Tropical Vitality

Crystal-clear seas, year-round sunshine, palm-lined beaches and lavish hotels—Hainan, located in the South China Sea, has never lacked the charisma of a tropical paradise for those looking for a breath of fresh air. All it needed was a chance to shine. And the island may finally be getting that opportunity.

On January 4, the State Council mapped out a long anticipated national blueprint to turn Hainan, once an agricultural island decades ago, into an "international tourism destination," in hopes of luring overseas visitors and bringing in extra income to its vast and underdeveloped countryside.

The goal was to lift tourism to account for more than 8 percent of its GDP by 2015 and more than 12 percent by 2020.

While sun-blessed coast and comfortable accommodations might satisfy the average traveler, those seeking an exceptional experience require much more. That is why Hainan has never spared any effort to make a visit worthwhile for travelers all over the world.

As a boost to its fun factor, the island received a green light to tap into sports lotteries and open more duty-free shops for departing foreign tourists. Duty-free shopping, in particular, was widely considered the strongest perk for the tourism industry and has paved the way for many Asian economies to take off. Hong Kong, for instance, is basking in the glow of a duty-free shopping spree.

The good news is Hainan is playing a swift game of catch-up. On September 1, 2009, Sanya, an economic hub located in the island province's south, opened the island's first duty-free shops outside airports, providing a selection of top-brand cosmetics, jewelry and garments catering to bargain hunters from all over the world.

"Hainan will be more of a complement than a threat to Hong Kong as a shopping paradise, and we have a lot to learn from Hong Kong," said Luo Baoming, Governor of Hainan Province, at a press conference on January 6 in Beijing.

Other stimulative measures included a trial program for cross-border trade involving renminbi (yuan) settlement and support for rural finance, as well as debt issues and share flotation of qualified tourism firms.

In addition, the island's visa exemption scheme will be widened to cover five countries including Finland, Denmark, Norway, Ukraine and Kazakhstan from the previous 21 nations, including the United States, Japan and Canada.

Meanwhile, the Central Government pledged vigorous efforts to improve infrastructure, modern tropical agriculture, the service industry and information technologies that will no doubt bolster the business environment and create thousands of jobs. The government also made it clear that it will build a national oil reserve base in Hainan as part of its strategic energy-stockpiling plan.

"The investments will not stand in the way of environmental preservation and ecological improvement," said Luo. "This will definitely require a compromise on economic growth, but given the far-reaching implications, it is well worth the effort."

"The strategy is part of the country's economic rebalancing to rely more on green industries and the service sector," said Xu Fengxian, a senior economist with the Chinese Academy of Social Sciences. "More importantly, tourism prosperity will have a chain effect for a string of relevant sectors, such as airlines, catering and entertainment."

Sparking interest

After becoming the country's youngest province and special economic zone in 1988, Hainan represented a beacon of hope as China's next economic miracle, due to its proximity to Hong Kong and Shenzhen. However, while other coastal provinces drew strength from export booms, the island's economy languished due to a rocky manufacturing foundation and infrastructure bottlenecks.

In recent years, the waves of tourists that wash the sandy Hainan beaches have reached almost tidal proportions, injecting energy into a once-flagging economy. Meanwhile, travel agencies have rushed to cash in on the bonanza. Premium hotels and restaurants have sprouted up almost everywhere.

The overall Hainan economy grew by a robust 11.7 percent in 2009 year on year, painting a clear picture of the upward momentum to come. The island's tourism, in particular, is bursting with vitality as travelers once again reach for their cameras and suitcases after a brief traveling hiatus during the financial crisis, said Tang Yibo, a senior sales manager with Ctrip.com, a major online travel company headquartered in Shanghai.

"We still have a long way to go," admitted Luo, citing persistent complaints of tourists being overcharged, forced to buy expensive and shoddy souvenirs or otherwise suffering poor services. "Though they may be individual cases, these problems have truly tarnished Hainan's reputation as an international hot spot."

Reaching even the lowest threshold for becoming an international tourist island will be difficult if the image problem is not appropriately addressed, he said.

Efforts are also needed to strengthen the service quality of tour operators, added Luo.

Ji Dongjiang, Director of the Haikou Association of Travel Agencies, believes world recognition is just a matter of time.

"It will still take some time for Hainan to make it into the top league of global resorts," he said. "But with government backing and global investors, we are definitely getting on the map."

Tang of Ctrip.com echoed Ji's opinion. "Infrastructure and service improvements could help catapult Hainan onto the global stage, but what would make it unique is the Xisha Archipelago with unspoiled tropical ecology, as well as the cultural attractiveness of the local Miao and Li ethnic minorities."

Much still needs to be done to develop and market those resources with appropriate protections, said Tang.

Sunshine and speculation

Hainan's march toward prosperity is not without concerns. Long before receiving approval, the tourism stimulus program seemed to ignite a real estate frenzy. Betting on further price surges, buyers across the country rushed to snap up houses, especially those with a front-row view of the ocean, while cash-swash property developers paid peak prices for land to lock up future returns.

This echoes happenings in the early 1990s when the island's real estate bubble burst, leaving thousands of projects unfinished and banks saddled with bad debt. The only difference is the storm may come even more violently this time. Fang Zhou, a manager with Hainan Alibaba Investment Management Co. Ltd., estimated that at least 470 billion yuan ($68.8 billion) is moving into Hainan for property speculation—10 times that in the 1990s.

A dangerous sign is the staggering house vacancy, said Liu Shuguo, Secretary General of Sanya Real Estate Association. "Around 90 percent of new flats in Sanya were bought by investors from the mainland as their second or third house."

"In some city communities, where homes are sold out, you can see very few lights on at night," said Xu.

But Luo downplayed the worries, citing that house price increases in Hainan have been less severe than they were given credit for.

He said the province will step up affordable house supplies for local low-income residents and keep a close watch over the market to ensure healthy growth.

Besides this, the fast-growing local economy will also put a solid floor under the buoyant property market, he added.