Half Year Report Card for Hainan

By John Gong / hiHainan / Updated: 2020-12-10,15:32

 (Dr. John Gong is a professor at the University of International Business and Economics

and a research fellow at the Academy of China Open Economy Studies at UIBE.)

It has been half a year since the central government issued a master-plan document for developing the entire Hainan Island/Province into a free trade port. A lot of things happened since these tumultuous six months. We had a worldwide pandemic on the order of the 1918-1919 Spanish Flu. China weathered through the first wave relatively unscathed. But the second wave and the third wave are still ravaging viciously in many parts of the world. We had seen our economy gradually recovering, with the last quarter GDP hitting a close to 5% increase. The last quarter of this year is projected to record a 6% increase. America’s trade war with us is winding down as the Sino-US relationship free-fall doesn’t look like is going to continue. American people have voted out President Trump.

 

Shoppers in the Sanya International Duty Free Shopping Complex, Hainan during Chinas National Day Golden Week this year. (Xinhua)

On the country’s southern island, things appear to be tugging along fine despite all the distractions and uncertainties. Six months is a long time by Hainan standard. It is time to check the report card for it.

Two and a half years ago when President Xi Jinping visited Hainan and announced the free trade pilot zone vision, I wrote an op-ed piece for CGTN (China Global Television Network) to resonate with that vision, in which I advocated to build Hainan into a combination of Florida, Dubai and Singapore. By that I mean the island needs to develop into a second home paradise for folks on the mainland to take the families to for vacations, pretty much like what Florida is to Americans on the east coast. The island also needs to develop into a shopping paradise like what Dubai is, aided by its flagship airlines the Emirates. And finally the island needs to attract investment to foster a high-tech industry boom as Singapore has wildly succeeded.

 

The Long March-5 rocket carrying the Change-5 spacecraft at the China Wenchang Spacecraft Launch Site, Hainan (Jiang Jurong)

Yazhou Bay Science and Technology City, Sanya, Hainan (Wu Wei)

Looking back there is no doubt that Hainan is on track to achieve the first two goals beyond expectation. Indeed the island has become a popular second home destination for many northerners. I know of at least three of my close friends at our university who have bought villas or condos there. One good friend has extended to me invitations to visit his swimming-pool equipped villa several times. OK, I might go next year during the spring festival season.

With respect to shopping, these days people cannot fly overseas for vacations and shopping due to the Covid-19 situation in many parts of the world. What do they do? They flock to Hainan. The duty-free stores there provide a bargain no less generous than places like Dubai and Hong Kong, thanks to its low taxes for doing business. Official figures show sales have already hit RMB 12 billion only four months into the new duty-free policy was introduced that exempt purchases up to RMB 100K. On November 11, which is China’s shopping carnival day, sales shot through the roof with RMB 365 million worth of sales recorded. This trend is likely to continue as people have come to discover the biggest hidden secrete that the duty-free shopping of name brand merchandise for a hard bargain is right at home on Hainan Island. And besides, you get a nice vacation for a few more days.

Night view of bustling Yangpu Port, Hainan (Liu Yang)

When it comes to catching up with Singapore in terms of developing a high-tech industry, there is still much work to do. The local government is hard at work to roll out a series of policy initiatives to entice domestic and foreign direct investment. Zero tariffs for certain trade transactions, 15% income tax for corporations and individuals, a much shorter negative list, preferential policies to attract talents, financial opening-up for free flow of capital, intellectual property rights protection, etc. and etc., these are merely a few examples of a long list of policy initiatives all intended to turn the island into a more open and free market.

So far the market does seem to have noticed the opportunities these policies would bring out. From Jun. 1 to Nov. 20 this year, the island has seen 99,100 new company registrations, an increase of 185% compared to the same period last year. A total of 388 foreign companies have set up presence between June and September, including such global giants as Tesla from the US, and EDF Asie from France.

But certainly like Rome, Singapore is not built overnight. And neither will be Hainan. It takes time and efforts to develop sustained high-tech industries with investments over many years. In addition to that, the local higher education sector also needs to step up to function as a source of supply of talents and of innovations. I know the flagship university on the island, Hainan University, is working very hard to break into China’s elite league of top universities. It is now coming up with lucrative offers to attract talents to permanently relocate there. But all of these things again take time, and their effect also takes time to show.

Without a doubt, Hainan has a huge potential with the central government’s wholehearted blessing. Not only it is hoped that it will catch up with the leading cities and provinces in China, but it is also hoped that Hainan will set a shining example of China’s continued reform and opening-up as a pilot zone. Time will tell if the island’s government leadership will deliver the grand vision President Xi has laid out. But at least for the first six months since it got its official mandate, I will give an A-minus for its report card. These six months were not the best of times by all standards, but the island appears to be still thriving and be able to still eke out a decent growth figure nevertheless. The new Hainan started off with an uphill battle, and hopefully it would be all smooth sailing after that.

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