What is Hainan Free-Trade Zone? We took a trip there to find out

On December 18, 2025, Hainan officially implemented the island-wide customs closure. When it comes to customs closures, people can’t help but think of the “closed country” policy in the late Qing Dynasty. Such simple and literal associations and excessively concise customs terminology make people even more confused: what exactly is customs closure? After a four-day trip to Hainan, we realize that customs closure is the exact opposite of “closing the country” and is a set of preferential policies for Hainan to be more open, to develop its local economy, and to build a free trade zone on the whole island.

At the beginning of the 2026 Gregorian New Year, our friend David invited us to travel to Hainan. He migrated to Guangdong from his hometown of Danzhou, Hainan in 2000 and now has his own logistics company in Shunde that provides services for customers who need to import and export goods. Rexon and James came long. Rexon is a scholar of Chinese culture, and James has his own sea freight company. Because of work, we were all curious about Hainan’s recent customs closure and had our trip to Hainan in early January to find out.

Street trees in Hainan: coconut trees

What exactly is customs closure?

After we landed at Haikou Airport, we started our road trip with a 7-seat vehicle from a car rental company. Coconut trees on the sides of the streets came in out sight immediately. Located south of the Tropic of Cancer, Hainan in January has a weather like Santiago’s spring, with warm sunlight and fresh breeze from the ocean. After a short lunch, we arrived at the Windows to Global Trade, a semi-government backed consulting agency specialized in Hainan’s new free trade policy.

Windows to Global Trade — Haikou, Hainan

The office building of Windows to Global Trade is in the central business district of Haikou. We first came to the 17th floor to visit their “Global Overseas Chinese Merchants Home,” a coworking space for international companies to have convenient leases. Chambers of commerce of many countries have rented offices here, allowing companies from their own country to take advantage of Hainan’s new policies and expand business opportunities through their platform.

Then we came to the conference room on the 30th floor to learn and discuss what customs closure is. With slides, videos, discussions, we finally figured out the meaning of customs closure. Customs closure takes advantage of Hainan Island’s unique geographical features and implements a set of preferential and open policies that isolates itself in terms of customs policies, tax policies, and immigration control. Because the most characteristic feature of Hainan Free Trade Port is the customs segregation from other provinces, the word “customs closure” comes to life.

About 74% of Hainan Customs’ 6,600 classified commodity items carried zero tariff as of January 2026. If my imported goods in Hainan are tariff-free, and I directly resell them to other provinces, do I not have a price advantage? This is the reasoning to have customs segregation: if the goods imported into Hainan are directly resold to other provinces, they require payment of customs duties and import value-added tax when passing through the customs of other provinces, which is equivalent to importing directly to other provinces, but paying additional freight and miscellaneous fees; If raw materials or semi-finished products are imported, but processed into semi-finished products or finished products in Hainan Free Trade Port, and the added value exceeds 30%, they are exempt from customs duties (VAT is paid as usual) when sold to other provinces. This is the actual meaning of Hainan’s core policy of “opening up the first line and controlling the second line.”

Another part of opening up the first line is “Double Ending,” which is importing materials from overseas and exporting value-added goods to overseas. Enterprises registered and operating in Hainan import raw materials or semi-finished products and processed them into semi-finished products or finished products in Hainan Free Trade Port, regardless of the value added, are exempt from the corresponding import duties and value-added tax for the overseas export portion according to the duty-free classification. Both Chinese and international enterprises can register branches in Hainan, enjoy the same free trade port policy, and open accounts quite conveniently.

What about the daily life of the island’s residents? They are happy, because they purchase and consume imported goods without leaving the island, and can directly enjoy the tariff-free goods under the duty-free category. What about residents from outside the island who come to travel? Residents from outside the island can enjoy customs duty and consumption tax exemption for some goods when they purchase at the duty-free shops on the island, but must leave the island, with a purchase limit of 100,000 yuan per person per year. There is also a one-time purchase limit for cosmetics, mobile phones, alcoholic beverages and other goods.

