Hainan Island: China’s "Customs Split" Strategy

Hainan Island: China’s "customs Split" Strategy

December 20, 2025

Kamaraj IAS Academy

Current Affairs Analysis

Subject Reference: GS Paper II (International Relations) | GS Paper III (Economy - Trade)

The News (Dec , 2025): China officially launched separate customs operations for Hainan Island. It is now a "First-line open, Second-line controlled" zone—meaning goods from overseas enter Hainan duty-free, but standard customs apply when they move from the island to mainland China.
Apt Topic: "Institutional Opening-up and the CPTPP Bid"
The 30% Value-Added Rule: A crucial UPSC point: Goods processed in Hainan can enter the mainland duty-free if at least 30% local value-addition occurs. This encourages manufacturing over simple re-export.
Strategic Intent: This is China's "testbed" for the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). By liberalizing Hainan, China aims to prove it can meet the high-standard transparency and data-flow requirements of the trade bloc.
Geopolitics: It creates a "Hong Kong-style" hub on the mainland's doorstep, reducing dependence on traditional financial centers while countering US-led decoupling efforts.