ASSESSMENTS

China Puts an Economic Backwater in the Spotlight

May 2, 2018 | 15:20 GMT

The fortunes of Hainan, an island province in the South China Sea, are set to change with its designation as China's first free trade port.

A raft of regulatory, financial and infrastructural work lies ahead for the Chinese government as it seeks to transform Hainan province into China's first free trade port.

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Highlights

  • Beijing will establish its first free trade port in the southern island province of Hainan.
  • The choice of Hainan, whose economic performance has lagged that of much of the rest of China, emphasizes the central government's priority on boosting the country's underdeveloped areas.
  • A weak economy and political isolation may make Hainan more willing to accept central government dictates as it shapes regulatory, financial and trade policies for the port.

Hainan, China's smallest province, will soon play a large role in the central government's efforts to reassert power over the country's provinces and further the process of opening the Chinese economy. As China's first designated free trade port takes shape in Hainan over the next two decades, the island province will become a testing ground for government policies that will shape the next phase of China's economic reform. Starting with its designation as China's newest free trade zone, a number of trade, financial and capital reforms will be needed to transform Hainan into a free trade port, which the government envisions will eventually become an offshore center of trade and finance that facilitates the flow of commodities, capital and talent to and from the country. As with the changes that preceded the establishment of other special zones in China aimed at inspiring wider economic reforms, the extent of the regulatory shifts...

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