With the official launch of island-wide customs closure in the Hainan Free Trade Port (FTP) on December 18, 2025, a new chapter in China’s highest-level opening-up has begun. For overseas businesses—especially in consumer goods, luxury items, and cross-border e-commerce—this is not just a policy update; it’s a gateway to one of the world’s most promising retail landscapes.
If you’re looking to expand in Asia, understanding Hainan’s dual-track duty-free system—Off-Island Duty-Free Shopping and Island Resident Duty-Free—is no longer optional; it’s essential. This article breaks down what has changed, where the opportunities lie, and how to navigate this market with confidence and compliance.
Understanding “Island-Wide Customs Closure”
First, let’s clarify what “封关” really means—it’s not a lockdown, but a customs restructuring. Hainan is now a separate customs territory within China, operating under the principle of:
- “First line” liberalization: Free and facilitated movement between Hainan and other countries/regions.
- “Second line” control: Managed movement between Hainan and mainland China.
- “Island-wide freedom”: Goods and capital flow freely within Hainan.
In simple terms, Hainan is now more open to the world, while maintaining regulatory oversight for goods entering mainland China. For retailers, this means more goods can enter Hainan with zero tariffs, and certain products can be sold under preferential terms both to tourists and local residents.
The Two Pillars of Hainan’s Duty-Free Policy
1. Off-Island Duty-Free Shopping (离岛免税)
This policy allows travelers leaving Hainan to purchase duty-free goods within an annual quota.
Key updates since December 2025:
- The annual quota remains CNY 100,000 per person, but its coverage has expanded.
- Beneficiaries now include all departing travelers, whether returning to mainland China or going overseas. Previously, only those going to mainland China could enjoy the quota.
- Purchase frequency is now unlimited—a significant boost for frequent visitors.
- The “buy and pick up immediately” (即购即提) model has been extended to 15 categories including cosmetics, perfumes, apparel, and luggage, making shopping more convenient than ever.
What this means for brands:
If your products fall under popular duty-free categories—cosmetics, fashion, electronics, liquor, or luxury items—Hainan’s off-island duty-free market is a high-traffic, high-spend channel. With more flexible rules, impulse buying and repeat purchases are likely to rise.
2. Island Resident Duty-Free (岛内居民免税)
This is a new frontier for retail in Hainan. Starting from the customs closure, Hainan residents can buy imported goods duty-free for personal use, under a positive list system.
Who qualifies as an island resident?
- Chinese citizens with a Hainan ID card, residence permit, or social security card.
- Foreigners with a valid Hainan residence permit.
Key features:
- Residents only need one off-island record within a year to qualify.
- They can purchase eligible imported goods without quantity limits, only subject to the positive list.
- This policy is designed to boost local consumption, improve living standards, and retain talent.
Opportunity alert:
Island residents represent a stable, growing consumer base with increasing purchasing power. For overseas brands, this is a chance to build brand loyalty inside Hainan, beyond tourist-driven sales.
The Numbers Behind the Opportunity
- Zero-tariff list expansion: The number of duty-free items has jumped from about 21% to 74% of all tariff lines—approximately 6,637 items, up 53 percentage points from before closure.
- Cost savings: Businesses importing equipment can save about 20% in tax costs.
- Market scale: In the first three quarters of 2025, duty-free import value under Hainan’s “three zero-tariff lists” reached CNY 27.06 billion, with tax exemptions of CNY 5.09 billion.
For consumer goods, this means everything from high-end skincare and watches to designer apparel and nutritional supplements can enter Hainan at lower costs, creating competitive pricing advantages.
How Overseas Businesses Can Enter the Market
Option 1: Partner with Licensed Duty-Free Operators
Most overseas brands do not directly run duty-free shops in Hainan. Instead, they supply products to licensed duty-free operators, such as:
- China Duty Free Group (CDFG)
- Hainan Tourism Investment Duty-Free
- Other authorized retailers at key ports, downtown stores, or online platforms.
Why partnership is key:
These operators have the licenses, logistics, and store networks to sell under both off-island and island resident schemes. Your role is to ensure your products are included in their procurement lists and marketed effectively.
Option 2: Explore Cross-Border E-Commerce (CBEC) Models
Hainan encourages cross-border e-commerce as part of its trade liberalization. Brands can sell via:
- Hainan-based CBEC platforms.
- Bonded warehouse models, where goods are stored in Hainan and shipped directly to consumers in mainland China (under CBEC rules, not duty-free rules).
This model suits brands testing the market or targeting younger, digital-savvy shoppers.
Compliance & Due Diligence: The Non-Negotiables
Here’s where many overseas businesses face hidden risks. The excitement of market entry must be balanced with smart compliance.
1. Verify Your Partner’s Credentials
Not all “duty-free operators” are equally reliable. You must confirm:
- Official licensing from Hainan provincial authorities.
- Compliance history with customs and tax departments.
- Financial stability and operational scale.
How to do this:
Request their business license, duty-free operation permit, and recent audit reports. Better yet, conduct a comprehensive business credit report to uncover any red flags—legal disputes, regulatory penalties, or financial instability.
At ChinaBizInsight, we specialize in providing detailed due diligence reports on Chinese companies, helping you verify potential partners before signing agreements. Knowledge is your best defense against partnership risks.
2. Understand the “Negative Lists”
Not all goods are freely importable. Hainan has:
- A Prohibited and Restricted Import/Export List (banning or limiting certain items).
- An Import Taxable Goods Catalog (the “zero-tariff negative list”).
Your products must comply with both. For instance, certain used equipment, hazardous materials, or culturally sensitive items may be restricted.
📥 Download key policy documents:
- Notice on Goods Entering/Exiting “First Line” & “Second Line”
- Hainan FTP Import Taxable Goods Catalog
- Hainan FTP Prohibited/Restricted Goods List
3. Monitor Policy Adjustments
Hainan’s policies are designed to evolve. The tax catalog, resident duty-free list, and quota arrangements may be adjusted based on market performance and national strategy. Work with local legal or consulting firms to stay updated.
Strategic Tips for Market Entry
- Start with market research
Identify which of your products are in highest demand in China, especially among tourists and young residents. Cosmetics, health products, and lightweight luxury items perform well. - Choose partners with omni-channel reach
Operators with both physical stores at ports, downtown locations, and online platforms give your brand wider exposure. - Leverage local marketing
Hainan residents are proud of their island’s international status. Campaigns that resonate locally can build strong community loyalty. - Prepare for logistics
While Hainan has streamlined customs, ensure your supply chain can handle island inventory management and possible “second line” checks for goods entering mainland China. - Consider long-term positioning
With Hainan’s corporate income tax capped at 15% for encouraged industries and personal income tax concessions for high-end talent, setting up a local presence (e.g., a trading entity or regional office) could bring additional benefits.
Final Thoughts
Hainan’s customs closure is a historic move—not just for China, but for global retail. The combination of off-island duty-free shopping and island resident duty-free creates a dual-engine consumption market that is rare worldwide.
For overseas businesses, the message is clear: The door is open, the demand is growing, but success requires more than just great products. It requires trustworthy local partnerships, rigorous due diligence, and a deep understanding of policy details.
In a market where regulations evolve rapidly, having reliable business intelligence is not a luxury—it’s a necessity. Whether you’re verifying a partner, checking a company’s legal standing, or understanding market risks, thorough research protects your investment and paves the way for sustainable growth.
As you explore Hainan’s retail potential, remember: Knowing your Chinese partners is the first step toward knowing your success.
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