by XIN Yuan

China's Hainan province said it will launch island-wide customs operations from Dec 18, 2025, a long-planned move that will fundamentally change how goods move between the island, the Chinese mainland and overseas markets.

The change will place Hainan under a distinct customs regime as Beijing presses ahead with plans to turn the island into a high-standard free trade port and a testing ground for deeper economic opening.

Analysts said the customs launch will effectively mean that goods moving between Hainan and the mainland are handled as imports and exports, while trade between Hainan and overseas markets will face far fewer restrictions than elsewhere in China.

A provincial government notice said a package of supporting rules will take effect on the same date, setting out how goods are supervised, taxed and circulated under the new system.

A shift in how trade is handled

Under the new regime, authorities will relax controls on trade between Hainan and overseas markets, while applying targeted supervision to goods flowing between Hainan and the mainland. Within the island, goods and production factors will circulate with fewer administrative barriers.

The customs launch is widely seen as the most significant institutional step since China unveiled the Hainan Free Trade Port plan in 2020, after several years of preparatory policy rollouts.

Officials say the move is designed to lower trade costs, attract investment and support industries such as import processing, offshore trade and cross-border services.

Tax incentives move to the foreground

The customs overhaul will also consolidate and expand Hainan's tax incentives.

ZHOU Zheng, spokesperson for the Hainan Department of Finance, said the province has already rolled out 18 free trade port tax measures, including multiple zero-tariff lists, exemptions for value-added processing, preferential corporate and individual income tax rates capped at 15%, and offshore duty-free shopping.

From December 2025, existing zero-tariff measures will be reorganized under a negative-list system, meaning most goods will be tariff-free unless specifically listed. The share of goods eligible for zero tariffs will rise from 21% to 74%, Zhou said.

What it means for businesses

Trade economists say the biggest change lies in how companies structure supply chains and logistics involving Hainan.

BAI Ming, a researcher at the Chinese Academy of International Trade and Economic Cooperation, said the new regime will redraw the boundary between Hainan and the mainland in practical terms.

"Once the customs regime is in place, goods shipped from the mainland to Hainan will be treated as exports, while goods sent from Hainan to the mainland will be treated as imports," Bai told Jiemian News.

He said lower tariffs, simpler tax rules and freer capital flows could reduce operating costs and open new opportunities for small and medium-sized firms, particularly those engaged in processing trade and cross-border business.

A regional role beyond China

Beyond domestic reform, policymakers and analysts see Hainan as a potential gateway linking China more closely with Southeast Asia and other RCEP economies.

CHI Fulin, president of the China Institute for Reform and Development, has said the island could serve as a base for Chinese companies expanding into ASEAN markets, as well as for regional firms seeking access to China.

China's direct investment into ASEAN rose 34.7% in 2023, with 8.5% routed through Hainan. Investment flows to the region are expected to continue rising as the China–ASEAN Free Trade Area 3.0 agreement takes shape during China's 15th Five-Year Plan period (2026-2030).

Officials cautioned that implementation will be phased and adjusted as the customs regime takes effect, but the December 2025 launch marks a decisive shift in how China's most ambitious free trade port will operate.