Investments in Hainan China
Article by Tom Lee
Hainan economy overview
Hainan province is the smallest province in China. Total population of Hainan has grown from 7.4 million in 1997 to 8.5 million in 2007, representing a 14.9% growth over a period of ten years. Among the population, more than 1.3 million are ethnic minorities. In terms of population, the Li are the largest original group in Hainan.
Being China’s largest Special Economic Zone, nominal GDP of Hainan province has been increasing steadily from 41 RMB billion in 2000 to 122.3 RMB billion in 2010, reflecting a threefold increase over the years. Hainan’s pillar industries include: agriculture, tourism, petrochemical industry, electronics and information, and marine bio-pharmaceutical industry.
In 2007, service sector constitutes the major portion of Hainan’s GDP amounting to 41% of the total GDP. The service sector comprises of one of the pillar industries of Hainan- tourism. In 2007, Hainan received a total of18 million tourists from both inland and abroad, ranking among the top travel destinations in China. This also reflects the booming tourism industry of the Hainan province. Through structural adjustments, Hainan’s status as a national vegetable production base has been strengthened greatly. In 2007, the agricultural sector has contributed to 29% of the GDP of the Hainan province.
Total investments in fixed assets of Hainan province has climbed from 16 RMB billion in 1997 to 50 RMB billion, representing a 3.1 times growth over a period of ten years. One major aspect that investors can consider is the development in the tourism sector. One of Hainan’s goals is to establish the province as an international travel island. In April 2008, the State Council has approved a proposal from the Hainan government to ramp up the island’s efforts to become an “international-standard island resort”, by allowing the local government to make changes to draw more foreign visitors. This would bring about tremendous scope of opportunities for investors. Other prospective aspects include: maritime industries, service industries, infrastructures, development and application of biological technology, information technology, environmental protection technology, new materials and new energy etc.
Agriculture industry Hainan is the largest production base of tropical crops and major crops are rice, sweat potato, sugar cane, peanut and tea. Hainan also raises large quantity of rubber, coconut, areca, pepper, coffee, cashew, coco, pineapple, logan and banana. Rich fishery products like, fish, shrimps, crabs, pearl and seaweeds are produced in the South China Sea.
Hainan is endowed with an abundance of agricultural crops. As an important tropical fruit production and seed-breeding base, Hainan is rich in tropical cash crops. The province is also an important herbal medicine production base in the country, producing more than 2,500 kinds of herbal medicine. With a long coastline, the province is an ideal breeding ground for many aquatic products. Sanya and Qinglan are the major fishing ports in this province. In 2006, Hainan’s agricultural sector took up the largest portion of the economy’s GDP as compared to other provinces within the country. Hainan’s agricultural sector has grown by 9.1% and contributes RMB 34.4 billion to the province’s overall GDP. Table 9.2.3 shows the agricultural products with the highest output. Among the agricultural produce, coconut has the highest output, with 214.0 million tons produced in 2006. Vegetables and melons, sugar cane, fruits and grains have the next highest output, with 40.0, 36.1, 18.8 and 18.6 million tons produced in 2006 respectively.
In 2006, Hainan’s industrial sector contributed RMB 28.8 billion to the province’s GDP, representing a growth of 19.8% from the previous year. With a relatively small manufacturing industry, its industrial sector has a low contribution to the province’s GDP, as compared to other provinces within the country. However, Hainan is an island that is significantly rich in natural resources including inland and offshore deposits of oil and natural gas. In line with expanding on the existing industry, the Hainan government has initiated the development of its natural gas and petroleum industries in its 11th Five Year Programme. Apart from offering oil and gas, Hainan is also an important production base for sea salt within the country. Other emerging industries within the sector include metallurgy, chemicals, pharmaceuticals and food processing.
Services industry Hainan’s service sector made a contribution of RMB 42.0 billion to the economy, an 11.0% increase from the year 2005. The retail industry saw retail sales of consumer goods increase by 14.8% to RMB 30.8 billion. Major commercial centers within cities like Haikou and Sanya contributed 60% of the overall retail sales within the province. International supermarkets such as Carrefour and Rt-Mart have also begun to develop their presence in Hainan.