China has a historic and diverse food culture, and health care is also an essential part of people’s lives. As of January 2026, the two industries on Hainan Island that have taken the most advantage of preferential free trade policies are agricultural and medical industries. Enterprises on the island enjoy the tariff-free policy by importing high-quality primary agricultural products from around the world and selling the processed agricultural and food products to the domestic market, when the added value increases by more than 30%. In the Boao Lecheng International Medical Tourism Pilot Zone, imported drugs and medical devices can enjoy full exemption from customs duties, value-added tax and consumption tax. New drugs certified by the US FDA and the European Union can show up at the pharmacy shelves in Hainan in as little as one week.

In terms of tax policy, Hainan Free Trade Port implements the “Double Fifteen” policy. The corporate income tax rate is 15%, and the part of individual income tax exceeding the 15% threshold is not charged at a progressive tax rate, but a flat rate of 15%. Low tax rates and low tariffs synergistically attract domestic and foreign talents and enterprises to invest, work, and settle on the island, and the number of enterprises and individuals consulting the Windows to Global Trade surged around the time of official customs closure. The platform provided by Windows to Global Trade guides enterprises to not only set up entities, but also open accounts and settle tax items, and becomes a powerful helper for domestic and foreign businesspeople to operate in Hainan and enjoy the new policy. Windows to Global Trade also organizes external lectures and training to promote the preferential policies of the free trade port.

In terms of immigration control, Hainan has a visa-free entry policy for citizens of 85 countries, and a single entry allows stay for less than 30 days, which brings great convenience to overseas businesspeople to come to the island.

Wine with food: how wine should be promoted in China

In the evening, we enjoyed Hainan cuisine with Mr. Zhang, President of Hainan Wine Culture Exchange Association, and Rita, a professional wine evaluator of Hainan Qiongyaojiang Culture Co., Ltd. The two brought a variety of high-quality wines, and we naturally talked about the market potential of wine in China. Mr. Zhang says that although the sales of alcoholic beverages in the Chinese market are now facing bottlenecks, the consumers are increasingly more aware of the quality of the wine they enjoy. Low-priced and low-quality wines have lost the market, which is replaced by high-quality and reasonably priced domestic and imported wines. He is optimistic about the Chinese wine market, believing that the economic condition is constantly improving while the consumer tastes are tagging along. He thinks wine has a lot of room for growth in China.

Wine paired with dinner

We have always believed that wine is a product rich in culture, and it may be difficult to simply promote the product itself without promoting wine culture. If the restaurant staff does not know how to open, decant, and serve wine, the customer’s wine experience will not improve. Consumers will not easily incorporate wine into their diet if they do not understand the basic pairing of red/white wine with food. If promotion of wine is brim of exaggerated description of exotic flavors, the customers will distrust the salespeople. Tastes vary personally, and description of wine flavors with too much detail may lead to a deviation from customers’ subjective perceptions.

Mr. Zhang knows a lot about Chilean wines and hits it off with our tastes. We continued to taste and chat about wine and agreed that Chilean wines have the top value for money with reasonable prices and excellent quality. Interestingly, the market price of Chilean wine in Chile is much higher than the market price in China due to tobacco and alcohol taxes in Chile, so there is no need to go to South America to just taste and consume Chilean wine.

Ausca: A model of “Double Ending”

Early in the next morning, we drove to the vicinity of Yangpu Port in Danzhou and visited Hainan Ausca International Oils and Grains Co., Ltd. Before we drove into the factory, the first things that caught our eyes were the huge granaries with the company logo. We entered the premise and found slightly smaller but still large oil tanks on the other side of the factory. We met the chairwoman of the company in the reception hall, who warmly received us and showed us around the factory.

Granary at Ausca

Ausca has a complete set of production and warehouse facilities in the bonded logistics park of Yangpu Economic Development Zone. When we passed by the company’s history exhibition, the chairwoman told us that the daily output of the factory can reach up to 6,000 tons, which is three times the highest daily output of its parent company’s original factory in Guangxi. The entire facility took only six and a half months in construction with the concerted efforts of more than 1,000 construction workers. The commissioning started in April 2021, with amazing preparation efficiency and speed.

