China has reportedly separated the southern island province of Hainan, which is similar in size to Belgium, from the mainland for customs purposes.
The move is part of a broader strategy to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and to develop a new commercial centre, reported Reuters.
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Authorities anticipate that creating a duty-free environment in Hainan will attract foreign investment.
Goods manufactured in Hainan with at least 30% local value-added content will be eligible to enter the rest of China without tariffs.
Foreign businesses will also be permitted to operate in service sectors that remain restricted on the mainland.
The country aims to strengthen its reputation for free trade in order to assure CPTPP members of its ability to comply with the bloc’s high standards for openness in trade and investment, using pilot initiatives like the Hainan Free Trade Port as evidence.
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By GlobalDataDuring a speech at the port, China Vice-Premier He Lifeng urged local officials to “build Hainan Free Trade Port into a vital gateway leading China’s new era of opening up to the world”.
He Lifeng described the initiative as a “major strategic decision” made by the Communist Party, “with an eye to the overall situation at home and abroad”.
This approach is seen as a reference to US tariffs introduced under President Donald Trump, which have prompted China to diversify its $19tn (133.79tn yuan) economy and strengthen its role in worldwide supply chains.
Official data shows that foreign direct investment into China dropped by 10.4% year-on-year in the first three quarters of this year.
Economists note that if the liberalisation of Hainan proves successful, it may encourage policymakers to introduce more market-driven reforms in other parts of China’s economy.
Official figures show Hainan’s gross domestic product reached $113bn in 2024, Reuters noted.
Trade negotiators have expressed scepticism about whether CPTPP members will view the Hainan initiative as sufficient, pointing out that joining the bloc requires liberalising the entire national economy, something China has not yet done, regardless of the scale of the Hainan project.
Meanwhile, in a separate announcement, Reuters reported that MetaX Integrated Circuits saw its shares surge by 700% during its Shanghai debut.
The Chinese AI chipmaker raised around $600m in an initial public offering, following a similar move by Moore Threads, whose shares experienced a 400% increase.
Bloomberg recently reported that the US is planning to pursue agreements with eight allied countries to strengthen the supply chain for critical minerals and secure resources essential for AI technology.
