In 2009, China’s State Council announced ambitious plans to elevate the tropical island province of Hainan into a world-class international tourism destination by 2020. A 2011 report by the World Travel & Tourism Council gushed: “Hainan is blessed with an abundance of natural resources – from its sun-kissed, palm-lined beaches, waterfalls and hot springs, to its extinct volcano crater and tropical mangrove and rain forests […] “It is not surprising that Hainan has already been dubbed the ‘Hawaii of the East’. Yet few destinations around the world, let alone Hawaii, offer such a variety of attractions and opportunities for outdoor recreation, nature-based tourism and sporting activities.” But 2020 has arrived and failure to fulfil the island’s potential has not been for want of Beijing’s support. The central government has designated the province a special development zone no fewer than three times, supporting it with a raft of subsidies and investment incentives. In 1988, Hainan was named a Special Economic Zone to piggyback other SEZs, such as Shenzhen and Zhuhai, and in 2009, the State Council designated the island a “Special Zone for the Development of International Tourism”. In 2018, it was announced that Hainan would be developed as a “ free port ”, which meant an increase in visitors’ duty-free shopping allowance – from 30,000 yuan (US$4,410) to 100,000 yuan annually – as well as a range of tax breaks for attracting foreign investment and talent. None of these measures have worked, and the local tourism board declined an interview with Post Magazine to explore the reasons why. The island has done a better job of attracting domestic tourists, touting itself as the nation’s premier beach destination. Local hotel managers say business this summer has been good, as might be expected with Covid-19 halting holidaying abroad. Yet in comparison with tourism to other provinces and growth in the national market as a whole, Hainan has lagged behind in its ability to pull in domestic visitors, let alone open their wallets. On average, Chinese visitors spend only about an eighth in Hainan of what they do abroad. And once international flights resume, how many of this year’s visitors will return? Does Hainan duty-free shopping boom spell doom for Hong Kong, Macau? China’s borders were not closed in 2018, for which the last international visitor figures for Hainan are available. Yet in that year, non-Chinese made up just 1.2 per cent of the island’s 76 million tourist arrivals and their average stay was just 3.3 nights. Among the 63 million foreigners who visited China in 2018, only 1.4 per cent went to Hainan. Seeing the little progress made towards creating a “Hawaii of China”, one wonders if the island even wants it. For foreign visitors not waylaid by Covid-19 or deterred by adverse reviews, the importance Hainan places on international tourism is perhaps best exemplified by the double-decker sightseeing bus in the capital, Haikou. Not only is the timetable hard to find and written solely in Chinese, but once the bus arrives, the fare must be paid via local apps WeChat or Alipay. The attendant speaks no English, and instead of restricting itself to the city centre’s charming old colonial buildings, remnants of the days when China recognised Hainan as a French sphere of influence, the ride halts at every local stop, making for a journey time of about three hours. Across the island, in the beach resort of Sanya, foreigners renting Airbnb-type accommodation are required to register with the police on arrival. They cannot access free Wi-fi in restaurants or bars without a Chinese telephone number, and will not be able to post their holiday snaps on Facebook or Instagram without a VPN, because those sites are blocked. Then at 7pm, their residential compound’s 1.5-metre-deep swimming pool will typically close, owing to safety concerns. Beaches are routinely shut at sunset, during storms or when the waves are deemed too big. The quality of Hainan’s tourism products has not yet reached an international, first-class level Yuan Guohong, professor Professor Yuan Guohong, the head of Hainan University’s School of Hospitality and Tourism Management and the local Party Branch Secretary, admits Hainan has so far failed in its goal of becoming a world-class tourism destination. But in line with Party orthodoxy, he points to supply-side problems. “The quality of Hainan’s tourism products has not yet reached an international, first-class level,” he says. “They are mainly at the lower end of the supply chain and the market order is chaotic.” Yuan says Hainan has also lacked good branding and marketing. But high prices for shopping, dining and other services are the most common complaint from visitors. At