By Wu Zhong, China Editor

HONG KONG – China’s tropical island province of Hainan is to be developed into a top international tourism resort by 2020, under ambitious plans announced this week by the State Council, or central government’s cabinet.

The proposals include visa-free entry for foreigners, increased access for airlines, duty-free shopping, and possibly some relaxation of gambling regulations, which would help to attract tourists from within China. The unprecedented privileges will make Hainan, which is across the Gulf of Tonkin from Vietnam and which lies on the same latitude as northern parts of Laos and Thailand, the most “special” of the five special economic zones (SEZs) in the country. (The other four are Shenzhen and Zhuhai, which border Hong Kong and Macau respectively; Shantou, on the Guangdong coast northeast of Hong Kong, and Xiamen, in Fujian province opposite Taiwan.)

The plan’s prime goal is to give a strong stimulus to Hainan’s development. Hainan, China’s smallest and southernmost province but the largest of the five SEZs, has far lagged the others in economic development. From a broader perspective, it also suggests that Beijing believes it has found a new pivot to sustain national economic growth in the second decade of the 21st century, with a focus on boosting domestic consumption in the form of domestic tourism.

China is a huge country, both in geographic and population terms, so its economic development has never been, and can never be, homogenous. Aware of this reality, Beijing’s strategy has been to concentrate on developing a certain region for a given period, making it a pivot about which turns the rest of the nation. Thus in the late 1970s, Shenzhen, taking advantage of its proximity to Hong Kong, was chosen to spearhead the experiment of economic reform and opening-up.

Amid economic sanctions by Western countries after the crackdown following the Tiananmen Square protests in 1989, the Chinese government decided in 1990 to cultivate the Pudong area of Shanghai as a financial center to provide a new stimulus to national growth. After China’s accession to the World Trade Organization, China’s 11th Five Year Plan (2006-10) set to develop the Tianjin Binhai New Area to boost the Bohai Rim economy in the port area immediately southeast of Beijing.

Incentives granted to these “pivotal” places have been to boost industries such as manufacturing, trade and finance. In this sense, the plan for Hainan is new, in that it is aimed at boosting the smokeless industry of tourism and related services, to stimulate domestic consumption.

While the plan aims to develop Hainan, which has an area of about 34,000 square kilometers – or slightly smaller than Taiwan – and a population of more than eight million, into an international tourism destination, the opening of duty-free shopping and gaming will also attract residents from elsewhere in China.

Hainan was until the late 1980s an administrative part of Guangdong, now China’s richest province, and a survey there after the proposals were made public found many people intended to make regular visits to Hainan for shopping and relaxation once the plan was implemented.

The development plan at the same time immediately aroused concern in Hong Kong and Macau, little more than an hour’s flight up the coast from Hainan. Mainland China now provides the former colonial possessions with their largest group of incoming visitors, attracted to Hong Kong, a free port, for its shopping, and to Macau for entertainment and gambling, which is banned in the mainland.

The Ministry of Finance is leading a feasibility study on giving tax refunds to overseas tourists in Hainan. Beijing is also exploring the possibility of allowing duty-free shopping on the island for domestic tourists from outside Hainan.

Hainan provincial leaders, however, moved quickly to ease such concerns in Hong Kong and Macau. The local Communist Party chief, Wei Liucheng, told a press conference on the development plan in Beijing on Wednesday that the island was only in the experimental stage of opening duty-free shopping, and it would take some time for it to develop a shopping environment that could match the level of Hong Kong.

“In the period we can foresee, strong competition between Hainan and Hong Kong is not going to take shape,” he was quoted by state-run Xinhua News Agency as saying.

At the same press conference, the Hainan governor, Luo Baoming, ruled out the possibility of building casinos on the island. Wei added that, as such, Hainan posed no threat to Macau.

According to the plan, Hainan has been given permission to “explore and develop” pari-mutuel sports lotteries and instant sports lotteries on large international events. (Pari-mutuel systems pool bets and taxes and the house “take” are removed.)

“Hainan has been given more space than other parts of China to explore the lottery market, but it does not mean Hainan will break China’s laws,” Luo said. He declined to confirm whether pari-mutuel horseracing would be introduced to the island. The Information Times reported earlier that Hainan might be a trial base for gambling options that could include horse racing.

Gambling is banned on the Chinese mainland, but two decades ago China began to legalize welfare and sports lotteries involving foreign basketball and football games to raise funds for social welfare and sports causes. Beijing plans to allow Hainan to extend pari-mutuel sports lotteries to biking, sailing, beach volleyball and horseracing, as long as the involved events are held on the island, Wang Xuehong, director of the China Center for Lottery Studies based in Peking University, told China Daily.

Wang and others in China believe Beijing will allow Hainan to open the gaming industry step by step on a trial and error basis. “When the door is opened slightly, it will eventually open widely. This is inevitable. We have seen all economic reforms go through in this way,” said a sociology researcher with the Chinese Academy of Social Sciences (CASS).

This is not the first time Beijing has had big hopes for Hainan’s development. The island was for a long time a prefecture of Guangdong province. In 1988, it was upgraded to being a province and then also a special economic zone, and four years later the State Council approved the area of Yangpu, on a peninsula in the northwest of the island, to be a duty-free zone. The island came to more international prominence in 2001, when it started to host the Boao Forum for Asia, an annual gathering of the region’s political and business leaders.

Despite all the incentives and efforts, Hainan remains the least-developed province on China’s east coast, which has been at the forefront of the country’s remarkable economic growth over the past three decades. Its economy remains predominantly agricultural, with little in the way of industrial growth.

Hainan’s per capita gross domestic product (GDP) in 2008 was 17,084 yuan (US$2,500), compared with the national average of 22,780 yuan. In neighboring Guangdong, per capita GDP is 37,579 yuan. Even Xinjiang, in the far northwest, does better at 19,732 yuan, and Tibet at 13,861 yuan is not far behind.

Should Hainan’s development now take off – and tourism is already a money earner with visitors drawn to the tropical climate and fine beaches – then it would be an apt completion to the “golden strand” of China’s east coast from the Bohai Rim in the far northeast, past Shanghai and the Yangtze River Delta and the Taiwan Strait, to the Pearl River Delta area of Guangdong, Macau and Hong Kong. The local concerns of the former colonial outposts pale beside that goal.