China on Thursday launched island-wide special customs operations in south China's Hainan Free Trade Port (FTP), the world's largest FTP by area, allowing freer entry of overseas goods, and expanded zero-tariff coverage and more business-friendly measures.

Hearing a work report on the FTP in early November, Chinese President Xi Jinping hailed the special customs operations as a landmark move to expand high-standard opening up and promote an open world economy. He called for efforts to better facilitate cross-border flows of factors of production and strive to create a first-rate business environment.

The idea of establishing the FTP was first proposed in 2018. Since then, multiple preferential policies – including duty-free shopping and low corporate income tax – have been introduced to make the business friendly FTP gradually take shape.

Starting on Thursday, the share of zero-tariff products in the Hainan FTP will surge from 21 percent to 74 percent, with the number of tariff-free items expanding from about 1,900 to 6,637, covering nearly all production equipment and raw materials.

Lan Zhenzhen, president of public affairs for L'Oréal North Asia and China, is optimistic about the company's growth following Thursday's launch.

"As China's largest free trade pilot zone, Hainan FTP houses the world's largest single duty-free store and is a major global shopping destination," Lan said. "In the future, L'Oréal will continue to invest in Hainan to better serve global consumers.”

Thai conglomerate Charoen Pokphand (CP) Group is also eager to capitalize on the opportunities for further expansion.

Xue Zengyi, a China executive from CP Group, said the group's coffee business will benefit from the FTP's zero-tariff policy on raw and auxiliary materials, reducing import costs by 8 percent in tariffs and 13 percent in value-added tax on green coffee beans.

Xue said coffee beans imported from overseas can enter the Chinese mainland tariff-free if they are processed in Hainan with at least 30 percent value added.

Bridging China and global markets

The 30 percent threshold is another key policy introduced by the FTP in recent years, allowing companies to source raw materials globally, add value locally and sell finished products into the mainland market duty-free.

Hainan Weili Medical Technology, a major global catheter supplier, has seen tariff reductions since becoming Hainan's first pilot for medical device processing and value-added operations in early 2023, previously sourcing most raw materials from Southeast Asia.

He Yongshen, the company's head, said that they have saved over 4 million yuan (roughly $567,920) in tariffs since 2023 by selling value-added products to the mainland market. With these cost reductions, the company could invest more in R&D and market expansion, He added.

His company is not alone in benefiting from the changes, as preferential policies have drawn a growing number of investors to Hainan. Over the past five years, foreign direct investment in Hainan reached $9.78 billion, growing at an annual rate of 97 percent, with investments from 176 countries and regions.

Feng Fei, secretary of Hainan Provincial Committee of the Communist Party of China, highlighted the island province's unique position in linking the vast domestic market of 1.4 billion people with the Southeast Asian market with nearly 700 million people.

Echoing Feng, Huang Hanquan, head of the Chinese Academy of Macroeconomic Research under the National Development and Reform Commission, said Hainan FTP's policies help create a trade route from Southeast Asian raw materials through Hainan processing to mainland distribution, positioning the island as a hub linking domestic and international markets.

The launch of island-wide special customs operations demonstrates China's commitment to high-standard opening up, boosting both the domestic economy and global growth, Huang added.