CHINA ACTS TO LURE INVESTORS TO HAINAN

CHINA ACTS TO LURE INVESTORS TO HAINAN

China announced an array of new economic and development powers for the southern island of Hainan as part of moves to make it a new industrial and trade power.

China wants to draw foreign investors and technology to the island, slightly smaller than South Carolina and with a wealth of natural resources but industrially backward.It's designed to be a laboratory for economic practices established in other countries and in China's four special economic zones, according to a senior official of the island's Communist Party, Meng Qingping.

The new dispensations allow Hainan to export whatever it wants in whatever quantities it can without reference to state guidelines.

Conversely, it will be allowed to approve its own imports of production raw materials, fuel, parts and other items without restriction.

The imports have to stay on the island, however, a stipulation designed to avert a recurrence of the illegal import schemes that cost the country millions in 1984-85, when Hainan officials bought huge quantities of consumer goods and transshipped them to the mainland.

Finished products made on the island may be sold on the mainland under preferential trade terms if there is at least 20 percent value-added content, Mr. Meng said in outlining the new policies.

Mr. Meng said more flexible financial policies will be introduced. He gave few details, but said foreign exchange transactions will be permitted freely on the island and with the mainland special economic zones.

Hainan will be allowed to retain all foreign exchange earnings made by island enterprises. Island companies in turn can keep 85 percent of their own export earnings.

In a bid to whet foreign appetites, Hainan will offer full tax holidays of two years to joint ventures, cooperative projects and wholly foreign-owned enterprises, Mr. Meng said. In the third year, only a percentage of the full tax will be charged, he said without giving details.

Exemption from profit tax may be extended to five years for firms engaged in industrial, agricultural or high-tech development.

Travel regulations will be simplified to allow foreigners visits of up to 15 days merely by showing their passports on arrival, Mr. Meng said. No visas will be required.

Foreign businessmen visiting ventures on the island may apply for temporary residence permits for six months or one year at Chinese embassies and consulates.

Hainan said it will introduce concrete regulations on housing, land management and environmental protection to assure overseas investors that their rights and interests are legally protected. Rights granted for land use may be transferred to another user for up to 50 years on payment of an unspecified fee, Mr. Meng said.

The tropical island - it is on the same latitude as Honolulu - is China's largest source of rubber, tropical crops and fruit; produces tea, coffee, pepper, coconuts and many other commodities; and has mineral reserves including titanium, iron ore, bauxite, cobalt, gold, silver and copper.

Oil exploration so far has been disappointing, but Atlantic Richfield Co. has struck large quantities of gas.

The first drive to develop it, with new hotels, transportation and other facilities, stalled in the wake of the import scandal, which saw the abrupt departure or jailing of several local officials and brought stiff import and foreign exchange controls to the whole of China.

Hainan is due to become the country's 22nd province next month, removing it

from the control of southern Guangdong.