China’s Hainan Free Trade Port Bets on Underwater AI Data Centers to Power Web3 and Digital Trade

On August 4, 2025, the People’s Government of Hainan Province released its “Three-Year Action Plan to Build a Modern Industrial System (2025–2027),” setting an ambitious target of achieving ¥220 billion ($30.4 billion) in digital economy core industry revenue by 2027.

The plan positions Hainan as a global digital innovation hub, leveraging its Free Trade Port status to accelerate advancements in artificial intelligence, blockchain, and big data.

Launching One of the World’s First Underwater AI Data Centers

A signature initiative of the plan is the deployment of one of the world’s first AI-powered commercial underwater data centers. Located off the coast of Haikou and developed in collaboration with industry leaders like Inspur and China Telecom, the facility utilizes ocean water for natural cooling, significantly improving energy efficiency while reducing operational costs and carbon emissions. It also integrates real-time AI computing for industrial and scientific applications.

The Hainan Ecological Software Park and downtown Haikou are designated as key AI and big data innovation zones. These areas will focus on applications in healthcare, education, smart cities, and digital entertainment, aiming to attract both domestic and international tech enterprises.

Aligning with Free Trade Port Reforms and Customs Closure

The digital economy push coincides with the island’s upcoming customs closure on December 18, 2025, when Hainan will begin full operations as a Free Trade Port. Under the “first-line liberalization, second-line control” model, goods entering from abroad will enjoy a zero-tariff regime, while goods moving to mainland China will remain subject to customs.

The government sees this transition as a key enabler for foreign tech firms and investment. "Digitized customs processes will make Hainan a seamless and trusted hub for global data and goods flow," a local official said at the press conference.

"We view full-island independent customs operations as a pivotal milestone for Hainan, marking a fresh phase of development. This will let the island leverage integrated policy strengths to deepen opening-up, ensuring steady flows of high-quality factors like talent, capital, and data," William Huang said, managing partner of EY China South.

Deepening Global Integration Through Technology

By combining digital infrastructure, tax incentives, and favorable trade policies, Hainan aims to attract Web3 startups, AI labs, and cloud service providers. The provincial government emphasized that the strategy supports China’s broader push for global economic integration and technological sovereignty.

As the region evolves from a tourism-dependent economy to a digital-first innovation zone, the ¥220 billion target serves not just as an economic goal, but as a milestone in China's national strategy for digital transformation.