Fosun Group, which runs Hainan’s top-flight resorts, Atlantis and Club Med, managing director Andrew Xu Bingbin acknowledges a perceived lack of value for money has been a problem, but says the situation is improving. “When we were promoting Sanya to European clients, they compared it to Bali and Phuket [and] found it costs more here, and maybe at the time the quality of service was better in Bali and Phuket, too,” he says. In Sanya’s Dadonghai area prices in McDonald’s are about 50 per cent higher than those in central Beijing, even though rents and wages are less than a third of those in the Chinese capital. Head of media relations for McDonald’s China, Jane Mai, says, “The cost structure of different business districts is different. McDonald’s regularly evaluates the cost of each restaurant and makes corresponding adjustments when needed.” As well as high prices, foreign tourists note a lack of products to suit their tastes. Russian expat Maria Merenkova is visiting Hainan on holiday from her job teaching English in Foshan, Guangdong province. She says Hainan is missing the “international vibe” of, among other things, trendy beach bars and surf cafes. “I love dancing but I haven’t found anywhere to go,” she says, “and it’s been a struggle to find anywhere to eat.” On the plus side, she says her hotel is “amazing and cheap”: 125 yuan per night for a big room with a balcony and sea view. Yana Wengel, associate professor at Hainan University’s International Tourism College, believes 95 per cent of foreigners visiting Hainan before the pandemic came from Russia and other countries in the former Soviet Union, on flights subsidised to promote Hainan as a tourist destination. As early as 2006, the Sanya government announced it would subsidise the landing fee paid by international arrivals, and in January this year the Hainan Daily newspaper reported Sanya would grant subsidies of up to one million yuan for each international plane arrival, plus up to 900 yuan per passenger. Another obstacle to Hainan’s development as a tourist hub has been the Chinese tendency not to encourage their children to work in hospitality and tourism, traditionally seen as low-status industries with poor salaries and long work hours. Adding to the problem, local managers complain, are restrictive visa regulations that make it hard to hire talent from overseas. While Hainan’s original designation as an SEZ did not turn it into another Shenzhen– its per capita income is still 20 per cent below the national average – it did prompt speculation and a property bubble. When that burst, a lot of investors were hurt and the economy went into decline for a few years. To prevent another bubble following Hainan’s free port designation in 2018, the government has been forced to introduce strict market curbs. In a 2016 paper, Hainan University associate professor Xie Xiangxiang complains of an “island of real estate”, with high property prices crowding out tourism. While Xie said he was too busy to be interviewed, when asked if the points he made in his paper still apply, he said, “There have been improvements, but much remains to be done.” Then there is that last-ditch money spinner, used the world over: gambling. Hainan was given permission to pilot sports betting as part of its 2009 international tourism island designation, exempting it from the existing ban on all forms of gambling except for state-run lotteries. For its 2018 free port status, horse betting was added, prompting a flurry of investment in equestrian-related businesses. In Beijing, senior policy adviser and former head of research at China’s Ministry of Finance, Jia Kang, has called for a relaxation of the national prohibition. The current law, he says, merely serves to push gambling underground and overseas – Chinese lose billions of dollars in foreign casinos every year. “These losses amount to substantial tax revenues into the coffers of foreign governments,” he says. “China gets no such benefits, only the social problems these gamblers bring back with them.” Jia would like to see Hainan use its special permissions to develop pari-mutuel betting on sports and horse racing – where pay-off odds are calculated from a shared pool – as milder forms of gambling. He points to the Hong Kong Jockey Club, which is a rock-solid source of government revenue and funding for social projects in the city. “This is how a pilot zone works,” he says. “You try something out to get experience of what works and what doesn’t. If it works it will change perceptions to the point where it can be adopted elsewhere in the country.” Casino gambling, involving games of chance as opposed to pari-mutuel betting, is prohibited under Chinese law, which shows no sign of being relaxed. While