The major cash crop is rubber, with Hainan accounting for 60 per cent of national production. Other major products include pepper, coconut products and tropical fruits, in particular mangoes. The island is also being developed as a major seed breeding centre for rice and vegetables.
The mainland is its major market for all these products. About one million tonnes of off-season vegetables are sold there each year.
But much of this agriculture is uncompetitive. Hainan's extensive rubber plantations, which cover 400,000 hectares of land, were developed as part of China's planned economy in the 1950s and 1960s. The rubber industry is having trouble adjusting to the new market conditions. Hainan's climate on the edge of the tropics is not as favourable as that enjoyed by other major rubber producers in the region. To make matters worse, rubber prices have fallen drastically, from Yn30,000 a tonne in 1995 to Yn7,000 a tonne last year, partly because of the smuggling of imports.
Mr Jie Xiao, vice-director of the province's agriculture department, says the industry had to improve efficiency, in both its management and developing new techniques to improve tree yield. Last year its plantations produced 250,000 tonnes. Rubber plantation managers are also branching out into other products, such as fruits.
But the newer fruit plantations are also facing stiff competition. Fruit from the Philippines now being sold in China is undercutting that of Hainan. "Our packaging and distribution has to be improved," says Jie. "We now realise that not only quality, but the appearance of the fruit is very important. We are changing the ways we manage our mango trees. If we can solve these problems, we will be able to compete with the Philippines."
The eastern coast of Hainan is its prime region for agriculture, dominated by the state farms. The central highlands are poorer. Here 290,000 people, mainly from the ethnic minorities including the Li and Miao nationalities, still live below the poverty line.
second wind. They are going to take the gas pipe all the way to Yangpu and will have a significant raw material for all kinds of intermediary chemical products," says Li.
"Since signing we have been bombarded by international conglomerates specialising in chemicals to see the possibility of having projects here." Plastics, textiles, animal feed and pharmaceuticals could follow.
"We don't relish turning a semi-tropical paradise into a heavy industrial base. But this is business. We are only talking to the most responsible companies," says Li, adding that extreme caution will be taken to protect the ground water.
"This new momentum will result in a complete change in the financial situation of Yangpu. If we can sign enough contracts we will seek a listing later this year, or next year."
Fortunately, all the investment so far has been equity-based. The consortium has not had to rely on bank loans.
Yangpu has attracted another major investment. The Singaporean/Indonesian Sinar Mas Group is to start building a 1 sq km wood pulp plant this summer. Trees for the operation are being grown near the zone.
The Yangpu Land Development Company has built office and residential blocks, of 28 and 34 floors each, now 20 per cent occupied. The Industrial and Commercial Bank of China also has its own 18-storey building, with a hotel and restaurant.
Yangpu's prospects should be improved by changes in Kumagai's ownership. Red chip China Everbright International has recently increased its stake in the company to 35 per cent. There has always been ambivalence in Beijing about the 70-year lease of Yangpu to a foreign company. With stronger mainland links, Yangpu may count on greater political support. Li is one of several senior Everbright executives to have recently joined Kumagai, which has a 30 per cent stake in the Yangpu Land Development Company.
But Yangpu has suffered a new blow. BASF Aktiengesellschaft and DuPont have selected Dongfang, not Yangpu, for their nylon intermediaries plant.
Mr Michael Estep, director for nylon intermediaries and specialities at DuPont, is at least still supportive of the Yangpu development zone. "From our economic analysis of the different sites, we concluded the project would be most attractive at Dongfang," he comments. "But there are no fatal flaws in Yangpu. There is no reason why it should not attract other industrial investment."
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