Ausca’s digital Kanban

We walked through the glass corridor, and the huge granaries came into view again. Ausca mainly imports soybeans and rapeseed from all over the world and processes these primary agricultural products into final producs and by-products such as edible oil and soybean meal through a series of processes such as machine pressing. The production line is separated by glass for visitors to see through, but there is no person working next to the production line. The chairwoman says that this factory has the highest level of digitalization and automation in the world among oil factories, and all parameter input and operation are controlled by workers in the control center. Only one worker can be left on duty in each building during lunchtime. We happened to visit at lunchtime and found that many of the chairs in front of the control panels were empty, but the semi-finished oil in the steel tanks in the processing lines was still rolling. The factory’s high level of automation has attracted executives and technicians from all over the world to learn its design and operation, and Ausca has spared no reservation to provide technical guidance to international companies.

Automatic oil processing line

Ausca is a typical “Double Ending” enterprise, and their processed edible oil is mainly exported to Southeast Asia, but they also expect to export to other countries in the future. China has a high edible oil consumption, and the annual export volume of edible oil was only about 200,000 tons. The operation Ausca in Hainan directly led to China’s edible oil exports to be quadrupled, because they are double ending on the policy of the triple tax exemption of the Hainan Free Trade Port.

Diverse Ausca products

At the end of the visit, the chairwoman invited us to “drink oil” directly. No kidding, we came to the final product showroom, where there was camellia oil served in small cups on the table. The chairwoman picked up a cup and drank from it. She says that the camellia oil they produce is oily but not greasy, and her throat feels comfortable when she drinks it. We tried and indeed, our throats became instantly smooth without greasy feeling. There was a faint fragrance in the mouth. I happened to be studying some books on reversing diabetes and learned that the healthiest fatty acid in vegetable oil is monounsaturated fatty acids. I curiously picked up a bottle of camellia oil to check its nutritional value table and found that its monounsaturated fatty acid content reached a very high 80%. It seems that this oil is not only delicious, but also healthy.

Yangpu Port: A natural deep-water port with full potential

After tasting Hainan cuisine and refreshing coconut water at an authentic food stall, David’s brother took us on a brief visit to the thousand-year-old salt fields in Yangpu. It was used to dry seawater to make salt, and now it is a tourist attraction. David’s brother is in charge of investment promotion in Danzhou. When he heard that we were going to visit their hometown, he carefully prepared the itinerary and brought us to visit Yangpu Port in the afternoon.

We arrived at Yangpu International Container Terminal Co., Ltd., whose office building has a 270-degree viewing multi-function room, with a panoramic view of containers and bridge cranes. As of January 2026, Yangpu International Container Terminal has opened 59 routes, mainly covering the domestic coast and major ports in the Southeast countries. It also has routes with South Asia, the Middle East, Oceania, North America and South America, with the latter one covering the port of Chancay in Peru and the port of San Antonio in Chile.

Yangpu Port at a glance

Yangpu Port is the nearest deep-water port connecting South China, central and western provinces in China and ASEAN countries, and is now developing the second phase to obtain greater throughput capacity. During both phases of construction, Yangpu Port has carefully protected the corals on the seabed and strived to minimize the negative impact on the natural environment. Yangpu Port is a typical policy-driven port. Its throughput has not yet reached the design capacity, but the expected throughput will continue to increase. David’s and James’ companies deal with terminals and ports every day, so they asked a lot of professional questions about sea freight, from which we learned quite some knowledge.

Hospitality Maximum: Danzhou people are no strangers

David and his brother invited us to dinner at his home in Danzhou, and on the way we bought some fruit at a wholesale fruit store. Hainan’s tropical climate has created big mouth-watering mangos. Hainan also has fruits that are not common in other provinces, such as bird’s nest fruit, fire ginseng fruit, etc., of which I have never heard before.

Hainan mango with a shocking size

In the evening, as soon as we arrived at David and his brother’s house, the whole family gathered at the door to greet us with smiles on their faces, as if we were their family who had just returned home after a long travel. We sat down for tea and then started setting up the dining table. David’s cousin brought a roast suckling pig and cut it in front of us. We held wine in our left hand and meat in our right, which made us very content. We sat around the dining table, while David’s mother, sister, brother-in-law, sister-in-law, and cousin kept serving food, filling the table to the brim. The meal was so sumptuous, we joked, why hadn’t the other dozen guests arrived yet?

Roast suckling pig

After we took the lead in singing, the table became a stage where everyone began to sing loudly one after another. David’s brother contributed several popular songs and sang the local folk music called Danzhou Tune. He welcomed us to visit again with our families with the highest courtesy, and to bring business partners who are interested in investing in Danzhou. In the end, David’s mother also wok-fried the beans she planted, which was sweet and tender. The vegetables that were free of pesticides and artificial fertilizers tasted really delicious.

