The central government's decision to make Hainan province a testing ground for further liberalisation of tourism and air transport will put further pressure on Hong Kong's position as a gateway for international travel into China. But local airline industry sources said they feared Hong Kong's air services relationship with the mainland was in danger of being neglected while the central government continued to rapidly deregulate the sector. One senior source said: 'It would be ironic if Hong Kong was left out of China's rapid air services deregulation, especially given the principles of closer economic ties between [the city] and the mainland under the Closer Economic Partnership Arrangement [Cepa, unveiled two weeks ago]. 'The pressing issue is that the CAAC [ Civil Aviation Administration of China] is liberalising very rapidly with major trading partners, even aside from the Hainan plan. But in air services, Hong Kong is disadvantaged,' he said. Last week, an air services agreement was signed with Australia that allows airlines from the two countries to operate within each others' borders and doubles capacity for international flights to key cities. That deal followed agreements signed earlier this year with Singapore and France which also offered significant liberalisation. As a result of the new 'open skies' policy for the island, Hainan Airlines executive vice-president Zhong Shu said the carrier would apply for more traffic rights to southeast Asian destinations, such as Singapore, the Philippines and Indonesia, in anticipation of a future traffic boom. 'It's good news for us and the airports. There will be more international tourists coming to Hainan ... [and] passengers from all over the world will also use Hainan as a stopover point to other cities in China,' Mr Zhong said. Explaining why Hainan was selected as the testing ground for the new 'special tourism zone' policy, Wang Ronghua, the CAAC's director-general for international affairs and co-operation, said: 'The answer to your inquiry is simple: Hainan island, though rich in natural resources [which are] good for developing tourism, is still underserved by air services. 'To help the development of the local economy and the leisure business, the CAAC would like to join the efforts of the Hainan government in making the island [more] easily accessible and more attractive to tourists, [along] with the other policies already granted to the island. 'Both officials of the local government and the CAAC held the first meeting not long ago, on July 1, at Hainan. Both sides applauded the idea,' he said, adding that a formal announcement of the new policy would be made soon. Policymakers from the CAAC said the plan to turn Hainan into a special tourism zone was just the latest step in the march to deregulate the mainland's aviation industry. It was possible that the policy would be extended to Beijing and Shanghai during the next five to 10 years. When the CAAC signed its new deal with Australia last week, Cathay Pacific Airways' general manger for international affairs, Andrew Pyne, said 'not a lot of outbound traffic from China presently comes through Hong Kong'. 'This is the case we were trying to make earlier in the year during the Atla [Air Transport Licensing Authority] hearings' to gain rights for mainland routes, Mr Pyne said. He said most transfer traffic from the mainland went through cities such as Bangkok or Singapore, with less than 5 per cent coming through Chek Lap Kok. 'With better connectivity, we can recapture much of that,' Mr Pyne said.