As a US-China trade dispute escalates and threatens to hamstring commerce between the world's two largest economies, President Xi Jinping is flying into a balmy southern resort island known as his country's Hawaii.
China wants to use this balmy island to tell the world it’s open for business
He means business.
China is on a mission to paint itself as a promoter of free trade and globalization, and Xi is about to give the island, Hainan, another chance at becoming a testing ground.
At the annual Boao Forum for Asia, which opened on Sunday on the island's east coast, Xi is likely to announce plans for new free-trade ports with greater autonomy, economic freedom and market access.
Hainan could be among the locations chosen, sources told the South China Morning Post.
Xi's speech there will be his first significant address since being confirmed as leader for a second term last month, and it comes as China and the United States hurtle towards an all-out trade war.
It was fitting, therefore, that Xi should use the occasion to assure the world that China remains open for business, analysts and sources said.
In January, Xi’s top economic aide, Liu He, told the World Economic Forum in Davos that China’s market liberalization efforts this year would be “beyond the expectations” of the international community, while newly appointed central bank governor, Yi Gang, said last month that a slew of major openings would be unveiled at Boao.
Hainan would be at the forefront of the opening up of China's services market, said Chi Fulin, the head of Hainan-based think tank the China Institute for Reform and Development, on Sunday.
Hainan had been there before.
In 1988, when Deng Xiaoping was paramount leader, Hainan was made independent from Guangdong as a province and became China’s biggest special economic zone.
Talent and money poured into the island, but the gold rush quickly descended into scandal and a massive property bubble as housing prices in Haikou, the capital city, tripled in 1992.
Beijing intervened the following year, stopping all bank loans for Hainan property and busting the first known housing bubble in history of China.
Even with favorable policies, Hainan “has messed up multiple times,” said Liu Yong, a regional development economist at Development Research Centre for the State Council.
“They never opened enough. There were good ideas, but each time when there were setbacks they pulled back.”
By turning Hainan into a free-trade port, like Hong Kong, Beijing is certainly hoping for a different outcome this time round.
The new ports will enjoy much greater freedom in terms of policymaking than the 11 existing free-trade zones, and be more open in terms of market access, sources said.
They would apply international standards to ensure the free flow of goods, human resources, capital and investment, a source said.
China’s Pearl Harbor
The Boao Forum for Asia is often seen as Asia’s answer to the World Economic Forum in Davos, Switzerland.
Its economic agenda aside, the forum will serve as a venue for Beijing to project its influence in the disputed South China Sea, through which a third of the world’s total trade travels.
Singapore’s Prime Minister Lee Hsien Loong and Philippine President Rodrigo Duterte are among the foreign leaders expected to be there.
Because of its strategic location, Hainan – a 13,130 square mile island in the northwest of the South China Sea, with Vietnam to the west and the Philippines to the east – is already home to significant Chinese military might.
China is building its own Pearl Harbor there, turning naval bases in the popular tourist city of Sanya into a massive port capable of handling aircraft carriers. The goal is to create a facility that can support China’s efforts to counterbalance the US presence in the western Pacific.
For the next several days, the island will play host to government officials, business executives and economic experts looking to find clues about Beijing’s economic plans.
“It would be great if we could develop Hainan well,” Deng Xiaoping said 31 years ago.
Now it is Xi’s turn to see if he can bring success where Deng failed.