Crater tea: whole garden organic and ecological

As tea lovers, we cannot miss the local tea plantations and tea products. Early on the morning of the third day, we came to Baisha Li Autonomous County to visit the tea house of the Meteorite Crater Tea flagship store. The owner welcomed us warmly and immediately started brewing their organic green tea. His brand is Crater Tea, because the location of his tea plantation was determined by geographers to have had a meteorite with a diameter of about 380 meters fallen to the ground a long time ago. We tasted his organic green tea and found that the taste was not astringent or bitter, with a well-balanced taste and aroma.

Crater Tea Baisha flagship store

The Crater Tea comes from a very large purely organic tea garden, which accounts for one-third of the area of Hainan’s organic tea plantation. The entrepreneur also started from scratch and reclaimed land to plant tea trees. Not only does all their tea come from their own tea gardens, but all their tea plantation is certified as organic and pollution-free. They face organic certification inspections twice a year, one for routine sampling, and the other for random sampling. Various organic certifications are on display on the walls of the tea house, and their tea has export qualifications for various countries. However, according to the owner, Hainan tea is relatively niche, currently mainly sold within Hainan Island. They sell smaller amount to other provinces through online sales and are now actively seeking recognition from overseas customers.

The owner started making their red tea, which was also very soft and tasted better than the red tea we had tasted before. Today’s organic tea and last night’s organic beans were so delicious, which made us think that we should eat more organic food. The owner also agrees with this view. Since one of the benefits of drinking tea is health, it is necessary to drink more pollution-free organic tea to maximize the benefit.

After the tea tasting, the owner led us to the Baisha Ecological Tea Garden Town, where there is his 10,000-acre tea garden. We first passed by the tea gardens of other tea farmers and stopped by a protruding rock. The owner pointed to the rock and said that after a long period of geological changes, the meteorite crater is not very visible now, but some geological features still showcase the result of the meteorite hitting the ground. The protruding rock has straight lines almost perpendicular to the ground, and the rock near the ground bushes has a transverse pattern, which is the mark left by the meteorite.

Geological features caused by meteorite landing

We continued towards the mountains and stopped after passing a small lake. The tea mountains are in a basin surrounded by higher mountains, with an altitude of about 400 meters. Tea gardens here emphasize on ecosystem diversification and do not weed, because herbicides cannot degrade for more than ten years and are easy to accumulate in the soil. Pests eat not only tea leaves but also other plants, thus minimizing the impact on organic tea yields. Betel nut trees and osmanthus trees are planted between tea trees not for the purpose of harvesting betel nuts or osmanthus, but to enrich species diversity and create shade for tea trees. Although other plants share the burden of pests, the yield of organic tea gardens is still not as good as that of non-organic tea gardens, and the cost per kilogram is higher. Their “golden leaf” tea has the strongest aroma, whose price can reach 10,000 yuan for half a kilogram of yield.

Sprout of tea tree

“Golden leaf” shoots

Crater tea garden ecosystem

Weeds blooming among tea trees

We moved to another area and found black soil in the pit between the tea trees. The owner says that these are pits dug out little by little manually filled with goat manure organic fertilizer. Planting tea trees in Hainan requires consideration of the island’s unique geography and climate: spring is the dry season in Hainan, with little rain and high irrigation costs; In summer, when the mountains are cloudy and misty, tea trees can happily absorb moisture. The owner invited us to pick young shoots in the “golden leaf” area and chew them in our mouths. We found that the taste was not like eating leafy vegetables, but like grainy satay sauce.

Organic fertilizer buried between tea trees

Shamei beautiful village: lovely villagers

After saying goodbye to the Crater Tea owner at lunchtime, David took us to Shamei. Shamei is a small village in Boao, Qionghai City, Hainan Province, and was designated as a Beautiful Leisure Village of China in 2018. The village is on the edge of a natural wetland. Here, we met David’s old friend, Xiao Mo, whose house is under renovation. He says the local government subsidized the villagers to renovate their houses to promote boutique tourism. Opposite his house is a wetland beach with a trail built on the edge, where walking is comfy. The pleasant and comfortable environment also attracts expatriate visitors to ride electric scooters and catch the wind.

