China declares Hainan a tariff-free free-trade port while mainland protections remain

China has declared the island province of Hainan a tariff-free “free trade port,” scrapping most import tariffs and cutting corporate and individual taxes on the resort island off the country’s southern coast, Beijing said. The government and state media have promoted Hainan as the world’s largest free trade port and an emblem of two-way trade.

Xi Jinping called Hainan “a significant gateway leading China’s opening up in the new era.” But most goods brought into Hainan cannot be shipped duty-free to the rest of China unless they are processed in ways that increase their value by at least 30 percent, and customs officers now check traffic leaving the island to prevent smuggling.

Analysts and businesses offered mixed reactions. Richard McGregor of the Lowy Institute said there was “no sign that Hainan is a forerunner for a broader and more systematic opening up of the national economy” and called the move, amid a record $1 trillion trade surplus last year, a “whiff of bait and switch.” Some traders are already using Hainan to avoid mainland tariffs; an Ethiopian coffee merchant, Nesredin Hussein, said he has rented warehouse space and plans to roast beans on the island because “here the rate is zero.” Others remained skeptical.

Beijing has also kept protectionist measures in place: days after the Hainan port began operating on Dec.

Key Topics

Business, Hainan, Xi Jinping, Haikou, Lowy Institute, Nesredin Hussein