Opinion | Is Hainan the next Hong Kong? That’s the wrong question to ask

On December 18, China made a bold move on the global economic chessboard. It launched a massive free-trade experiment by turning the entire island province of Hainan – an area, comparable in size to Belgium, whose gross domestic product was US$113 billion last year – into a duty-free customs zone. A new narrative has now taken hold: with its free-trade port status, Hainan is on track to rival or even supplant Hong Kong.

Having followed this development closely, I believe this comparison is fundamentally flawed because it ignores a critical structural difference. Hong Kong is a special administrative region operating under “one country, two systems” and Hainan is not. This is not a minor legal detail; it is the core reason Hainan should be viewed not as a competitor but Hong Kong’s most promising partner on the mainland.

This distinction changes everything. Hong Kong’s status as a special administrative region grants it a unique constitutional position, with its own legal system based on common law, a fully convertible currency and independent membership in international organisations such as the World Trade Organization. Its success is built on this framework, which offers global businesses a trusted, rules-based gateway to China.

Hainan operates on a completely different model. It is a province of China undergoing an unprecedented economic experiment within the national system. Its free-trade port status is a policy innovation, not a constitutional one. Its zero-tariff focus is on raw materials and production equipment, designed to build a high-end manufacturing and logistics base, particularly for trade with Southeast Asia.

It aims to see how much controlled, targeted openness in finance and trade can be achieved while remaining firmly within the mainland’s legal and regulatory orbit. Xu Tianchen, senior economist at the Economist Intelligence Unit, called it a case of “managed liberalisation”.

If Hong Kong and Hainan are not on the same track, what’s their relationship? I see it as a perfect partnership of capability and opportunity. Hong Kong faces real constraints: high costs, saturated markets and limited land. With its vast space, fresh policy incentives and strategic location, Hainan offers a solution. It is the ideal testing ground and expansion zone for Hong Kong businesses.