China’s Hainan wants more than beach tourism. Will new customs rules cause a sea change?
After three speculative booms – and busts – the island province is seeking sustainable growth based on new status as a free-trade port
After Joyce Wu moved from Hainan province to Hong Kong in 2013, she marvelled for years at the increasingly crowded skyline of Haikou on visits home. The gleaming high-rises continued to spring up across the southern island’s capital as an economic boom, driven by property values, reshaped the city.
Around 2020, that momentum began to fade. In place of cranes and concrete, Wu noticed a quieter shift: more professionals and foreign academics arriving through university partnerships, and growing business interest from outside the province.
“They were clearly not tourists,” she said. “They were professionals or researchers.”
Her observation mirrors Hainan’s broader transformation – after the bursting of three speculative booms that were driven by policy windfalls, the province’s previously tourism-centred economy is moving towards a more sustainable growth pattern revolving around its new status as a free-trade port, even as long-standing structural constraints remain a challenge.
On December 18, the island – with more than 10 million people and a slightly larger surface area than Belgium – became a customs territory separate from the rest of mainland China.
The move exempted around 6,600 categories of goods from tariffs – about 74 per cent of taxable imports.
The provincial government also pledged to raise the annual duty-free shopping quota for individuals as high as 100,000 yuan (US$14,500) and to cut the corporate income tax rate for selected businesses to 15 per cent from the national standard of 25 per cent.
Beijing hopes the policy shift will help turn Hainan into a new engine of domestic consumption, and early indicators appear encouraging. Haikou’s customs office said that duty-free sales on the island in the month since the policy took effect totalled 4.86 billion yuan, up 46.8 per cent year on year, with the number of shoppers rising 30.2 per cent to 745,000.
And during the travel rush for this year’s Spring Festival holiday, duty-free purchases by travellers leaving Hainan totalled 7.49 billion yuan, up 39.8 per cent year on year, with 937,000 shoppers, an increase of 30.5 per cent, according to Haikou customs.