This paper explores how institutional innovations in Free Trade Zones (FTZ) and Free Trade Ports (FTP) promote cultural exchange and soft power construction. Through a systematic literature review and policy analysis, it is found that institutional innovations in FTZs and FTPs, including relaxed restrictions on foreign investment in the cultural industry, streamlined approval processes for cultural exchange activities, the establishment of diverse cultural exchange platforms, and optimization of cultural talent introduction policies, effectively enhance the depth and breadth of international cultural exchange. These efforts have significantly improved China’s cultural soft power. A case study of the Hainan Free Trade Port demonstrates how proactive cultural policy innovations have led China to achieve notable success in international cultural exchanges, offering new ideas for global soft power competition. This study provides reference recommendations for future policy formulation and academic research, especially in optimizing cultural policies in FTZs and FTPs to further enhance cultural soft power.