Expatriate visitor catching wind in Shamei

The old house in Shamei has a unique charm

Xiao Mo took us to visit the Shamei Wetland Park and the Mangrove Ecological Conservation Area. We crossed a small bridge, and the sunset illuminated the water surface with mesmerizing reflections. We came to a shoal full of lotus leaves and a few budding lotus flowers. We could see coconut trees full of coconuts every few steps. Xiao Mo finally invited us to drink fresh coconut water, and he skillfully chopped the coconut with a knife himself. Beautiful villages become lovely with hospitable villagers.

Lotus in the wetland of Shamei

Xiao Mo cut open fresh coconut

Chia Tai Xinglong Coffee Factory: China has good coffee

Early on the morning of the fourth day, we came to the Chia Tai Xinglong Coffee Cultural Park in Wanning. The first coffee factory in China was the Xinglong Overseas Chinese Farm Coffee Factory, founded in 1952. Chia Tai Group took it over in 2020 and completed the construction of Chia Tai Xinglong Coffee Cultural Park in 2022. Guests can experience a variety of coffees, look at coffee equipment, learn knowledge about coffee, and experience coffee roasting.

We first came to the café and saw some clever devices for guests to enjoy the aroma of various coffee beans. The ground coffee is placed in a conical flask whose air inlets can blow air inside and horn-shaped air outlets release the aroma of coffee. The aroma of different conical flask varies, and most coffees originate from Ethiopia, Colombia, Costa Rica. The café also sells merchandise, and the plush toys in the shape of coffee beans were so cute that they made me smile. As we walked out of the café’s other door, a wall appeared filled with coffee cups marked with the names of all the cities in China. This is the vision of Chia Tai Xinglong Coffee to make their high quality coffee available in all cities of China.

Coffee aroma experience device

Coffee bean plush toys

Wall full of coffee cups

We walked through the courtyard behind the cultural park and came to the coffee tree adoption yard №1. It turns out that we can adopt coffee trees here every year, and the coffee beans produced on the trees or the ground coffee powder can be enjoyed exclusively by ourselves. We found a small lizard resting on a coffee tree. It seemed that this tree did not need pesticide, since the little lizard could take care of pest control. Although the pond next to the adoption farm was small, it attracted an egret to perch on the coconut tree, indicating fish in the pond.

Xinglong Coffee Tree Adoption Yard №1

Little lizard on a coffee tree

Perching egrets

We walked to the exhibition corridor, where we saw some equipment for hand-grinding coffee beans before the era of automation, knowledge boards of coffee making and brewing on the wall, and a fully automated coffee processing line behind the glass window. Chia Tai Xinglong Coffee not only uses Xinglong’s locally grown coffee dried fruits as raw materials, but also imports coffee dried fruits from Brazil, Colombia, Costa Rica, Ethiopia and other countries. They make full use of the tariff-free advantages of Hainan Free Trade Port and sell processed high-quality coffee to other provinces and Southeast Asian countries.

Automatic coffee processing line

Finally, we came to the Cultural Park shop that sells various forms of coffee products. Among them, the packages of coffee beans have an ingenious design: they have ventilation pores in the bags; consumers can easily evaluate the aroma of the coffee beans by gently squeezing the bags. We sat down to taste a variety of coffees with the coffee experts at the Cultural Park. It was surprising to us that Xinglong’s locally produced “ancient village” coffee is made with the traditional craftsmanship of overseas Chinese, whose aroma and taste are not inferior to imported coffee. Chinese coffee can have such high quality, just like Chinese wine. Chinese wine and coffee producers may need to break the stereotypes of Chinese coffee and wine in most people’s mindset by promoting culture and knowledge of their products to compete better on the world stage.

Breathable coffee bean packaging

Tasting Xinglong coffee

The “ancient village” coffee is full of color and aroma

Final Thought

After lunch, we drove to Meilan Airport, listened to Faye Wong’s Nanhai Girl on the way, looked at the tropical vegetation along the highway, and felt strongly that Hainan has many business opportunities with the new trade policy. China is already the world’s factory exporting high-quality and reasonably priced goods, and the official launch of the Hainan Free Trade Port will become a new value seeking playground in this part of the nation.