Hainan , once a byword for economic mismanagement, has spent much of the past decade recovering from the freewheeling excess that greeted Deng Xiaoping's establishment of the entire island as a special economic zone exactly 20 years ago. Unlike Shenzhen, Zhuhai , Shantou and Xiamen - coastal cities that were able to use their special economic zone status to help kick-start the mainland's export processing boom - Hainan pumped investment into an unsustainable construction binge in the capital, Haikou . After the bubble burst in the mid-1990s, the island - with a population that then accounted for just 0.6 per cent of the national total - was left with 10 per cent of the country's unsold housing stock and an anaemic economy that trailed even that of Tibet's in growth. An economic programme designed to promote tourism and modern industry has helped the province claw its way back to respectability, with per capita gross domestic product topping US$2,000 last year. But the island remains largely rural, with 61 per cent of the population living in the countryside. Agriculture accounts for 30 per cent of the economy, which is dominated by tropical fruits and seafood. Hainan's interior remains virtually devoid of industry. 'Much of Hainan remains rural and backward and there is a huge gap between rich and poor,' admitted Zhou Wenzhang, head of the provincial publicity department. 'If peasants are going to improve their lives, they need to look to the cities.' But the island's lack of industry and its unspoilt environment is also the big selling point for officials marketing it as a tropical paradise to Western European and Japanese sun worshippers. Tourism accounts for a surprisingly meagre 14 per cent of the island's GDP, but this is forecast to rise to 25 per cent if Hainan can succeed in luring foreign tourists. 'The environment is the most important advantage that Hainan has,' said Chi Fulin , president of the China Institute for Reform and Development, a think-tank based in Haikou. 'This is crucial for the development of tourism, but it is also important to maintain a good environment for the island's agricultural production and as a platform for our relationship with Southeast Asia.' Hainan's strategic position between the growing economies of Southeast Asia and the mainland, together with its proximity to oil and gas deposits in the South China Sea, make it a base for export processing, logistics and petrochemicals. To this end, the government is pumping investment into Yangpu Port - originally set up as a free economic zone in 1993 but still covered by vast tracts of empty scrub - which it hopes will add an annual 30 billion yuan (HK$33.5 billion) to provincial coffers by 2010. It is home to an oil refinery operated by Sinopec and a 10.2 billion yuan factory run by the Indonesian group Asia Pulp and Paper - a rare example of foreign investment. But the high hopes for Yangpu's future rest on the decision by the State Council last September to establish the country's fourth bonded port there, which will provide tax-free trade and warehousing facilities, and the opening of a deep-water port capable of accommodating 300,000 tonne oil tankers. The twin aims are to create an import-export processing centre focused on energy and petrochemicals and a bonded international logistics centre - the only such facility south of Shanghai. 'Yangpu has big potential to become an export processing centre, although this has barely started,' Professor Chi said. But an intriguing problem facing Yangpu is that provincial officials, keen to protect the island's image as an environmental haven, expressly reject the very light industrial export model that has made the Pearl and Yangtze River Deltas rich. 'We only want big enterprises to invest because they are better able to protect the environment and minimise pollution,' said Ye Zhanghe, head of the province's investment promotion office.