China towards the Second Goal: Economic Development of a Tropical Island

By Mahika Ming | Published: 2:00 AM Jul 29 2021
FT China towards the Second Goal: Economic Development of a Tropical Island

By Mahika Ming 

Hainan is a province in south China. The province has many islands with the largest with the highest population known as Hainan Island. The island is about 95% of the provincial land mass. Hainan literally means “south of the sea” the main land of the Peoples Republic of China (PRC). As per Chinese statistics, the provincial land mass is approx. 33,920 Sq km of which the main island (Hainan island) is approx. 32,900 Sq km (roughly half the size of Sri Lanka). 

The other small islands are scattered across three archipelagos. Before 1988 Hainan was part of Guangdong province and was an important part of the Special Economic Zones plan initiated by Deng Xiaoping. Now Hainan is China’s largest special economic zone and its geographic location also supports the concept as per Chinese sources. As in Sri Lanka Hainan is home to many ethnic groups. They include the Li community (15%) and the Han community (85%). People speak many languages including; Mandarin, Hakka Chinese, Min Hainanese and Yue Chinese etc. 

The main city is Haikou which faces the main land while Sanya is a well known tourist city. In June 2020 the PRC launched the Hainan Free Trade Port (FTP) initiative which will turn the entire province into a mega free trade facility for global players. The majority in Hainan are Buddhists. The Li community has Theravada Buddhist links while most communities in the Sanya area are Muslims. It is believed that Muslims have settled there due to the trade activities which took place surrounding the ancient Silk Road. Since missionaries have taken this route, Hainan has a small Christian minority (0.5%) as well. The Nanshan Park is a forest covering approx. 

50 Sq km and is considered the centre of the Buddhist base in Hainan. There are many ancient temples, statues and meditation parks etc within this 50 Sq km stretch. Nanshan Temple located at the centre is similar to the Maha Vihara which was located in the Maha Mega forest in Sri Lanka. The most popular attraction in the Nanshan Cultural zone is the 108 meter statue of Bodhi Sath Guan Yin near the South China Sea which is taller than the statue of liberty donated to the US by France and located in the New York harbour area. 

Economically developing a Buddhist community In June 2020, the PRC started implementing the master plan to construct the Hainan FTP which will turn the island province into a international duty free trading center when the PRC celebrates its centenary in 2049. One year later in June 2021 the State Council Information Office of the PRC released a white paper (WP) on the mega development and construction of the FTP which stressed the objectives and the achievements during the past year. As per the master plan the FTP focuses purely on trade and investment. 

Accelerated trade liberalisation is the key focus of this initiative. With the objective of supporting the liberalisation process PRC legislature recently adopted six new laws, including new laws on stamp duty. These laws were passed at the 29th session of the Standing Committee of the 13th National People’s Congress which is the PRC’s top law making entity. The new law on stamp duty should take effect in July 2022. So far the PRC has made amendments or made new laws for 12 of the remaining 18 tax laws. How to attract investors? The PRC last week issued a new revised negative list for the service industries that are expected to invest in Hainan specifically. 

It is expected to increase transparency and predictability in the business environment of the FTP. Accordingly the list of cross border service trade in the Hainan FTP specified 70 special management measures in 11 categories for transnational services industry investors as per the Chinese Ministry of Commerce. Increasing the market quality local and foreign services providers will therefore enjoy equal market access and have a level playing field in the Hainan FTP in the areas not included in the list. The new list gives space for the international investors to plan for their progress and at the same time it will ensure the growth of the FTP. 

According to many analysts the list serves as a major breakthrough in the management model of service trade as it is a market opening mechanism which will help further promote liberalisation of service trade. Just as in Sri Lanka the service industries accounts for more than 60% of Hainan’s economy lead by the tourist trade. Although some are skeptical about the PRC’s approach towards its internal security, it should be noted that so far the PRC has not acted like the former USSR allowing politics and defense issues to hamper trade or economy. 

That approach has in fact benefited the PRC and its partners along the Belt and Road etc. In future foreign yachts entering and leaving the Hainan FTP will no longer have to pay pilotage. The FTP also encourages further opening up for individual foreign investors to open securities and they will be able to apply for qualifications in securities and futures investment consultancy. These in fact are good points to focus on as Sri Lanka is also located in an ideal place for a free port. The PRC is expecting more business opportunities in Hainan for international companies and it is expected to create more chances to provide cross-border trade. In general even with the COVID – 19 obstacles the PRC’s service trade alone was more than 661 billion USD in 2020 which is the second highest in the world (Ref. Chinese stats). 

The world trade organisation (WTO) has officially categorised 160 service sectors. The PRC has so far liberalisaed approx. 120 sectors of that list meaning international investors are free to come into China to invest and trade in those sectors. However, it should be noted that decades ago political superpowers in the west did not allow the PRC to join the WTO until the PRC opened its doors especially to the tobacco industry and other international brands managed mainly by western multinationals. What is in it for Sri Lanka? So far the communist PRC has proved that they have mastered economic liberalisation whilst being a socialist country. 

Socialism was introduced into Sri Lanka in an organised political form in the mid 1930s. By mid 1950s the government expected their support to develop the country but the late Mrs. Sirimavo Bandaranaike had reportedly said that it was the communists who indirectly assassinated her late husband and in fact initiated the economic reversal process. It became a violent force reversing socio economic development in Sri Lanka with the launch of new political entities in the mid 1960s. Analysing the history since then one can see that such forces have always contributed towards taking the national economy backwards notably in 1971 and 1987. Malaysia started its economic development march in the mid 1960s. Sri Lanka was a role model for them but was never a threat. 

Singapore was established in the mid 1960s. Sri Lanka was a role model for them as well according to its founding father. It is not clear if certain Sri Lankan political forces are actually receiving pay cheques from those who want Sri Lanka to go backwards. Many international donor agencies including the World Bank have published that Sri Lanka is not attracting investment due to riots and strikes at work places. If Sri Lankans are keen on developing the country while being predominantly Buddhist, Hainan is a good case study. The responsibility rests on the population including the small 3% of voters who still promotes reverse mechanisms with or without the knowledge that socialism or communism is actually taking countries forward.

By Mahika Ming | Published: 2:00 AM Jul 29 2021

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