant registered address is required.

Acceptable options may include:

• Commercial office premises

• Approved business centers or industrial parks

• Designated addresses for digital or trade-related enterprises

Virtual or non-compliant addresses are not permitted.

Q6: Is there a minimum registered capital requirement for foreign-invested companies?

Generally, no statutory minimum applies.

• Hainan follows the capital subscription system

• Registered capital should align with business scope and operational scale

• Certain regulated industries (e.g., finance, education, healthcare) may impose capital requirements

A reasonable capital structure is important for banking, tax, and cross-border operations.

Q7: Do Hainan Free Trade Port tax incentives still apply after the customs closure?

Yes, core tax policies remain in force, subject to eligibility conditions.

Key incentives include:

• 15% corporate income tax for encouraged industries

• 15% personal income tax cap for qualified high-end and scarce talent

• Preferential treatment for eligible imports of equipment and materials

• Processing-value-added (30%) duty exemption policy, where applicable

Eligibility depends on the company’s business model and industry classification.

Q8: Can foreign-invested companies in Hainan engage in cross-border or offshore business?

Yes. This is one of Hainan’s strategic advantages.

Hainan actively supports:

• Cross-border trade and services

• Offshore trade and offshore settlement

• International logistics and shipping

• Digital trade and technology services exports

Under the framework of “first-line opening, second-line control,” related procedures are expected to become more standardized and transparent.

Q9: Can foreign investors complete company registration in Hainan remotely?

In most cases, yes.

• Company incorporation can be handled remotely

• Shareholders and directors are generally not required to be physically present

• Certain steps (such as bank account opening) may require video verification or additional documentation

Professional local support can significantly streamline the process.

Q10: What ongoing compliance obligations apply after registration?

Foreign-invested companies must comply with ongoing obligations, including:

• Annual corporate reporting

• Tax filing and bookkeeping

• Foreign exchange and cross-border fund compliance

• Ultimate Beneficial Owner (UBO) information maintenance

• Industry-specific licensing and renewals

The customs closure does not reduce compliance requirements; regulatory transparency is increasingly emphasized.

Q11: Is Hainan suitable for every foreign investor?

Not necessarily.

Hainan is particularly suitable for:

• Cross-border trade and service companies

• Offshore business and international settlement structures

• Digital economy and technology-driven services

• Foreign companies using Hainan as a China entry platform

Purely domestic manufacturing or heavy-asset models may require a more cautious assessment.

Q12: Is a feasibility or compliance assessment recommended before registration?

Strongly recommended.

Before incorporation, foreign investors should consider:

• Industry access and regulatory review

• Tax and policy applicability analysis

• Corporate structure and shareholding design

• Capital planning and operational alignment

Early assessment helps avoid structural errors, compliance risks, and policy misalignment.

Conclusion: Seizing Opportunities in Hainan’s New Era

The Hainan Free Trade Port full-island customs closure is a landmark development in China’s economic reforms, offering foreign businesses unprecedented access to a duty-free, business-friendly environment with seamless links to the mainland market. By expanding tariff-free imports, simplifying customs procedures, and incentivizing local processing, the policy transforms Hainan into a global trade hub poised for rapid growth.

For enterprises considering entry into China or expanding their regional operations, Hainan now stands as a compelling choice. Success will require a clear understanding of the policy details, from tariff exemptions to value-added rules, and proactive engagement with local partners. As Hainan evolves into a world-class free trade port, the businesses that act decisively today will be best positioned to thrive in this new era of global trade.