IS HAINAN A VIABLE CENTRE FOR FOREIGN BUSINESS ACTIVITY?

The effort to use Hainan’s geographic position to attract foreign investment and to promote local exports began in the early 1980s. When Hainan gained its status as an SEZ and was granted preferential policies, many of these had already been practised in other SEZs and even “coastal open cities” and consequently, it lost the policy advantage.

On the island of Hainan, the government encourages fair competition among and equal treatment of enterprises with different types of ownership. Hainan provides unified policies towards all types of enterprises in the areas of investment, taxation, supply of raw materials, pricing, import and export rights, etc. The provincial government has also cut its links with state-owned enterprises and no longer administers any business companies.

From 1988 to 1991, foreign investment in Hainan totalled US$7 million. Most early foreign investment was from Hongkong and the size of investment projects was small. After 1994, multinational corporations from the United States, Europe, Japan and Korea gradually replaced those of Hongkong.

Indeed, foreign investment has not only brought into Hainan badly needed capital for local economic modernisation, it has also brought with it many market-oriented, internationally accepted business practices that will help Hainan to improve its economic system.

This solution offers information on:

§ a detailed geographic, demographic, economic and governmental profile of Hainan;

§ the legal framework for local law-making;

§ the legal framework for foreign business organisation and administration;

§ local tax incentives and measures for encouraging foreign investment;

§ regulation of contracts, labour management and land use rights; and

§ other activities or special areas.