Hainan has been given permission to pilot new forms of pari-mutuel gambling, its leaders have so far shown no willingness to move forward with this . Instead their speeches have stuck to traditional Communist Party ideology, condemning the “three evils” of prostitution, drugs and gambling. There is no doubt the island is best set up to cater to families, which in China often means three generations travelling together. For children, wholesome Hainan offers an ever-expanding range of theme parks and play areas. For Chinese grandparents not up to a foreign adventure, it means short travelling times with no visa complications, language issues or unfamiliar culture. These factors make Sanya a favourite holiday destination for Spanish expat José Tuke, a Shanghai resident who holidays in Hainan every year with his wife, two daughters and mother-in-law. “If there is a sex industry here I have never seen it,” he says. “I’m with my family and I don’t want to be approached by prostitutes or see an old foreign guy with a very young local girl on his arm. The beaches are empty here. The water is clean. What else do you want?” And at the time of writing, Hainan is free is Covid-19. So while the rest of the world is struggling to contain the pandemic, Hainan requires no social distancing and no face masks, except for at sites receiving coach loads of visitors every day, such as the Guanyin of Nanshan statue and Yalong Bay Tropical Paradise Forest Park. Before the pandemic, Hainan offered a 30-day visa-on-arrival to visitors from 59 countries arriving on direct flights from outside China. They could not, for example, enter China on a five-day visa-on-arrival granted in Shenzhen, then move on to Hainan. This summer, during the low-season months of June and July, rooms in Hainan’s swanky five-star hotels could be had for just 200 or 300 yuan per night. At the Atlantis, which has more than 1,300 luxury rooms, 21 themed restaurants, a huge water park and the largest natural seawater aquarium in China, managing director Xu says occupancy has been around 90 per cent, with average daily rates well up on last year. Club Med, he says, has averaged 200 foreign expat guests. “It’s still early days for Hainan,” Xu says. “I would say we are at the stage of Cancún in the 1980s or Bali in the 90s, when business was starting to boom. The surrounding business and service environment is maturing.” Consulting firm PwC has advised the Hainan government on tourism, and like Xu, PwC partner Cathy Kai Jiang emphasises that the island’s development into a world-class, international tourist destination is very much a work in progress. The expanded duty-free shopping allowance, she says, will pull in more tourist spending to lift the island’s retail sector. Helped by good government policies and their implementation, a full ecosystem of supporting services will develop, resulting in more competition and better value for money. Jiang might be right, it may just be a matter of time before Hainan reaches its goal. But there are also reasons to believe that substantial challenges still lie ahead. Take climate change. Many Chinese already find Hainan too hot in June and July, preferring cooler Thailand and Malaysia. Rising global temperatures could lead to a longer low season. Then there is the island’s militarisation: security concerns may override moves towards greater openness or relaxation of controls. Bo’ao, on the southeast coast, completed its “international” airport in 2016, only to be told by the People’s Liberation Army that it could not accept international arrivals because of a nearby PLA airbase. Foreigners are not allowed to join cruises in the South China Sea that run from Sanya, and military installations restrict where foreigners can find lodgings or take photos. “This is a step-by-step process. Hainan today lacks the hard and soft infrastructure of a city like, say, Beijing,” Jiang says. “This makes doing business expensive, reduces confidence and causes entrepreneurs to adopt short-term rather than long-term strategies. As the infrastructure gradually improves, confidence will improve and businesses will take a long-term view that includes providing good value and service to build up a base of loyal customers.” Meanwhile China finds itself butting heads with many countries from where tourists might have come to Hainan – yet another check on a list of issues keeping this island paradise from achieving its potential. “Thailand is world famous as the Land of Smiles, Vietnam for its amazing food and colonial heritage. What about China?” asks Wengel. “Instead of being known as a country of marvellous ancient inventions that pioneered maritime trade, I’ve been hearing less favourable opinions from foreigners recently.”