Ground Zero | China’s massive Hainan bet

On March 10, 2023, Xi Jinping His precedent-setting third term officially beganWith the ceremonial National People’s Congress (NPC) confirming him as China’s President For the next five-years. The First decade of the Xi The era was defined by China’s return to one-man rule The end of the collective leadership model was met with three years of the ‘zero-COVID’ Policy It is essentially walling China It is not accessible to the rest.

What a decade later Beijing Declared as “a new era” under Xi, China Stands at a Crossroads Beijing Many observers and critics, both inside and outside, are asking questions about the place of China in the world. China Many people around the world are wondering if the Reform Era, which saw its end, is still alive. China It is over. Three These perceptions have only been reinforced by years spent in isolation.

A grand plan Hainan

Forty Years ago, China We were at similar crossroads. In 1992, Deng Xiaoping I embarked upon a “southern tour” His stalled reforms will get a second wind. ShenzhenJust three years later, the events took place Tiananmen had shaken China And the rest of the world. Xi The appearance was that they were following the lead of the Deng play book when, right after last year’s NPC session, he decided to begin the last year of his second term with his own southern tour.

Xi You can continue south to the island of HainanHe called for the acceleration of plans to build what was being called “The Future”. China’s first “Free Trade Port” (FTP). That The messy ending of the trip meant that it went largely unnoticed Xi’s second term that came in the following months. There were numerous, harsh zero-COVID lockdowns, including in Hainan; Unprecedented Protests November; and finally, the abrupt, almost instantaneous, withdrawal of the policy in the month following.

Now That the walls of zero-COVID are falling has been realized. Xi Has been elected to his third term. Beijing’s focus is turning to kick-starting its beleaguered economy that is grappling with not only the after-effects of COVID policies, but other long-persisting problems, such as rising local government debt and an ailing property sector. Complicating It is attempting to worsen relations with the West particularly the U.S. and trade and technology disputes that could derail Beijing’s quest to become the world’s largest economy and a leading global innovation power.

Xi’s plans for Hainan This is a clue to what you can do. China’s broader strategy to deal with these headwinds and to deepen its position as an economic lynchpin for the region. The The FTP blueprint is definitely ambitious. Last year, Xi The plan calls for the acceleration of the first phase, which aims at establishing the 35,000-square-kilometre island as China’s most open economic region by 2025. The The ultimate goal is to create a tropical environment. Dubai In the middle of the South China Sea By 2035 The Forget about the stakes Beijing Both the area and its inhabitants are immense. “After Shenzhen and Shanghai,” ” Wang DaxueAn official of the Hainan government, “this will be the third most important event in China’s reform and opening up history.” The However, the jury is still out as to whether or not Hainan This will be a transformational success story. Shenzhen Or underwhelm, such as Shanghai’s much-celebrated free trade zone launched a decade ago.

Experiments Under way

HainanThe lush tropical island of, which is close to Hanoi More than BeijingIt is a unlikely spot for a global trading hub. It It is located right off the Chinese The crystal-clear waters off the mainland make it the most beautiful place on earth. South China Sea. Tourism Its economy is driven by millions of tourists from the mainland who visit the island each year to enjoy its beaches and tropical weather. Home It was home to close to 10 million people. Guangdong In 1988, the province was given an administrative status. Since The site has been used since then as a test ground for economic reform. Property In the early 1990s, reforms were implemented. Hainan Later, across the globe China, heralding a real estate boom. This End up driving Chinese Three decades of economic growth

The FTP plan, which will be in effect established by 2035 Hainan As an administrative trading entity distinct within China. At its heart is what’s being called the “free flow through the first line, control at the second line” model. Goods You can enter the “first line” From overseas to Hainan You can freely move about with the normal customs scrutiny starting only at the “second line” If they enter the Chinese mainland. This It is a first-of its-kind trading arrangement China. The plan proposes “five frees” — another first for China — referring to free trade, investment, cross-border capital flows, transportation, and exit and entry. How “free,” Particularly on the fifth point, is uncertain. China’s generally tight immigration controls.

The broader idea is to attract foreign enterprises — particularly from Southeast Asia, given its proximity — to use Hainan As a trading base, offer incentives like zero tariffs or the lowest tax rate. China.

HaikouThe sprawling capital at the northern tip of the island is called “Capital”, and it’s a modern and sophisticated place. SanyaThe twin economic engines of the plan are a tourist spot and a navy base in the far South. The Infrastructure is already in place. A bullet train link constructed in 2010 runs all along the island’s eastern coast, covering the 300 km distance between the two cities in a little over 90 minutes.

