Eliza Wong
A Strategic Partnership in the Making
Against the backdrop of Victoria Harbour, where a 30°C sea breeze did little to dampen the enthusiasm for opportunity, business leaders from Hong Kong, Shenzhen, Hainan, and Suzhou exchanged business cards and connected on WeChat. The occasion was the Hainan Free Trade Port Promotion and Policy Interpretation Conference, held at the Hong Kong Convention and Exhibition Centre. This marked Hainan’s first overseas ‘self-introduction’ since announcing its official transition into a new phase of Free Trade Port construction on December 18.
Hainan’s choice of Hong Kong for its debut international promotion is deeply symbolic. One is a globally renowned, mature free trade port; the other is an emerging free trade port with Chinese characteristics. The potential for synergy between these ‘twin ports’ has captured significant attention.
Hainan Party Secretary Feng Fei (冯飞) emphasized in his address that both the Guangdong-Hong Kong-Macao Greater Bay Area and the Hainan Free Trade Port are major national strategies. Their collaborative development is a crucial force in building a new development paradigm and facilitating domestic and international circulation.
Setting the Tone for Collaboration
Hainan officials consistently referred to Hong Kong as a ‘role model’ and ‘partner,’ making it clear that the relationship is built on mutual respect and shared goals. This sentiment was reinforced when Cai Qiang (蔡强), Director of the Hainan Provincial Department of Finance, directly addressed the question on many minds: Is Haimen meant to replace Hong Kong? His answer was a definitive no.
Dispelling the Competition Myth
Since the State Council Information Office announced in July that the Hainan Free Trade Port would begin island-wide customs operations on December 18, speculation about Hainan ‘replacing’ Hong Kong has been widespread. However, a closer look at the policy design reveals a different story.
Cai Qiang explained the differences through the lens of tariff policies. Hong Kong imposes duties on only four categories of goods: alcohol, tobacco, hydrocarbon oils, and methanol. In contrast, Hainan’s import tax catalog corresponds to the People’s Republic of China’s Import and Export Tariff, which includes 8,960 items. After December 18, 2,323 items will remain taxable, while 6,637 items—about 74% of the total—will be tariff-free.
This represents a significant increase of nearly 53 percentage points in tariff-free goods compared to pre-closure policies. However, Hainan’s approach is not intended to mirror Hong Kong’s. The 2,323 taxable items include most consumer goods, as the current zero-tariff policy focuses primarily on trade in goods. The 6,637 tariff-free items largely cover products needed for corporate production, processing, and R&D, allowing tax-free circulation among eligible entities.
A Dynamic and Evolving Policy
Importantly, the taxable items list is not static. Cai Qiang noted that it will gradually shrink over time. However, he stressed that Hainan’s zero-tariff catalog will always differ from Hong Kong’s because Hong Kong is a separate customs territory, while Hainan is not. The central government’s goal for Hainan is to align with high-standard international trade rules and achieve institutional opening and innovation.
As China’s largest special economic zone, Hainan has always been tasked with serving as a ‘testing ground’ for reform.
Learning from a Global Leader
From the very beginning of its free trade port construction, Hainan has looked to Hong Kong as both a mentor and a partner. Li Shijie (李世杰), Deputy Director of the Hainan Provincial Committee of the Chinese People’s Political Consultative Conference and Dean of the Hainan Academy of Open Economy Studies, once pointed out that Hainan-Hong Kong cooperation is the first step in Hainan’s institutional opening to the world. Deep, high-quality collaboration between the two would serve as a rehearsal for Hainan’s broader global engagement.
Cooperation with Hong Kong is not just strategic; it is essential. Zheng Yongnian (郑永年), Dean of the School of Public Policy at the Chinese University of Hong Kong (Shenzhen), observed that while Hainan is not an economic powerhouse, free trade requires flow. The Greater Bay Area, in turn, needs outlets for its flow—whether in goods trade, regulatory standards, or talent. Connecting these flows creates a win-win situation.
Hong Kong as a Source of Investment and Talent
Hong Kong is already Hainan’s largest source of foreign investment and its biggest trade-in-services partner. In the nearly seven years leading up to March this year, Hong Kong-invested enterprises established 3,470 new companies in Hainan, accounting for 42.4% of all new foreign-funded enterprises in the province. Actual utilized capital from Hong Kong reached $88.26 billion, making up 74.7% of Hainan’s total utilized foreign capital.
From January to July this year, Hong Kong established 382 new foreign-funded enterprises in Hainan, a year-on-year increase of 7.3%, while actual utilized capital from Hong Kong grew 99.3% to RMB 11.87 billion.
Cooperation extends to specific sectors, with several pioneering initiatives. In talent recruitment, Hainan has rolled out实施细则 supporting employment and entrepreneurship for Hong Kong and Macao youth in the Hainan Free Trade Port, along with implementation measures for talent introduction. This year’s Recognized Hong Kong Professional Qualifications Catalog unilaterally recognizes 45 professional qualifications from Hong Kong, including those for healthcare workers, architects, and lawyers.
In financing, Hainan has issued offshore RMB local government bonds in Hong Kong for three consecutive years from 2022 to 2024. This year, it will mark its fourth issuance in Hong Kong, including its first space-themed bond. These issuances not only raise funds for environmental protection, characteristic industries, and livelihood projects but also enhance Hainan’s international visibility through Hong Kong’s global financial platform.
Complementary Strengths and Shared Opportunities
Collaboration is a two-way street. In March of this year, during the Boao Forum for Asia Annual Conference, Hainan and Hong Kong signed a Memorandum of Understanding between the Hainan Provincial People’s Government and the Government of the Hong Kong Special Administrative Region, outlining deeper cooperation in five areas: trade and investment, finance, ordered cross-border data flow, tourism, and talent exchanges.
