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The Island of Hainan: A pilot free trade zone

Visa-free travel, attractive conditions for investors and major scientific centers: that’s the future awaiting the island

In over 30 years, Hainan has come quite a long way from being a remote tropical island to becoming a popular international resort, with its GDP per capita having increased by 14.3 times totaling 48,430 yuan as of 2017. The province’s economic success became the forerunner of important changes. In April 2018, Chinese President Xi Jinping announced that the party’s Central Committee had decided to support the creation of a pilot free-trade zone across the Island of Hainan.

1. Why was Hainan chosen as a spot for the pilot free trade zone? Because of its unique advantages

Hainan is the second largest island in China after the Island of Taiwan, and it is the biggest province in China and the largest special economic zone. Creating a free trade zone in Hainan is very promising thanks to five factors:

  • Geography: Hainan has access to Asia-Pacific sea routes. This advantage makes it possible to carry out customs control, and to regulate migration faster and easier than in other Chinese free trade zones.
  • Culture: There is the Nanshan Temple, the Goddess Guanyin Park and several large national parks on the island’s territory.
  • Finance: For 30 years, Hainan has been the largest special economic zone in China, with tax breaks and special conditions for investment.
  • Politics: China’s policy is aimed at globalization, and Hainan is the most convenient way to cooperate with Southeast Asian countries.
  • Resources: Hainan possesses reserves of oil and natural gas, brown coal and shale, as well as iron, titanium, manganese, tungsten, aluminum ore, molybdenum, copper, gold and silver. In the central part of the island, there are valuable species of trees, which include teak and sandalwood.

2. How is the pilot free trade zone going to develop? Through strategic positioning

Hainan’s provincial government is now working hard on presenting the new face of China’s politics, by creating a pilot free trade zone on the island, and developing plans on the construction of a free port with Chinese features.

A new era in the island’s history is being ushered in. Hainan’s authorities are planning to turn the island into the following:

* A pilot zone for implementing reforms

* A national pilot zone for ecological culture

* An international center for tourism

* A zone for implementing key state strategies

According to the authorities, the strategy of openness and the creation of a new type of economic system should bring Hainan closer to becoming, in time, China’s Pacific and Indian gateway to the world.

Main goals

Stimulating Hainan’s economic development is one of China’s key national policy goals, which entails expanding China’s openness and boosting globalization. Here is how China is planning to implement those goals:

  • By 2020, it plans to establish the core features of the free trade zone, to increase its openness to other states and to create a ‘society of moderate prosperity’.
  • By 2025, it intends to set up the free trade port’s general operational schedule and create a top-notch business environment on the Island of Hainan.
  • By 2035, Hainan should become the champion of socialism in China, in addition to completing the formation of the port of free trade’s operation and ensuring a world-class business environment.
  • By 2050, a new Hainan will emerge with a thriving economy, a cultural society, a favorable environment and it will become a leader among the country's regions in terms of economic and cultural indicators.

How does Hainan intend to develop a new economic environment? Through three key industries

New times require new approaches. So, in a world where the Internet, big data and AI reign supreme, the administration of Hainan is developing the economy’s real sector in order to create a modern economic system with a dominant industry of services as soon as possible. The authorities are focusing their efforts mostly on the following sectors:

  • Tourism.
  • The service sector.
  • New technologies.

Hi-tech is one of the key fields of the island’s development. Thus, five hi-tech development centers focusing on various areas will be set up on the island:

  • The introduction and transit base for global animal and plant germplasm resources.
  • The south center of the national deep sea base.
  • The Chinese academy of tropical agricultural sciences.
  • The National nanfan scientific research and seed breeding base.
  • The major aerospace scientific and technological innovation base.

Hainan is conducting a policy of implementing reforms and openness in 10 key areas: shipping, seed industry, healthcare, education, sports, telecoms, the Internet, culture, maintenance, and finance.

The authorities have also highlighted 12 key industries that will boost economic growth: healthcare, modern financial services, the conference and exhibition fields, tourism, tropical high-efficiency agriculture, the Internet, logistics, the marine industry, low-carbon manufacturing, real estate, education, culture and sports, and pharmaceuticals.