Tourism is an important industry within the sector. Hainan has unique tripical and subtropical scenery with favorable climate and evergreet vegetation. Sanya Seashore, a well known winter resort worldwide, has fine white sands and clean sea water. Tianya Haijiao, meaning the end of the world and the corner of the sea, lies in the southwest seaside of Sanya city, is a must see in Hainan Province. Other attractions are Wugong Temple and Hairui’s Cemetery in Haikou, Wenchang Tower in Wenchang and Tropical Arboretum in Danzhou.Located at the south of the island, Sanya beach resort is a popular tourist destination, regarded by the State Council as one of the major tourist spots in China. Apart from organizing regular festivals, events and forums to boost Hainan’s tourism industry, many recreational development zones have also emerged in the province. In 2006, 15.4 million domestic tourists visited Hainan. Overall, the province received 617,000 overseas tourists and generated an income of US$ 1,786 million, demonstrating a growth of 78.4%.
Foreign Trade and Foreign Investment In 2006, Hainan’s total trading volume was US$ 2.85 billion – a growth of 9.8% from the previous year. The value of its exports increased by 34.5% to US$ 1.38 billion, while the value of its imports decreased by 6.3% to US$ 1.47 billion. Hainan’s main export destinations are Hong Kong, with an export value of US$ 491 million and the U.S. with an export value of US$ 208 million, a significant increment of 44.9% and 52.8% respectively. Japan is also another major export destination, with an export value of US$ 134 million. Hainan’s utilized FDI grew by 12.1% in 2006, amounting to US$ 793 million. Hong Kong was the largest investor within the province, followed by other countries such as the U.S., Taiwan and Singapore. Investments were mainly channeled into areas including transportation and telecommunications services, tourism, real estate, as well as energy projects
In 2006, foreign investments contributed to the establishment of major commercial centers within the province. Many international commercial giants such as Carrefour and Rt-Mart have also launched mega-marts in Haikou. Meanwhile, Haikou’s service industry has continued to flourish with the expansion of international fast-food chains such as KFC and McDonalds, and the influx of tourists in the city. With the aim of attracting foreign investors, Haikou Pharmaceutical Valley – a national level base for research and development, and the production and sales of medicines, is also being established.
There are three principal business models for foreign companies seeking to establish themselves in China : Joint Ventures, Wholly Foreign-Owned Companies, and Representative Offices (ROs)Foreign investors can now determine an organizational structure according to the operations of their enterprises at their own discretion. Such potential investors should approach the appropriate government departments for a better understanding of the legal procedures involved in setting up a business in China.
One-stop services for investing in Hainan
Since 2006, Tommy China Business Consulting has been focusing on consulting services for our clients to invest in Hainan. We are specialized in establishment of wholly foreign owned enterprises (WFOEs), setting up of offshore companies, trading services, tax minimization Assist in obtaining government approvals and certificates for running business, negotiate and draft various legal documents provide legal advice, negotiate government officer for Land acquisition
Advising on formation of WOFE and business structures ,managing and controlling WOFE in China drafting privacy policies and structuring commercial transactions
TCBC will manage all aspects of incorporation to get you a business license in Hainan China. We offer a range of company formation services including helping you to set up:-Wholly Foreign Owned Enterprises (WFOE )-Representative Offices-Joint Ventures (Equity/Co-operative)
Compared to registering a business in most Western countries, registering a business in China is challenging work filled with paperwork and bureaucratic red tape. It is practically impossible to properly complete the registration process without a qualified agency. Be sure that the agency is qualified and the agency has good connections and relationships with the various local authorities, and that they possess comprehensive knowledge about the numerous important aspects involved with legally and properly registering a WFOE.
Tom Lee With MBA degree focus on international business have more than 10 years China Sourcing experience.
Tommy China Business Consulting http://www.tommyconsulting.com/index.htmlTel: 86-755-25809219Fax: 86-755-83256658Email:firstname.lastname@example.org, email@example.comMsn: firstname.lastname@example.orgSkype:tomleeli