Using Hainan as a Gateway to China

Hainan is no longer simply a regional development zone. From December 2025, it becomes a strategic platform for foreign businesses looking to enter, expand, or restructure their presence in China.

Used properly, Hainan can act as a controlled interface between international markets and mainland China — reducing friction while preserving compliance.

This article focuses on how businesses are using Hainan in practice.

Hainan’s strategic positioning

Hainan’s model deliberately separates trade logistics from market entry.

• Overseas to Hainan: liberalised, tax-exempt import regime

• Hainan to Mainland China: regulated entry under standard customs rules

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This allows companies to import, store, process, or test goods in Hainan before deciding when and how to enter the mainland market.

Practical use cases being explored

Foreign enterprises are considering Hainan for:

• Regional trading and distribution hubs

• Inventory holding and consolidation centres

• Light manufacturing or processing operations

• Market testing prior to mainland expansion

Each model carries different tax, customs, and compliance implications, making early design critical.

The role of cross-border structuring

For many groups, Hainan works best as part of a broader regional structure rather than in isolation.

Common considerations include:

• Alignment with offshore holding or trading entities

• Management of cash flows and funding

• Transfer pricing and intercompany pricing logic

• Operational substance and governance

Misalignment between structure and actual operations is a frequent source of regulatory risk.

Interaction with China’s FDI framework

Hainan operates within China’s national foreign direct investment regime.

This means:

• Entity establishment must comply with foreign investment rules

• Business scopes must match actual activities

• Capitalisation, governance, and reporting obligations apply

• Ongoing compliance is expected despite preferential trade treatment

Hainan simplifies trade, not corporate governance.

Risks of a purely tax-driven approach

While the tax benefits are significant, authorities closely scrutinise structures that appear artificial.

Common issues include:

• Insufficient operational substance

• Importing goods without a viable second-line strategy

• Treating exemptions as a substitute for compliance

• Inconsistent treatment of intercompany transactions

Successful structures balance commercial logic with regulatory expectations.

Planning for long-term use, not short-term advantage

Hainan’s value lies in its role as a long-term platform rather than a short-term workaround.

Businesses that integrate Hainan into a broader China roadmap — covering trade, investment, and compliance — are better positioned to scale without disruption.

Final thoughts

With the new regime commencing on 18 December 2025, Hainan represents one of the most significant changes to China’s trade environment in years.

For international businesses willing to plan carefully, it offers a rare combination of reduced trade barriers, regulatory clarity, and strategic flexibility — provided it is approached as a structural decision, not just a tax incentive.

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Woodburn Accountants & Advisors is one of China and Hong Kong’s most trusted business setup advisory firms.

Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

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