December will mark a turning point in the Chinese commercial strategy as the island of Hainan is set to launch its large-scale independent customs operation . This initiative positions Hainan as the new nerve center for international trade with China, occurring just five years after Hong Kong lost its historical role as a bridge between the East and West.
The Western Entrance Door to China
Since 2020, Hong Kong has seen a decline in its appeal to Western companies, largely due to Beijing’s implementation of the National Security Law in the territory. This shift has been a crucial factor in cooling foreign investment in China. Other contributing factors include the growing geopolitical tensions , subdued growth prospects, and perceived increased risks associated with the shifting U.S. political landscape, especially following Trump’s return to power.
The former British colony, which had served as the privileged entrance to China for over two decades, no longer provides the predictable commercial environment desired by Western multinationals. Its allure has significantly diminished, compelling companies to seek alternatives that can offer more stable and favorable conditions.
<img alt="Silicon Valley is reviving something that has been prohibited in China for years: the 'Day 996'" width="375" height="142" src="https://i.blogs.es/403d87/pexels-ron-lach-8100048/375_142.jpeg"/>A New Commercial Bridge
Hainan is being presented as the “new and improved Hong Kong,” and the figures speak for themselves : 74% of tariff lines will now include tariff-free products, a significant increase from the previous 21%. The number of tax-free items will rise from 1,900 to 6,600 . Furthermore, products imported into Hainan that exhibit at least 30% added value during processing can enter the Chinese mainland tariff-free. This move signifies China’s creation of a freer economic zone at a time when many countries are experiencing fragmentation in their trade partnerships.
Prepare, Europe
European companies now face a critical dilemma : should they align with their governments’ geopolitical stances or capitalize on the compelling economic opportunities presented by Hainan? As Europe grapples with a potential separation from its substantial financial ties to China, Beijing is actively offering commercial conditions that many multinationals may find difficult to resist. The Chinese strategy aims to turn Hainan into an irresistible magnet for foreign investment , especially during a time of heightened geopolitical tensions.
The Signals Are Already There
The data from the first half of the year indicate that companies with foreign investment registered a 2.4% growth in commercial value, reaching approximately 751,720 million euros . The number of foreign companies engaged in business activities in China has climbed to 75,000 , marking the highest figure for the corresponding period since 2021. Notably, countries such as Switzerland, Japan, the United Kingdom, and Germany have increased their direct investments by 68.6%, 59.1%, 37.6%, and 6.3% , respectively.
What Comes Now
As of now, Europe has yet to establish a clear strategic direction . While the United States has adopted a more defined stance in its competitive relationship with China, European nations find themselves embroiled in discussions focused on reconciling their economic ties with China against pressures to align with Washington. Hainan symbolizes China’s commitment to demonstrating its ability to offer more favorable conditions than any other emerging market, particularly at a time when its economic model is under scrutiny.
The countdown is approaching its end. December 18 will mark the official opening of China’s new gateway to the world .
Cover Image | Denny Ryanto
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