Customs closure brings diverse business opportunities
At the end of last year, Hainan FTP officially launched island‑wide customs closure and implemented a special customs operation system described as “freer access at the first line, regulated access at the second line and free flows within the island”. It has since become a special customs supervision zone.
In the first month of customs closure (18 December 2025 to 17 January 2026), the value of zero‑tariff goods imported through the first line reached RMB750 million [2]. Trade and investment are now more liberalised and convenient, with the simultaneous implementation of a series of customs closure policies and measures, including a goods circulation taxation policy, a catalogue of imported taxation commodities and a tariff exemption policy for goods with value‑added processing for sales to the Mainland.
Since becoming a special customs supervision zone, Hainan has transformed into the world’s largest free trade port that facilitates a large free flow of goods, capital, personnel and data. Hong Kong companies can consider leveraging Hainan FTP to develop the Mainland market while making the best use of local resources to explore new opportunities.
Offshore duty-free shopping delivers impressive results
Due the “freer access at the first line” policy, residents and tourists in Hainan FTP can buy goods at more favourable prices on the island. In fact, in addition to offering duty‑free incentives to tourists, Chinese customs authorities are encouraging Hainan residents to buy more imported goods. To this end, these authorities are adopting “positive list management” of imported goods intended for local consumption. This allows island residents to buy imported products tax free, that is, exempt from import duties, import value‑added tax (VAT) and consumption tax. Effective from 1 November 2025, Hainan FTP has adjusted its offshore duty‑free shopping policy for travellers leaving the island. Departing tourists are entitled to an annual offshore duty‑free shopping quota of RMB100,000 per person, while the range of duty‑free goods available has expanded to 47 categories.
In the first month after customs closure, the amount of offshore tax‑free shopping surged drastically. The value of zero‑tariff goods imported through the first line has already reached RMB750 million, according to Haikou Customs. In the same period, the customs authority has supervised offshore duty‑free sales of RMB4.86 billion, up 46.8% year on year, while the number of shoppers rose 30.2% to 745,000 [3]. Consumers’ high shopping enthusiasm is testimony to the sustained stimulating effects of this policy.
Tax‑free shopping is the key driver of Hainan FTP’s retail sector. Along with Hainan’s unique tropical tourism resources and the world’s largest offshore tax‑free consumer market, the development of the sector is increasingly vigorous, presenting an ideal business platform for brands from around the world. Hong Kong companies can help Hong Kong and international brands enter the Chinese domestic market through the FTP’s tax‑free channels and tourism consumption opportunities. This way, not only can they make good use of Hainan FTP’s tax incentives, but they can also showcase and sell products to tourists coming from all over the Mainland, raising brand visibility and expanding market development.
Leverage tariff exemption value-added processing to expand domestic sales
As for the domestic sales of products, under the policy of “regulated access at the second line”, goods originating from Hainan FTP or products with an added value of 30% or more after processing of imported materials in Hainan are exempt from import duties when entering the rest of China. Nevertheless, VAT and consumption taxes at import links will still be levied according to regulations. Other goods coming from Hainan are still required to pay customs duties, import VAT and consumption tax when entering the Mainland (second line).
Products that enter the rest of China from Hainan and meet the requirements will benefit from this tax‑burden threshold‑lowering policy. For companies engaging in entrepôt trade or processing, this is equivalent to the opening up of a domestic sales pathway with more cost advantages.
Companies can consider setting up a base in Hainan, and in doing so can capitalise on the zero‑tariff advantage from “freer access at the first line” to source and processed raw materials. They can also take advantage of the domestic sales channel that exempts customs duty for products that have undergone value‑added processing. As these products can directly enter the Mainland without paying full customs duty as before, their price competitiveness in the Mainland market will be substantially raised.
Take note of investment liberalisation and facilitation measures
Hainan has also introduced corresponding preferential taxation policies and lower individual income tax rates for specific encouraged industries, providing investors with attractive options. After customs closure, Hainan FTP continued to advance the implementation of a system of “market access upon commitment”. This system includes drawing up a special list for relaxing market access, implementing a management system of pre‑establishment national treatment, creating a negative list for foreign investment and easing the scope of capital utilisation by foreign enterprises. Simultaneously, innovation and improvement will be made to the investment liberalisation system, a fair competition system will be established and improved, while domestic and foreign‑invested enterprises will be treated equally in government procurement.
The Catalogue of Encouraged Industries in Hainan Free Trade Port (2024 Edition) states clearly that, in addition to encouraged industries in existing national industrial catalogues, Hainan has so far added 14 encouraged industries totalling 176 types. These align with Hainan’s focus on developing the “3+1” modern industrial system, that is, high‑end tourism, modern services and high‑ and new‑tech industries, as well as high‑efficiency tropical agriculture. These cover in detail all kinds of manufacturing industries, wholesaling and retailing, transportation/warehousing, accommodation and catering, information transmission/software and information technology services, finance and other commercial services. These industries are eligible for preferential enterprise income tax (EIT), with the taxation rate reduced from the national standard of 25% to 15%. The validity of this policy has now been extended to the end of 2027. For details, please refer toHainan Free Trade Port Extends Preferential EIT Policy to End of 2027.
Hainan FTP also continues to offer personal income tax incentives to eligible high‑end and urgently needed talent. Individuals whose effective tax burden exceeds 15% will be exempted from the excess portion. (This policy has been extended to the end of 2027 [4]). It is worth noting that related conditions must be met to be eligible for these incentives. These include that the individual has to reside in Hainan FTP for a cumulative total of 183 days in one tax year, with reasonable days for off‑island business trips, vacations, studying and training counting towards cumulative residence, provided that the actual number of days of residence is not be less than 90. A talent must also be recognised by various Hainan FTP departments with the authority to identify talents, or the income of the talent in Hainan FTP has exceeded RMB300,000 during the tax year.
Conclusion
The aforementioned measures create new opportunities for Hong Kong companies to expand into the domestic market. They can take advantage of Hainan FTP’s tax incentives and geographical location (the flight time to and from Hong Kong is only about 90 minutes) to set up production bases, warehousing and logistic centres or sales outlets to develop their domestic sales businesses. Furthermore, with Hainan’s well‑developed transportation infrastructure, such as upgraded high‑speed rail, airports and ports, and vibrant e‑commerce ecosystem, Hong Kong companies will find it easier to develop online and offline sales channels in Hainan and other inland areas.
Meanwhile, companies can make good use of Hainan’s tariff exemption mechanism for value‑added processing of imported materials there. If the added value after processing exceeds 30%, a product will be exempted from import duties when sold domestically to the Mainland and only VAT and consumption tax is payable according to the rules. This will significantly lower business costs and benefit several popular sectors, such as food processing and intensive processing of health products. In addition, for specific encouraged industries, Hainan is implementing tax incentive measures and a lower individual income tax policy to enhance investment appeal. The Hainan FTP will continue to develop and is worth paying attention to by enterprises looking to expand domestic sales.
Source：HKTDC
自贸港经贸发展研究院于香港九龙成立，作为综合型智库咨询机构，研究院汇集专业博士与行业资深顾问，在国内外拥有丰富的行业技术积累和区域发展经验。以政府和企业为核心，长期致力于国内外产业提升、地方经济发展、专项规划策划、城乡发展咨询、存量资产盘活、谋划优质项目、企业双向出海、全球战略落地与实施等。紧密围绕区域高质量发展，充分利用国际资源优势，提供解决方案和全过程支持。
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