A capitalist showcase for China? Chinese face hurdles wooing funds for island ventures
At midnight, as moonlight gleams off the tops of palm trees, a dark factory suddenly blazes with light, and its workers leap from their dormitory beds. The lamps instill an urgency in the employees of the Haikou Electronic Industry Co. They declare that the factory has electricity: the workers can work.Skip to next paragraph
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The resolve of laborers to make products that run on electricity despite a chronic electricity shortage is more than irony. A 40 percent power shortfall is a dire problem for Hainan island.
The island faces many such fundamental obstacles on the eve of its assignment as the proving ground for China's boldest venture yet in economic reform.
The tropical island must pull itself out of backwardness using unskilled laborers, insufficient railways, shallow harbors, short airport runways, and just 12,000 telephones. Its network of roads, although well-paved, appears to double as an island-wide barnyard, handling more chickens than cars.
Nevertheless, Peking aims to invigorate Hainan with massive public works projects and reforms aimed at luring foreign investors with the loosest business restrictions ever adopted in communist China. It plans to grant the island greater autonomy when China's nominal legislature, the National People's Congress, upgrades Hainan to provincial status this month.
Chinese leaders hope that Hainan's minerals, oil, natural gas, agriculture, and tourism prospects will make it a sort of South China Sea Charybdis, sucking in foreign investors and their hard currencies.
A prosperous Hainan would offer Peking significant propaganda value in its effort to assimilate parts of China outside its control. By displaying a booming Hainan as a showcase, Peking could assure Hong Kong and Taiwan that it can reconcile an efficient, semicapitalistic enclave with communism.
Pragmatic island officials appointed by Peking have said the formula for Hainan's economic miracle will include more freedom to sell products to the mainland, the right to sell leases on land ranging up to 50 years and beyond, and the elimination of duties on goods needed for manufacturing.
The leaders have said that when Hainan is elevated to provincial status it will retain all the profits from state enterprises instead of handing such earnings to Guangdong Province, its current administrator. Hainan banks will receive state funds directly from Peking instead of competing with Guangdong banks, and officials will be able to approve investment projects valued at up to $30 million, six times the size of ventures they may endorse today.
But Peking leaders know that the lack of adequate transport, electricity, and communications could discourage most overseas investors despite Hainan's unrestrained economic climate. Consequently, they have announced a colossal plan to construct power stations, a deep-water port, another trans-island road, telecommunications links, a railway, and a new airport.
Peking has not specified the cost or the source of funding for this grandiose scheme. But it will have to spend far more than the $1.29 billion it has funneled toward capital projects on Hainan since 1983, according to an unclassified US Embassy report on Hainan issued last month.