Hainan Free Trade Port is a positive-sum force for expanding China-ASEAN cooperation

The Hainan Free Trade Port, a landmark in China’s high-standard opening-up, has been carrying out island-wide independent customs operations since Dec 18, 2025, with the aim of realizing the strategic goal of building a key gateway leading China’s new era of global engagement.

Despite complex geopolitical and geoeconomic shifts, cooperation between China and the Association of Southeast Asian Nations anchored in free trade remains a prevailing trend. As one of the world’s most dynamic and promising economies, China is poised to promote closer integration of the markets for goods and services and the establishment of a regional common market. Such efforts are not only pragmatic steps for China to unlock its own growth potential, but could also meaningfully contribute to global economic rebalancing. Therefore, closer ties between China and ASEAN markets not only align with the essential goal of the Hainan FTP as an important gateway, but also are imperative for China’s own development.

In recent years, China and ASEAN have leveraged their respective comparative advantages and deepened cooperation with a focus on manufacturing. This has facilitated growing economic complementarities between the two sides, making each side an increasingly important partner for the other’s growth. With the completion of negotiations on the Version 3.0 China-ASEAN Free Trade Area in May 2025, bilateral trade is expected to surpass $1 trillion, nearly 20 times the level at the signing of the Framework Agreement on Comprehensive Economic Cooperation in 2002.

Backed by China’s vast domestic market and strategically positioned at the crossroads of Southeast Asia, the Pacific Ocean and the Indian Ocean, Hainan is well placed to serve as a regional gateway. With the launch of island-wide special customs operations, the zero-tariff schedule has been extended to 6,600 tariff lines, covering the vast majority of production equipment and raw materials, with further expansion on the horizon. The policy not only lowers operating costs for businesses, but also opens up broader opportunities for ASEAN companies to access China’s enormous consumer market.

Looking ahead, trade in services will be central to deeper China-ASEAN integration. In 2023, services accounted for less than 10 percent of total bilateral trade, well below the global average of about 26 percent. The independent customs operations of the Hainan FTP will gradually remove barriers to cross-border delivery and overseas consumption, while granting national treatment to overseas service providers, including those from ASEAN, encouraging them to offer high-quality services to China’s domestic market and benefit from China’s expanding services sector.

Ensuring the stability and reliability of industry and supply chains is a shared priority for China and ASEAN. As a strategic gateway, the Hainan FTP enables freer flows of goods, capital, personnel, data and transport, supported by zero tariffs, low tax rates and a simplified tax system. In doing so, it will better support the resilience of supply chains and upgrade the value chains in China and ASEAN.

Steady growth in bilateral investment has fostered increasingly close and resilient economic ties, with the Hainan FTP emerging as a key platform for two-way investment flows. In 2023, China’s direct investment in ASEAN rose by 34.7 percent, with 8.5 percent channeled through the Hainan FTP. This share is expected to increase further as more Chinese companies expand overseas and as the FTP’s liberalized financial policies continue to take effect. At the same time, the FTP’s resources and supportive policy framework create favorable conditions for ASEAN companies to invest in the island and expand into China’s broader domestic market.

Amid mounting global uncertainty, ensuring the security and stability of China-ASEAN supply chains has become increasingly vital. The development of the Hainan FTP seeks to align with established free ports such as Singapore, fostering mutually beneficial cooperation to better respond to external risks. With robust infrastructure, including the international hub at Yangpu Port, and supportive measures such as the duty-free policy for goods with at least 30 percent local value-added processing, the Hainan FTP is well positioned to advance regional free trade and reinforce supply chain connectivity.

The digital economy has become a major engine of growth for both China and ASEAN. By 2030, China’s digital economy is projected to reach 80 trillion yuan ($11.59 trillion), while ASEAN’s could grow to $2 trillion with the successful implementation of its Digital Economy Framework Agreement. Notably, the CAFTA Version 3.0 has included a dedicated chapter on the digital economy for the first time, establishing an institutional foundation for deeper cooperation.

To support the digital economy, the Hainan FTP is implementing secure and orderly cross-border data flows. In 2024, Hainan had more than 400 industrial companies in core digital industries, generating approximately 100 billion yuan in revenue. Two international telecommunications gateway bureaus and two international submarine cables have been put into operation to support cross-border data flows.

Looking ahead, Hainan will align with frameworks such as the Mainland and Hong Kong Closer Economic Partnership Arrangement to advance mutual recognition of cross-border data rules with ASEAN, strengthen mutual recognition of digital identities, streamline cross-border business processes and help businesses reduce costs in digital trade and digital transformation.

Developing a green economy is an important objective for China and ASEAN. The Hainan FTP aims to reach peak carbon emissions before 2030, and its progress in green industries, green finance and green consumption will position it as a front-runner in China-ASEAN green cooperation and as a testing ground for the commercialization of green technologies helping implement the Paris Agreement and providing a practical pathway toward sustainable development.

The blue economy represents another vast arena for growth, industrial upgrading and cooperation between China and ASEAN. Hainan has the largest maritime area among all provinces in China. Leveraging the Hainan FTP as a strategic platform to promote China-ASEAN blue economy cooperation can create a powerful engine for growth. It may also help foster strategic mutual trust through economic collaboration, establishing a new governance model in the South China Sea characterized by “cooperation-led governance”.

China’s cruise ship industry could contribute 500 billion yuan in output to the country’s economy by 2035. Building a China-ASEAN cruise tourism network centered on Hainan would open a new chapter in regional tourism cooperation and benefit Southeast Asian countries.

To summarize, the Hainan FTP does not seek to replace existing players, but provides a more open, stable and predictable institutional environment for China-ASEAN cooperation, elevating their mutually beneficial collaboration to a new level.

The author is the executive director of the Hainan Institute for Free Trade Port Studies.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.