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1988
Heavenly Hainan> Beijing Review Archive> 1988
UPDATED: February 3, 2010 NO. 18 MAY 2, 1988
Hainan Province - China's Largest SEZ
By  YANG XIAOBING
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Hainan boasts the world's most advanced pearl breeding technology. The Sino-Japanese Nanhua Pearl Breeding Co. began operations in 1984. In 1986 it harvested 2,300 pearls, each measuring over 10 mm in diametre. The largest measures 30 mm and weighs 15 g, a record in China. Lingshui County has six pearl breeding grounds.

Tourism

 One of Hainan Island's most spectacular features is its tourism potential. The beaches are superb, particularly at Sanwan. Then there are the well-known Dadong Offshore Bathing Grounds and the Yalongwan with its seven kilometres of magnificent coastline scattered with white sand beaches. The annual average temperature of the surrounding waters is 20oC.

The hilly areas inhabited by the Yis and the Miaos also provide an attraction for tourism.

Construction of the island's 30-square-km International Tourist Centre has already begun. The project involves an investment of US$6.74 million from the well-known Hong Kong businessman Fok Ying Tung.

In 1986 Zhao Ziyang, then premier of the State Council, proposed to make tourism one of Hainan's main industries and the main force in the island economy. The province is now one of China's seven major tourist areas enjoying priority state investment. In 1987 Hainan received 350,000 visitors. A dozen foreign companies have approached Hainan to co-operate in tourist projects.

Preferential Policies

The Chinese government has formulated special policies for Hainan which are more flexible than any offered to other parts of China. They include some internationally applied measures which have not been adopted in the other four special economic zones.

According to Xu Shijie, head of the Preparatory Group for the Establishment of Hainan Province, the island will operate on the basis of a market economy with basic socialist features. "Sino-foreign joint ventures, cooperatives and wholly foreign-owned enterprises will enjoy a good deal of the benefits Hainan's economy has to offer," said Xu.

Preferential policies adopted by the central government for Hainan are that:

No controls will be placed on investment in capital construction. Construction funding will come mainly from abroad as well as Hong Kong and Macao. Hainan is free to borrow overseas according to its debt servicing capacity.

In principle, all enterprises formerly under the authority of the central government or Guangdong will now be under the Hainan provincial government, to incorporate them into the island's market economy. Foreign entrepreneurs will be allowed to manage, on contract, local enterprises owned by the state or the collective.

Hainan will assume all responsibility for profits and losses from trade with the outside world. Local exports will be free of state control. Capital goods, including raw and processed materials, parts and components, fuels and tools, are exempt from import duties. Imports of articles for daily use, including household electrical appliances and 23 other items subject to state restriction, enjoy a 50 percent tax reduction (on the condition that they are used locally). Wine and cigarettes are still taxable items. Foreign-funded enterprises in Hainan (including Sino-foreign joint ventures, co-operatives and wholly foreign-owned enterprises) are exempted from industrial and commercial consolidated tax in the first two profit-making years and an 85 percent reduction in the third profit-making year. Expanding industrial and agricultural enterprises, high-tech industries, enterprises manufacturing new products, and infrastructural facilities (excluding power stations) are exempt from tax on profits during their first five years and enjoy an 85 percent reduction in the following five years. Enterprises facing difficulties in paying tax may apply to the Hainan provincial government for exemptions or reductions. Foreign investors are free to remit their foreign exchange earnings which will be exempt from individual income tax.

Hainan's financial system will be locally managed, that is, the Hainan branch of the People's Bank of China will act as the island's central bank. The Haikou branch of the Bank of China will enjoy the same preferential treatment as extended to foreign banks. All Hainan Island's banks are empowered to deal in foreign exchange deposits, stocks and securities, and to establish foreign exchange markets. They can also conduct foreign exchange borrowing and lending business with the other four special economic zones. All the foreign exchange income earned in Hainan will be retained by the province.

Foreign banks will be allowed to set up branches in Hainan; these branches will be able to deal in foreign exchange deposits, stocks and securities.

Hainan Province will be able to engage in international tourism and have the power to endorse and issue entry visas. Compatriots from Hong Kong, Macao and Taiwan, and foreigners will be issued entry visas from Haikou or Sanwan for a 15-day stay in Hainan on producing their ID cards, travel licences or passports; it will no longer be necessary to apply to the Chinese embassy or consulate.

Foreign investors and business people staying in Hainan for longer periods of time, may apply for temporary residence cards from the Hainan government; each card will allow them a six month to one year stay and renewal may be granted on application.

The Hainan government will be empowered to approve local residents and cadres (not including governor and deputy governors who will require state approval) to trade and travel abroad. The Hainan government will also have the power to approve local enterprise plans to establish commercial outlets overseas.

Foreign aviation companies will be able to start scheduled flights to Hainan.

The sale, transfer or mortgage of land-use rights will be allowed. such rights can last to 70 years and can be extended by renewing the contract. If not renewed at this point, the right to use the land and any buildings on it will be returned to the local government gratis.

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