Since the announcement of the FTP in 2018, the plan’s progress has been measured steady, if unspectacular. Three Years of zero COVID have not been the best advertisement of openness. The province’s $64 billion GDP ranks it fourth from bottom of China’s 31 provinces, only higher than the western provinces of Ningxia, Qinghai Tibet. In In 2021, foreign investments amounted to $3.5 billion The However, the number of foreign-funded businesses had nearly doubled to just under 2000.

On Sanya’s northeastern suburbs is a cluster of high-rise buildings. The “tax-free city” is still a work in progress — massive construction cranes dot the landscape — but there were long lines on a recent afternoon outside luxury goods stores. For years, Chinese Luxury goods have attracted consumers from abroad, who travel to purchase them. Louis Vuitton Handbags Tiffany jewellery. The Get the idea now. Zhao JingDirector at the Tax-Free CityThe goal is to redirect them within China. The Rules of the city Chinese Citizens can purchase goods duty-free as long as they have a ticket to another country. Sanya You can go anywhere on the mainland. Once The goods purchased will be available for pickup at Sanya airport. The To prevent black market sales, elaborate arrangements have been made.

Duty-free goods and free trade aren’t the only experiments under way in HainanIt is also used as a testing ground. China’s new energy transport policies. By 2030, Hainan We will ban all sales of fuel cars. The Electric vehicles (EVs) are exploding on the streets of Haikou — easily noticed by their green licence plates — is among the fastest in ChinaBecause of a tax exclusion policy. The The number of electric cars in the province has increased from 20,577 units to 1,91,937 units in 2018, up from 1.62% and now 10.46%. This This is the highest percentage anywhere in China. Also It is noticeable that most of the cars are domestic brands. The Only one overseas EV manufacturer was in the top five in terms of sales in 2021. Tesla. It The market’s fifth ranking, with 5%, was just behind Chinese BYD is a car manufacturer with a 14.4% share.

Experimentation This has been crucial to the success and sustainability of economic reforms. ChinaThis goes back to the 1980s. Policies They were first tested in selected cities or regions. Those Those that worked were spread elsewhere while those that did not work were quietly tossed. This This is why Hainan’s officials explain, the FTP is being rolled out in stages to see what works before 2035. Beijing Hopes that it will be possible. Hainan Giving will be happening Hong Kong There is always some competition.

Hurdles To cross

There There are however many obstacles that still remain. One A major reason why reforms are occurring, as explained by Deng The political decentralization pushed previously, such as crossing the river and feeling the stones, was also done. Deng. Provinces They were allowed to create their own policies. Perhaps The greatest political legacy of all is the Xi This era has seen the decline in autonomy for provinces. In Recent interviews revealed that officials from two local provinces felt there had been some policy paralysis in recent years due to the fear of making mistakes and the need for safety. To What is the degree? Hainan’s opening will be micromanaged by Beijing It remains to be decided if the question should be left up to local officials.

Another The legal protections available to foreign investors are a major obstacle. Hainan’s FTP plan promises international standards. Over The Jiang Zemin Hu Jintao years, China A range of judicial reforms were implemented to improve the professionalism of the courts and create conditions for foreign investment. This worked well, attracting businesses despite being difficult. China’s party-controlled legal system. HoweverMost foreign companies believe that the last decade has seen a reduction in judicial autonomy, and an increase in party control.

The Another tension in the past decade was between integration and integration. China You can connect more economically with the world while still exercising Chinese Be more assertive. Some These are the same countries that Beijing Is looking to attract people Hainan Are they contesting? Beijing’s tightening military grip in the South China Sea.

Relations With India Another example is the case of China. While trade is still booming, the flood of Chinese Invest in IndiaBoth countries previously viewed the, which they considered a positive force for economic and political integration, as a trickle after 2020. People’s Liberation Army’s transgressions across the Line This is Actual Control (LAC). While The LAC and the impasse in India-China Relationships remain unresolved Xi His third term began by appearing to correct course, at least tactically elsewhere, and to win the region amid Beijing’s primary strategic challenge — worsening relations with the U.S. China It is positioning itself to be the defender of internationalisation and developing countries. Belt Road Summit expected to strengthen later in the year

IndeedThis is the larger message of the Hainan project. “Hainan is a vivid example of China’s commitment to the future,” ” Zhou Li, Counsellor At the Foreign Ministry In Beijing. “It highlights China’s resolution of further opening. A free trade port represents the world’s highest level of opening up, and demonstrates that China’s door will not close, but open wider and wider.”