Hainan:

Open for Busi­ness

NewsChina - - CONTENTS - By Min Jie Wang Xinli, Zhang Qianyi and Hong Jian­peng con­trib­uted to this story

On April 13, 2018, Chi­nese Pres­i­dent Xi Jin­ping an­nounced that the cen­tral gov­ern­ment would trans­form Hainan Prov­ince into a pi­lot in­ter­na­tional free trade zone for deep­en­ing over­all re­form and open­ing-up, a pi­lot na­tional eco­log­i­cal zone, an in­ter­na­tional tourism and con­sump­tion cen­ter, as well as a ma­jor na­tional strate­gic lo­gis­tics zone.

“Hainan will be­come an ex­am­ple of the na­tion's im­age,” Xi said, an­nounc­ing the move at a con­fer­ence cel­e­brat­ing the 30th an­niver­sary of the prov­ince and Hainan Spe­cial Eco­nomic Zone (SEZ).

Since the SEZ was founded in 1988, Hainan Prov­ince has be­come a mi­cro­cosm of China's re­form and open­ing-up, leap­ing to the fore­front from its pre­vi­ous po­si­tion as a back­ward ad­min­is­tra­tive re­gion of Guang­dong Prov­ince.

Back then, there were few traf­fic lights and no large power sta­tions. Shops had to gen­er­ate their own power through small elec­tric gen­er­a­tors. “Haikou, the cap­i­tal city of Hainan, res­onated with the thun­der­ing noise of gen­er­a­tors ev­ery day,” said Xing Zengyi, a long­time res­i­dent who moved to Haikou for busi­ness in 1987.

Up­grad­ing Hainan's in­fe­rior in­fra­struc­ture and im­prov­ing the in­vest­ment en­vi­ron­ment has been a pri­or­ity of the lo­cal gov­ern­ment ever since.

On Jan­uary 7, 2003, China's first cross-sea rail-line, link­ing Hainan and Guang­dong Prov­ince, was opened. On De­cem­ber 30, 2015, a bul­let train net­work of some 650 kilo­me­ters cir­cling the is­land was launched, turn­ing Hainan into a busi­ness zone that can be cir­cum­nav­i­gated in three hours. Ac­cord­ing to of­fi­cial fig­ures, Hainan's GDP soared to 446 bil­lion yuan (US$71B) in 2017, up from 5.7 bil­lion yuan (US$908 mil­lion) 30 years ago.

Cool­ing Prop­erty

In 1991, Hainan reg­is­tered GDP growth of 14.9 per­cent, which climbed to 41.5 per­cent in 1992 off the back of real es­tate de­vel­op­ment. Back then, the is­land, with a pop­u­la­tion of 6.6 mil­lion, was home to at least 20,000 prop­erty de­vel­op­ment com­pa­nies.

In June 1993, the cen­tral gov­ern­ment an­nounced it had re­stricted real es­tate com­pa­nies from go­ing pub­lic, stopped banks from en­ter­ing the prop­erty mar­ket and raised de­posit in­ter­est rates sub­stan­tially. Fol­low­ing these strin­gent mea­sures, the real es­tate boom in Hainan went into a down­ward spi­ral.

Mean­while, the prov­ince had a large num­ber of va­cant build­ings, with floor space to­tal­ing 5.94 mil­lion square me­ters, and nu­mer­ous un­fin­ished projects. The real es­tate bub­ble gave rise to a fi­nan­cial cri­sis in the prov­ince. Hainan De­vel­op­ment Bank, which launched in 1995, lasted for only three years, be­com­ing the first Chi­nese com­mer­cial bank to col­lapse.

But in re­cent years, a grow­ing num­ber of Chi­nese na­tion­wide have

moved to Hainan for tourism, jobs, in­vest­ment or to re­tire, push­ing up prop­erty prices again.

“The gov­ern­ment's fi­nan­cial de­pen­dence on land-sales rev­enue has to be halted. We have to bear in mind that hous­ing is for liv­ing in, not for spec­u­la­tion,” Liu Cigui, Party chief of Hainan, said dur­ing an eco­nomic meet­ing in De­cem­ber 2017.

The Hous­ing and Ur­ban-ru­ral De­vel­op­ment Depart­ment of Hainan told our re­porter that to cool down the real es­tate frenzy and re­struc­ture the econ­omy, the prov­ince has in­tro­duced a pack­age of mea­sures to sup­port its com­pet­i­tive in­dus­tries and put an end to the as­sess­ment of GDP growth in its 21 cities and coun­ties.

The bureau added that while it would strictly pro­hibit spec­u­la­tion on com­mer­cial hous­ing projects, it would give a green light to the con­struc­tion of pub­lic rental hous­ing and com­mon prop­erty hous­ing.

Dur­ing the 2018 Na­tional Peo­ple's Congress in March, Hainan gov­er­nor Shen Xiaom­ing said to fill the busi­ness gap left by the prop­erty in­dus­try, Hainan would sup­port 12 key sec­tors, in­clud­ing tourism, agri­cul­ture and the dig­i­tal econ­omy. Mean­while, he said, the prov­ince would work to grow the pro­por­tion of con­sump­tion in the lo­cal econ­omy.

