Hainan FTZ: A fresh step in China's opening-up

By Rabi Sankar Bosu

April, 2018 is likely to go down in history as a month which has seen a major milestone in China's development. Addressing the opening ceremony of the 2018 Boao Forum for Asia (BFA) in the southern province of Hainan, Chinese President Xi Jinping pledged to further open up China's economy according to its own timetable. Three days later, addressing a conference celebrating the 30th anniversary of Hainan's founding as both a Chinese province and a special economic zone, Xi Jinping announced plans to turn the whole of Hainan into China's largest Free Trade Zone, as well as its first Free Trade Port Zone, with the goal of opening up China even further to the rest of the world.

The establishment of pilot free trade zones represents China's major move to adopt a more proactive strategy of opening up in-line with global economic development. China has so far established 11 pilot free trade zones (FTZs) for Shanghai, Tianjin, Guangdong, Fujian, Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan and Shaanxi to accelerate the country's opening-up and support the Belt and Road Initiative.

Photo taken on Dec. 10, 2016 by a drone shows Bailu park in Sanya, south China's Hainan Province.[Photo: Xinhua]

In announcing the new plans for Hainan, Xi Jinping suggested Hainan will be developed through the concept of creating an "ecological civilization." "I'm announcing that the CPC Central Committee will fully support Hainan to gradually build a free trade port with Chinese characteristics. We will step by step complete a free trade system here. This is a serious and crucial decision made after careful research and planning. It also shows China's strong will to further open up and push forward globalization," said Xi.

The political message is clear: the proposed plan suggests the Chinese government is taking economic reforms more seriously in next phase of country's opening up. There is no doubt that emerging as China's 12th free trade zone, Hainan will become the largest free-trade port in the world and may challenge other regional trading ports in Hong Kong to Singapore, earning a reputation as the "name card of China."

It should be noted that Hainan was officially established as China's largest Special Economic Zone on April 13, 1988, as part of late Chinese leader Deng Xiaoping's opening-up policy. Hainan was part of Guangdong Province until 1988. The youngest province of China remains the country's sole provincial-level special economic zone, giving it a special status in comparison with the other four, Shenzhen, Xiamen, Zhuhai and Shantou.

During the past 30 years, Hainan Province, located at the southern end of the Pan-Pearl River Delta and close to the Greater Bay Area, has been thriving as China's largest testing ground for reform and opening up. Through the Belt and Road Initiative, the southern island is geographically positioned to bolster regional cooperation with fellow Pan-Pearl River Delta cities, while also helping with the Qiongzhou Strait Economic Belt, which connects Hainan and Guangdong. This region is the terminus for commercial activities moving through the western and central regions of the South China Sea.

Dubbed by some as "China's Hawaii," Hainan Province is known for its stunning coastline and clean environment. Over the years, the people of Hainan have built the province into a first-class island for tourists, a tropical agricultural base and a pilot medical tourism zone. The number of foreign tourists to the island crossed the one million mark at the end of 2017. Chinese authorities have helped make this happen through preferential policies, including visa exemptions.

To build a "beautiful and new" Hainan, Xi Jinping has underscored advancing reform and opening-up in Hainan "from a higher perspective, with a broader vision and greater strength." April 14th, the day after the Chinese President's announcement, the central government mapped out its detailed plans for establishing Hainan as a free trade zone by 2020. Goals also include the establishment of the free trade port system in Hainan by 2025, with it becoming "more mature" by 2035. The plan shows China is "committed and serious" about further opening up China's market.

The new plan mainly focuses on six new goals for Hainan: (1) A Free Trade Zone covering the whole island, (2) A Free Trade Port with Chinese characteristics, (3) A Pilot Zone for comprehensively deepening reform and opening-up, (4) A National Ecological Experimental Zone, (5) An International Tourism Centre, and (6) A National Major Strategic Service Guarantee Zone.

According to the documents, China will encourage multinationals to set up their international and regional headquarters in Hainan, with the goal of opening up the province's economy to foreign investors. The document says China will support the "all-round participation" of foreign firms in the building of a free trade port in Hainan.

Surely, for Hainan, as an island economy, opening up is the key to its survival and development. Wu Shicun, president of the National Institute for South China Sea Studies, is suggesting the new opening-up policy in Hainan will bring about substantial progress in both Belt and Road construction and regional economic cooperation and integration.

Hainan, once considered a backwater for fishermen and poor farmers, is now a vibrant example of China's commitment to the future. Undoubtedly, Hainan's development will be one of the key legacies of China's opening up under Xi Jinping's watch. And the world should be watching and learning from what will be taking place in Hainan. India is planning to build 100 smart cities across the country by 2030. To do this, Indian policy makers and think tanks should be keeping close tabs on Hainan's development, success and prosperity.

(Rabi Sankar Bosu, Secretary, New Horizon Radio Listeners' Club, based in West Bengal, India)