* China's Hainan Free Trade Port (FTP) has entered a one-month countdown to launching island-wide special customs operations.

* Hainan FTP's strategic position and policy flexibility have made it significant to the country's long-term plan to advance its opening-up at the institutional level.

* The anticipated policy certainty, especially in terms of tariffs, market access and tax incentives, enhances the FTP's growing appeal as both an investment destination and a springboard into China's broader market.

HAIKOU, Nov. 18 (Xinhua) -- China's Hainan Free Trade Port (FTP) has entered a one-month countdown to launching island-wide special customs operations, a major milestone in the opening-up drive of the world's second-largest economy despite rising protectionism worldwide.

Starting on Dec. 18, the special customs operations will increase the proportion of zero-tariff products in the Hainan FTP from 21 percent to 74 percent, while further opening up the local tourism, modern services, and high technology.

"The launch of island-wide independent customs operations will give Hainan greater latitude to pilot higher-standard opening-up measures," said Cai Ping, an official of the National Development and Reform Commission (NDRC).

Cai said that these initiatives will send a clear message to the world: China's commitment to high-level opening-up is unwavering, and its doors will continue to open wider.

Located in China's southernmost island province, the Hainan FTP is the country's largest special economic zone and a key testing ground for deepening reform and opening-up. Its strategic position and policy flexibility have made it significant to the country's long-term plan to advance its opening-up at the institutional level.

China first announced its development of a pilot free trade zone in Hainan in April 2018 amid growing global uncertainty. So far, the Hainan FTP has established a foundational framework to facilitate free and orderly flows of goods, capital, personnel and data, underpinned by zero tariffs, low tax rates and a simplified tax system.

POLICY PACKAGE

Under the special customs operations, Hainan FTP will implement a special supervision model described as "freer access at the first line, regulated access at the second line, and free flows within the island."

The "first line" refers to Hainan's connection with overseas markets. "Freer access at the first line" allows overseas goods to enter the island more conveniently, with most benefiting from zero tariffs and expedited clearance.

The "second line" refers to the customs boundary between Hainan and the mainland, where goods will undergo standard customs oversight to ensure fairness and prevent smuggling.

The two-tiered customs system enables freer trade between Hainan and areas outside China's customs borders.

"Hainan's opening-up is not merely about lifting restrictions, but about systematically building an institutional framework to ensure the free and efficient flows of people, goods and capital," Cai said.

In terms of trade, the proportion of tariff lines with zero-tariff products in the Hainan FTP will increase from 21 percent to 74 percent, while the number of tariff-free items in Hainan will increase from about 1,900 to around 6,600, covering nearly all production equipment and raw materials. Coupled with simplified customs clearance procedures, this is expected to sharpen Hainan's competitive edge as a low-cost, high-efficiency trade hub and a key entry for global goods.

In terms of investment, Hainan will continue opening up sectors such as tourism, modern services, and new and high technology. Eligible enterprises and personnel in encouraged industries will enjoy preferential income tax rates that are highly attractive globally.

Economist Cao Yuanzheng noted that the construction of the Hainan FTP demonstrates China's firm commitment to economic globalization.

"Once island-wide special customs operations begin, Hainan will attract more global enterprises, integrate further into global value chains, and become a new gateway of China's reform and opening-up in the new era," he said.

APPEAL TO INVESTORS

The steady buildup of policies and infrastructure has already begun to reshape the island's economic landscape in its pilot zones, boosting confidence among global investors.

Industry observers note that the anticipated policy certainty, especially in terms of tariffs, market access and tax incentives, enhances the FTP's growing appeal as both an investment destination and a springboard into China's broader market.

Over the past five years, Hainan has utilized actual foreign investment totaling 102.5 billion yuan (about 14.47 billion U.S. dollars), increasing at an annual average of 14.6 percent. So far, Hainan has attracted investment from 176 countries and regions -- a trend widely expected to accelerate once the special customs model is in operation.

Among these early movers is Canadian chocolate maker Green Chocolate Works, which first encountered the Hainan FTP at the inaugural China International Consumer Products Expo in 2021.

What began as an exploratory visit soon turned into a long-term commitment. The Canadian company built the Jia Green Chocolate Works (Hainan) Co., Ltd. manufacturing base in Hainan, which now runs three automated production lines, with a total annual output value of 80 million yuan and more than 100 product varieties.

According to Meng Xinli, chairman of Jia Green Chocolate Works, FTP policies have lowered sales costs by more than 10 percent, while preferential tax rates have saved it nearly 10 million yuan. "We have reinvested the saved money in product development and technological upgrades," Meng noted.

Another favorable measure is allowing goods processed in Hainan to be sold to the mainland duty-free if their processing generated an added value of 30 percent or above -- and the policy is set to be optimized, making it easier for companies to qualify.

"We import ingredients from Belgium and use local pandan leaves to make chocolate," said Meng Weiwei, general manager of Jia Green Chocolate Works. "The new policy will reduce our costs further, and we plan to use more locally grown cocoa in the future."

With island-wide special customs operations on the horizon, Jia Green Chocolate Works is preparing for its next growth phase. It said that the new system will streamline imports and exports of raw materials, enabling it to build an international distribution network centered in Hainan.

"Hainan will not just be a production base for us," Meng Xinli said. "It will be a new starting point for our global ambitions."

In 2024, the total volume of Hainan's imports and exports of goods totaled 277.65 billion yuan -- up 20 percent year on year, and up nearly 200 percent compared to 2020.

The long-awaited customs operations are also expected to open new doors for regional cooperation. Ong Chong Yi, former CEO of Malaysia's Port Klang Free Zone, said that Hainan's tax framework is especially attractive to ASEAN businesses.

"Take palm oil processing as an example. In Hainan, raw materials can be imported tariff-free, and income tax rates are lower. If the processed goods are later sold to the Chinese mainland, they can still enjoy zero tariffs. It's a huge advantage," Ong said.

Benjamin Rae, senior economist at the United Nations Office of the Resident Coordinator, China, also envisioned a bright future for the Hainan FTP. The Hainan FTP is poised to play a distinctive role amid deepening regional economic integration, Rae said.

FTPs like Hainan, he noted, act as catalysts for inclusive growth as their open, predictable and transparent institutional frameworks can spur innovation, create decent jobs, stabilize economies and strengthen trust among trading partners. 

(Reporting by Zhong Qun, Wu Maohui, Li Yue, Huang Zechen and Yao Yuan; Video reporters: Liu Yutian, Zhao Yuhe and Guo Liangchuan; Video editors: Zhang Mocheng and Luo Hui)  ■