Cainiao, the logistics arm of Chinese ecommerce giant Alibaba, announced that it plans to launch a pilot supply chain zone in cooperation with the government of Hainan, helping the southern Chinese island become a free-trade zone similar to Hong Kong.

At the Cainiao 2021 Global Smart Logistics Summit on Thursday, the company’s CEO, Wan Lin, and the director of Hainan’s International Economic Development Bureau, Han Shengjiang, jointly announced that they would work together to build a digital intelligence supply chain zone on the island, which is known as the “Hawaii of China”.

The Alibaba-owned company said it would support Hainan’s free-trade port by giving it access to its own global logistics capabilities and expertise in digital logistics technology. The aim is to attract more than 1,000 duty-free merchants, especially those that have not yet entered the China market.

The initiative will also see the establishment of a smart service centre and global supply chain centre in Hainan, which Cainiao said will allow customers to complete a pickup within 70 seconds at designated locations, half the time it currently takes.

Last year, China announced plans to turn Hainan, a tropical island in the south of China and a popular holiday destination, into a free-trade port similar to Hong Kong. The plan outlined by Beijing stated that income tax rates for selected individuals and companies would be lowered to 15% and relaxed visa requirements for tourists and business travellers would be implemented.

The island province with a population of 9.5m will also enjoy loosened restrictions on trade, investment, capital flows and the movement of people and data by 2035, with the goal of gaining “strong international influence” by the middle of the century.

Given that the Hong Kong Special Administrative Region, which had always served as China’s largest free-trade port, has been facing intensified pressure from Beijing, many have speculated that the Chinese government is making long-term plans to replace Hong Kong with Hainan.

In response to these speculations, Chinese officials have insisted on multiple occasions that Hainan becoming a free-trade port will complement Hong Kong’s status and not threaten it. “The free-trade area of Hainan will have a different status, unlike that of Hong Kong,” deputy director of the National Development and Reform Commission Lin Nianxiu said after Beijing announced its plans. “It will focus on industries different from those in Hong Kong,” he added.

The past year has seen Hainan rapidly expand its international reach. Cainiao said that as part of its cooperation with the island, it plans to upgrade Hainan’s global freight network, including the expansion to more than 800 international cargo flights by the end of 2021. This news comes two months after the company launched seven weekly charter flights between Singapore and Hainan.

Amid rising pressure from Chinese authorities and fierce competition, Alibaba is facing a strenuous time. The ecommerce company suffered a net loss of 5.47bn yuan ($848.5m) in its fourth-quarter after it was hit with a $2.8bn antitrust fine recently.