In­ter­na­tional Chal­lenge

In Jan­uary 2010, the State Coun­cil, China's cab­i­net, an­nounced that great ef­fort would be made to trans­form Hainan into a site of in­ter­na­tional tourism. The prov­ince has since opened 56 in­ter­na­tional air routes. Since 2000, it has pro­vided visa-free en­try for res­i­dents from 26 coun­tries and ex­tended this to 59 coun­tries on May 1, 2018. On De­cem­ber 6, 2017, Hainan passed a record of one mil­lion tourists for the year.

How­ever, the is­land's tourism ser­vices have a long way to go be­fore they meet in­ter­na­tional stan­dards. Dur­ing the re­cent Chi­nese New Year hol­i­day, heavy fog dis­rupted ferry ser­vices on the Qiongzhou Strait that links Hainan and Guang­dong, strand­ing over 100,000 pas­sen­gers and at least 10,000 ve­hi­cles on the is­land.

“We have to be aware of in­ter­na­tional stan­dards. The num­ber of in­ter­na­tional tourists is im­por­tant, but what is more im­por­tant is the level of one­ness with the out­side world,” Gov­er­nor Shen said dur­ing a meet­ing on the con­struc­tion of Hainan in­ter­na­tional tourist is­land.

On April 20, 2011, Hainan un­veiled duty-free poli­cies for tourists both in China and abroad, but has to date failed to meet the grow­ing de­mands of tourists. Ac­cord­ing to Liu Jing, gen­eral man­ager of Sanya Duty Free Store, no tourist can buy more than one ar­ti­cle priced at more than 8,000 yuan (US$1,275), and they must pay a high tax to mail it. Fur­ther­more, each tourist can only pur­chase com­modi­ties that to­tal less than 16,000 yuan (US$2,550).

“The duty-free pol­icy has to grow with the times,” Liu said. “As an in­ter­na­tional tourist is­land, po­lices should meet in­ter­na­tional stan­dards.”

In or­der to as­sess the “in­ter­na­tion­al­iza­tion” of the is­land, Sanya tourism author­ity es­tab­lished a com­plete set of ap­praisal cri­te­ria to gauge the tourism ser­vices in the city. “We al­ways have to be aware of our sta­tus in the world and the ser­vices that com­peti­tors pro­vide,” Wang Feifei, deputy di­rec­tor of the Sanya Tourist Com­mis­sion, told our re­porter.

She added that the com­mis­sion had ap­plied tech­no­log­i­cal mea­sures, in­clud­ing big data anal­y­sis, to quan­tify the prov­ince's com­pet­i­tive­ness on price, traf­fic is­sues and pub­lic ser­vices, com­par­ing them with 11 top global tourist des­ti­na­tions.

Nat­u­ral As­sets

With a land area of 34,000 square kilo­me­ters and a sea area of 2 mil­lion square kilo­me­ters, Hainan is China's only trop­i­cal is­land prov­ince. “Hainan's sea area ac­counts for two-thirds that of China. The vast sea area of­fers a va­ri­ety of ma­rine re­sources,” said a se­nior of­fi­cial from the prov­ince's ocean and fish­eries depart­ment, who de­clined to be named for this story.

Hainan may be a ma­jor mar­itime prov­ince, but it is not a pow­er­ful mar­itime prov­ince. The lack of mar­itime aware­ness has led to a rel­a­tively weak ocean in­dus­try. Poor mar­itime tech­nol­ogy and in­vest­ment and a lack of skills in the sec­tor have con­tin­ued to im­pede the healthy de­vel­op­ment of the ocean prov­ince. “The great­est po­ten­tial for the prov­ince lies in the sea,” the of­fi­cial told our re­porter, adding that the prov­ince will con­tinue its open­ing-up pol­icy.

“Re­form and open­ing-up is a cru­cial step for the de­vel­op­ment of Hainan,” Chi­nese Pres­i­dent Xi Jin­ping said dur­ing a field trip to Hainan in 2013. To date, Hainan, as the coun­try's big­gest spe­cial eco­nomic zone, still trails some is­land economies and prov­inces which are strong in in­ter­na­tional trade.

Lü Yong, head of the Hainan Provin­cial Depart­ment of Com­merce, told Newschina the scale of in­ter­na­tional trade in the prov­ince re­mains weak, with large for­eign-funded projects scarce. The prov­ince's ser­vice in­dus­try leaves much to be de­sired, he said.

“We will give pri­or­ity to the in­no­va­tive pi­lot projects in ser­vices and open the ser­vice trade,” he said, adding that it would fo­cus on tourism, ed­u­ca­tion, health­care, trans­porta­tion, in­sur­ance and tra­di­tional Chi­nese medicine. “The prov­ince's ser­vice ex­port and im­port vol­ume in­creased 19.3 per­cent and 23.9 per­cent in 2016 and 2017 re­spec­tively,” Lü said.

Chi Fulin, who heads the China In­sti­tute for Re­form and De­vel­op­ment, said the les­son of the past 30 years was that Hainan could not have achieved suc­cess if it re­lied on pref­er­en­tial poli­cies and re­fused to open up to the out­side world.

“Hainan's de­vel­op­ment lies in the high­est de­gree of open­ing-up,” Chi told Newschina. “Re­gional open­ness boosts in­dus­trial open­ness and the in­te­gra­tion of both will be the big­gest sec­ond-mover ad­van­tage for Hainan.”

An ae­rial photo taken on March 18, 2016 shows the scenery around the Boao Fo­rum for Asia In­ter­na­tional Con­fer­ence Cen­ter in Boao, South China’s Hainan Prov­ince

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