BEIJING, China: China unveiled a sweeping free-trade experiment on its southern island province of Hainan, carving it off from the mainland for customs purposes as Beijing seeks to revive foreign investment and bolster its case for joining a major Pacific trade pact.

Under the plan, the Belgium-sized island, home to an economy comparable to a mid-ranked country, will operate as a duty-free zone. Goods produced in Hainan with at least 30 percent local value added will be allowed to enter the rest of China tariff-free, while foreign companies will gain access to service sectors that remain restricted on the mainland.

Officials hope the move will help transform Hainan into a Hong Kong-style commercial hub and attract overseas capital at a time when China's economy is grappling with weak investment and external pressures.

The initiative is also designed to strengthen China's free-trade credentials as it seeks membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), one of the world's largest trade blocs. Beijing has argued that pilot schemes such as the Hainan Free Trade Port show it can meet the CPTPP's high standards for trade and investment openness.

China's Vice Premier He Lifeng urged local officials to "build Hainan Free Trade Port into a vital gateway leading China's new era of opening up to the world," during a speech at the port.

He described the project as a "major strategic decision" by the ruling Communist Party, "with an eye to the overall situation at home and abroad." The remarks appeared to allude to pressures stemming from U.S. President Donald Trump's tariffs, which have pushed policymakers to diversify China's US$19 trillion economy away from heavy reliance on the U.S. market and reinforce its role in global supply chains.

China's leaders have made reversing a decline in investment a priority for next year, aiming to shift from stimulus-led growth toward a dual focus on consumption and investment. Officials are also weighing longer-term structural reforms to rebalance the economy.

Foreign direct investment into China fell 10.4 percent year-on-year in the first three quarters of 2025, according to official data.

Economists say success in Hainan could encourage policymakers to expose more of China's economy to market forces.

"The benchmark is something similar to Hong Kong," said Ran Guo, director for Consumer Economy at the China-Britain Business Council, who has tracked the plan's progress for five years.

"In addition to boosting Hainan's tourism sector, the plan should also encourage more foreign investment and manufacturing," she said, adding that the island could serve as a logistics and trading hub linking China with Southeast Asia.

Hainan's GDP reached $113 billion last year, official data show — roughly equivalent to the world's 70th-largest economy, according to World Bank figures. That remains well below Hong Kong's $407 billion economy.

"The Hainan model basically offers managed liberalisation that will be great for reintegrating supply chains, yet it lacks the legal system and financial openness Hong Kong boasts," said Xu Tianchen, senior economist at the Economist Intelligence Unit.

Hainan will also face competition from Southeast Asia and Japan, Xu said, making success uncertain.

Trade negotiators remain sceptical about whether CPTPP members will be persuaded, noting that accession requires opening the entire economy, something China has yet to demonstrate.

"CPTPP members are looking for nationwide steps that accession partners are prepared to take, along with a track record of compliance with other trade agreements," one Western diplomat said off the record, citing recent trade tensions between Beijing and Tokyo linked to disputes over Taiwan.