At the recent conference, the idea of ‘complementary advantages’ was repeatedly emphasized. Feng Fe expressed hope that comprehensive cooperation would allow Hainan’s geographical, spatial, and resource advantages to synergize with Hong Kong’s development, openness, and international network advantages, amplifying their regional influence and reach.
Distinct Roles, Shared Vision
The differences between the two free trade ports are a source of strength. Hong Kong is a key international financial, shipping, and trade center. Hainan aims to leverage its rich natural resources, unique geographical location, and proximity to the massive domestic market to emphasize trade and investment facilitation, focusing on tourism, modern services, and high-tech industries.
From a development perspective, Hainan offers something most free trade ports cannot: space. Yu Tao (于涛), Director of the Hainan Free Trade Port Research Center at the China National Institute for South China Sea Studies, noted that Hainan is building the world’s largest free trade port, with land area approximately 49 times that of Singapore and 32 times that of Hong Kong.
A representative from a Hong Kong manufacturing association highlighted that Hong Kong is advancing ‘re-industrialization,’ but space constraints make it difficult for certain industries to thrive there. Hainan’s vast developable area offers an ideal alternative. Both regions are striving for more balanced industrial structures—Hong Kong moving beyond finance, and Hainan beyond tourism—making collaboration in sectors like food, biomedicine, and automotive manufacturing highly promising.
A Concrete Example of Collaboration
A compelling example of this synergy is the BNCT boron neutron capture therapy center launched by China Biotech Services Holdings in the Boao Lecheng International Medical Tourism Pilot Zone. As one of Lecheng’s Hong Kong-funded medical projects, it is the first center outside Japan to offer this therapy, aligning Chinese medical technology and equipment with international advancements.
The center chose Lecheng for its large market and special policies supporting clinical research and application transfer of cutting-edge medical technologies. After正式运营, the center plans to use Lecheng’s clinical data to apply to the National Medical Products Administration for innovative product registration and launch in China, followed by expansion to multiple regional central cities.
Building a Shared Future Together
With just 100 days until the start of island-wide customs operations, Hainan and Hong Kong are poised to elevate their collaboration to new heights.
Tang Hua (唐华), Director of the Hainan Provincial Bureau of International Economic Development, highlighted Hainan’s advantages: beautiful ecology, broad market reach, high economic outward orientation, and strong talent attraction. Hong Kong offers world-class technological R&D capabilities, financial services, and international talent resources, providing technical, capital, and talent support for Hainan enterprises. ‘In the future, industrial collaboration between the two places, joining hands to link international and domestic markets, has bright prospects and limitless potential,’ she said.
In Hainan’s development strategy, improving and upgrading services is a priority, especially in high-end shopping, education, and healthcare. Some envision that Hong Kong’s extensive experience in cultural tourism, education, and high-end services could combine with Hainan’s strengths under a model of complementary development, jointly building regional industrial development centers to aggregate resources and explore markets on a broader scale.
Pathways for Future Collaboration
Several pathways for post-closure cooperation emerged at the conference. These include cultivating cross-border industrial clusters by leveraging Hainan’s ‘zero tariff + processing value-added tax exemption’ policies to attract Hong Kong electronics and pharmaceutical companies to set up factories in Hainan, creating a ‘Hong Kong orders – Hainan production – global sales’ cross-border产业链.
Another opportunity lies in utilizing Hainan’s strengths in transportation and processing services alongside Hong Kong’s advantages in international shipping, finance, and high-end business services to establish a procurement, distribution, and supply chain management center for the Asia-Pacific region, offering integrated logistics solutions for enterprises from both sides.
Li Zhiping (李枝平), Deputy Director of the Hainan Provincial Department of Commerce, also mentioned leveraging Hainan’s resources—’three degrees and one color’ (referring to its latitude, solar, and marine resources, and ecological green)—and Hong Kong’s role as an international hub to jointly expand into emerging markets under the Belt and Road Initiative.
Hainan is a key node in the Belt and Road network, aiming to enhance its openness, strengthen exchanges and functional alignment with free trade zones in Belt and Road countries and regions, and play a unique role in serving domestic and international circulation. As Belt and Road cooperation deepens, particularly in health, green development, digital economy, and innovation, Hong Kong’s expertise in professional services, international rules, innovation technology, and cultural exchanges will be invaluable.
As Hong Kong Chief Executive John Lee (李家超) stated, cooperation between Hong Kong and Hainan is about ‘sailing together to explore the world.’
Key Takeaways and the Road Ahead
The relationship between Hainan and Hong Kong is not one of competition but of collaboration and mutual enhancement. Hainan’s decision to make Hong Kong the first stop for its international promotion underscores the strategic importance of this partnership. By combining Hainan’s vast resources and market potential with Hong Kong’s international expertise and connectivity, both regions can amplify their strengths and create new opportunities for growth and innovation.
As Hainan prepares for its December 18 milestone, the focus remains on learning from Hong Kong’s success while carving out a unique path as a high-standard, internationally aligned free trade port. Businesses and investors should watch this space closely, as the synergy between these two dynamic regions is set to redefine regional trade and economic collaboration.
Explore how your business can leverage the emerging opportunities in Hainan and Hong Kong. Connect with trade promotion agencies, attend upcoming forums, and consider strategic investments in sectors where complementary advantages are most pronounced. The future of trade in the Asia-Pacific region is being written now—ensure your organization is part of the story.
