This paper is submitted for a special issue of Asian Education and Development Studies on the topic of Greater China Development. The purpose of this paper is to explore the challenges and opportunities of developing a free trade zone (FTZ)/free port in China’s Hainan island.
Hainan is to be Mainland China’s newest and largest FTZ. However, the experience of the existing Mainland FTZs is not encouraging, their limited, piecemeal reforms attracting little interest from foreign investors. To make a difference and provide a new engine of growth for the Mainland economy, the approach for Hainan needs to be much bolder. Hainan should aim to develop as a free port, a services centre and a financial centre.
Regarding the financial sector development, the opportunity should be taken to experiment with special drawing rights. Hong Kong can provide the exemplar and expertise to jump-start Hainan’s development. To provide critical mass, mutual access should be opened between Hainan and the nine Mainland municipalities of the Greater Bay Area. An inner border will be needed to distinguish the experimental area from the rest of the Mainland, and an outer border to preserve its integrity vis-à-vis the international environment.
If Hainan can be developed into the China Offshore Centre, it would have the potential to restart the Mainland’s stalled reform process, and to relieve international trade and financial tensions.
