Hainan, China's Hawaii, faces an uphill struggle to catch Hong Kong, Singapore and Dubai
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.
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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.
This month, the standing committee of the National People's Congress, the country's parliament, passed a national law specifically on governing the island's transformation into a global hub and empowering the local authorities.
Despite the hype, Hainan's transformation is far from assured not least because of its chequered history.
The tropical island may be known for its pristine sandy beaches, coconut trees and azure waters but historically it was always on the fringe and since the Song dynasty (960 to 1279), it has been notorious as a place of exile for disgraced officials and criminals.
In the early 1990s, billions of yuan poured into real estate development but the bubble burst in late 1993, leaving hundreds of unfinished office and residential buildings littered throughout the island.
Due to the suspension of international travel because of the pandemic, the island has turned into a duty-free shopping mecca for the Chinese, particularly after the government increased the annual duty-free shopping quota from 30,000 yuan (US$4,690) to 100,000 yuan and widened the tax-free goods categories to include electronics and wine in July last year.
But the island faces an uphill battle to transform into a global business hub.
For one thing, unlike Hong Kong or Singapore, Hainan is not known for efficient and clean governance or for being a business-friendly environment.
In June last year, a businesswoman who was also a political adviser to the government of Haikou, the capital of Hainan, made headlines by complaining publicly to the provincial and city leaders about how she had run into bureaucratic brick walls and had her business propositions ignored by local officials for months. By way of contrast, she said officials in Shenzhen had responded to her requests within days.
Meanwhile, the island also faces a tough time in attracting domestic and international talent despite its plans to offer low income tax rates comparable to those of Hong Kong or Singapore, not least because the province lacks the cultural attractions or nightlife of either of those two cities.
For years, local officials have been secretly lobbying the central government to allow the island to build casinos to enhance its lure but to no avail.
As the Chinese leadership strengthens ideological controls over society, it seems almost impossible that Hainan's wish will ever be granted.
The provincial government is also believed to be lobbying aggressively for horse racing to be allowed on the island. So far, that idea remains on the drawing board.
Wang Xiangwei is a former editor-in-chief of the South China Morning Post. He is now based in Beijing as editorial adviser to the paper
This article originally appeared on the South China Morning Post (SCMP).
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