More than four decades ago, Chinese leaders strategized that radical openness on one island could lead to reunification with another.
Now, as cross-strait relations roil both politics in Taipei and the Sino-American relationship, Beijing has revived a decades-old dream: an island-sized free trade zone on Hainan Island. Top Communist Party officials and intellectuals have long hoped that such a zone might transform “China’s second largest island” into a mainland-controlled version of Hong Kong and lure Taiwan back into the fold.
Hainan is today engaged in what may be China’s most radical economic experiment since Beijing established the country’s first Special Economic Zones in the mid-1980s. In December 2025, Hainan, which is perhaps now best known as a tropical tourist destination for domestic and Russian tourists, was cleaved off from mainland customs rules in a move to make the island the world’s largest free-trade port. What appears to be a technocratic trade reform, however, has deep roots in an earlier geopolitical gambit that sought to reshape the relationship between China and Taiwan by using Hainan as a political and economic showcase. The idea was to leverage geographic and cultural similarities to create economic interdependence between the two islands and accelerate peaceful “reunification.”
For Beijing, the two islands have been inextricably linked since the birth of the People’s Republic of China in 1949.
The last major battle of the Chinese Civil War took place on Hainan, a place that Chiang Kai-shek hoped to make into the twin stronghold of Taiwan. After the Communists seized the island in the spring of 1950, for most of the early Cold War, Beijing kept Hainan cordoned off from the mainland, treating it as the military frontline “shield” of south China.
With the reversal of international politics that followed U.S. President Richard Nixon’s 1972 visit to China, however, Beijing reimagined the island’s role in China’s political economy and international strategy. Top reformist leaders began to reconceive of Hainan as an economic and geopolitical weapon.
As early as 1983, top leaders in the Communist Party drew comparisons in key internal documents, reports, and speeches between their country’s “two largest islands.” While they noted uniformly how “backward” Hainan was compared to Taiwan, top reformist leaders such as Zhao Ziyang and Hu Yaobang nonetheless drew parallels between the two islands’ geographies and natural endowments and even began to dream that, if Hainan could be put on a developmental trajectory similar to Taiwan’s, Hainan might prove invaluable in promoting Taiwan’s return.
In 1984, Deng Xiaoping himself suggested that through greater openness, Hainan should be developed rapidly and even catch up with Taiwan in 20 years. Then, in June of 1987 he revealed to a Yugoslavian delegation that something special was in the works.
“We are setting up a larger Special Economic Zone,” Deng told the delegation. “Namely, the Hainan Special Economic Zone. Hainan Island and Taiwan are roughly similar in area. … If Hainan Island is properly developed, that would be truly remarkable.”
In late 1987, Beijing tasked a team of economists from the Chinese Academy of Social Sciences with formulating Hainan’s future as an independent province and the country’s largest special economic zone. Both would be officially established in April 1988. In a report compiled in just three months in late 1987 and early 1988, the team pursued two guiding questions: Why was Hainan more backward than Taiwan? And could it catch up?
They decided that it could – if Hainan pursued policies that put into practice a “market economy guided by socialism” to construct an outward-oriented “free economic zone,” one that attempted to pare down the role of the state, while emphasizing economic cooperation with Hong Kong, Southeast Asia, and, yes, Taiwan. The central government bought in and gave the new provincial governor and party secretary wide latitude on the island.
At one point in 1988, Beijing even directed Hainan’s top officials to remove the customs posts between Hainan and the rest of the world and set them up, instead, between Hainan and mainland China, which would have created a free trade port almost four decades earlier.
Those visions, however, would be only unevenly realized. Although sweeping economic reforms – and even a radical shrinking of the party-state on the island – were attempted in 1988 and into 1989, the political turmoil of the Tiananmen episode in the summer of 1989 brought down Hainan’s governor and party secretary and put an end to the most radical experiments. Comprehensive economic reform and the attempt to establish the free trading “special customs zone” on the island also stalled out in the degraded investment environment that followed.
By the time reformers regained the initiative on Hainan after Deng’s “southern tour” in 1992, the Communist Party center had turned its attention to Shanghai. Hainan languished through a series of property boom-and-bust cycles, instead.
With the revival of the free trade port, some of the visions of reformist leaders may at last be coming true on Hainan, just as Taiwan finds itself caught between an assertive China and an unpredictable Washington. Some Taiwan leaders – such as new Kuomintang (KMT) Chair Cheng Li-wun, who visited China and met CCP General Secretary Xi Jinping in April in an attempt to thaw a decade of diplomatic chill – are seeking to rebalance the cross-strait relationship.
For many Taiwanese, “one country, two systems” lies discredited in Hong Kong following the 2019-2020 protests and subsequent crackdown. The free trade experiment on Hainan, then, resuscitates possibilities long advanced by reform-era officials and intellectuals – if the free trade port can live up to the promise that previous experiments, which envisioned creating a “Hong Kong for the mainland by 2040,” have failed so far to deliver.
Although the current Chinese leadership has not explicitly linked the Hainan free trade port to Taiwan reunification, Xi has called the Hainan free trade port a “landmark” project and a “key gateway driving the country’s opening up,” language that inherits a decades-long foundation underpinning Hainan’s development that frequently invoked the Taiwan issue.
Meanwhile, reformist intellectuals such as Chi Fulin, who was one of the first cadres sent by the central government to Hainan in the late 1980s and intimately involved in the original attempt to create a “special customs zone” there, have been unambiguous. “The establishment of the Hainan Special Economic Zone has profound significance for completing the great cause of peaceful national reunification and promoting Taiwan’s early return,” Chi wrote in a 2018 memoir titled “My Hainan Dream.”
Chi, now president of both the China Institute for Reform and Development and Hainan Free Trade Port Research Institute, has argued that success in developing the “very backward” Hainan would have significant persuasive power, something all the more attractive, in Chi’s mind, due to the similar geographic and cultural conditions on the “two great islands of the motherland.”
Anticipating the exact kind of experiment represented by the massive free trade port, Chi suggested that if Hainan continued its opening to the outside world to strengthen its contacts, understanding, and cooperation with Taiwan, China could deepen the degree of economic interdependence between the two islands. “Then,” Chi wrote, “through the close linkage and consistency of their economic interests, the two islands may ultimately achieve a shared identification with national reunification, thus realizing the objective of using economic ties to promote political progress.”
It’s a strategy that seems unlikely to work, given Taiwanese public opinion. But Taiwanese businesspeople have shown an appetite in the past to invest in Hainan. In the 1990s, they often found the environment too difficult and infrastructure too underdeveloped to be worth their money or their efforts – except those who found success in nightclubs, karaoke parlors, and other businesses on the shadier side of commerce.
With the rapid upgrades to infrastructure on Hainan over the past decades – even if the interior remains relatively rustic – that might change. The East Asian political environment, too, is in flux.
What seemed like a flight of fancy in 1988 might be more realistic 40 years later. Beijing’s long bet could finally be ready to pay out.
