China Briefing | Hainan, China’s Hawaii, faces an uphill struggle to catch Hong Kong, Singapore and Dubai

Beijing hopes to turn the island, a tourist destination and duty-free shopping mecca, into the world’s largest free-trade port as part of its policy of opening up to foreign investment

But the transformation is far from assured, not least because of its chequered past as a base for exiles and smugglers. It is not known for efficiency, clean governance or being business friendly. Nor for its nightlife

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A vendor selling swimming accessories on Sanya Bay beach in Hainan province, China. Photo: Reuters

Published: 9:30am, 19 Jun 2021Updated: 9:30am, 19 Jun 2021

To counter US-led efforts to contain the rise of China, Beijing has made further opening up to foreign investment the cornerstone of its policy, betting that the lure of its massive domestic market is difficult to resist and decouple from.

Turning Hainan Island, China’s most southerly province known as the “Hawaii of China”, into the world’s largest free-trade port is a crucial piece of the puzzle. With a land mass of about 33,900 sq km, the size of the island is similar to Belgium and slightly smaller than Taiwan.

This month last year, Beijing released a three-phase master plan for the island, home to 9 million people. The first phase aims for the entire island to impose zero tariffs on imported goods and for one part of the province, Yangpu, to become a free-trade hub by 2025. The second phase, to be realised by 2035, would introduce low income tax and relaxed visa requirements for foreign businessmen and extend the free-trade status to the entire province. The third phase envisages Hainan becoming a global free-trade port by 2050.

To lure foreign businesses and their supply chains to the island, it will grant duty-free status on imported goods to be sold to the rest of China as long as 30 per cent of their value is added on the island and the “Hainan Origin Certificate” is obtained.

Chinese analysts now say Hainan’s ultimate aim is to catch up with Hong Kong, Singapore and Dubai and give them a run for their money.

Understandably, Hainan’s ambitions have caused angst particularly for many people in Hong Kong who see another sign that their city risks losing its competitive edge as a global hub at a time when its economy has suffered dearly from both the coronavirus pandemic and the political unrest of 2019.