Sunday, May 26, 2024

Island Market

Will China’s New Island Leases Create a Tourism Boom?

As China opens up a set of small islands for lease, entrepreneurs are planning a new era of luxury resort development in Zhejiang. Are these investors prepared for the challenges ahead?

(Image Courtesy of Our China Daily)

According to a recent article in the China Daily, Chinese officials have stated that the government intends to open up approximately 30 small islands for lease in the eastern coastal province of Zhejiang. Just a tiny fraction of the more than 2,800 small islands found in the region, they will be available on long-term leases of 50 years, and foreign nationals are not prohibited from participating. Prices are said to range from a modest 100,000 Yuan (US $15,200) to potentially more than 100 million yuan (more than $15M).

In Zhejiang, which enjoys a moist, subtropical climate, picturesque forested hills border the East China Sea, where shallow, warm waters stretch out towards Japan’s sandy Ryukyu Islands. The province has a sizeable tourism industry well-known throughout Asia, including taking the top ranking for the number of state-designated scenic spots. Rich with historic areas and monuments, the province’s proximity to Shanghai and other major cities would seem to create prime opportunities for resort development.

At least one Chinese investor, as quoted in the China Daily, is excited about the prospect:

“Wenzhou businessman Huang Xiangxun, who’s also the president of the Shanghai-based Haobo Chair, is one of the investors keen on such investments. “I’m thinking of leasing an island near Wenzhou and then rebuild it as an attractive tourist destination,” Huang says.”

However, this is not the first time that China has made such an offering. According to the article, officials made a similar campaign to lease Zhejiang’s islands in 2003 – and some entrepreneurs discovered that there were unforeseen challenges.

“Tang Hongsen, a professor at the Zhejiang Ocean University, says that the current moves find an echo in 2003 when the State Oceanic Administration said for the first time that private citizens and organizations were allowed to exploit such opportunities.

“But the moves did not gather momentum as developers realized the enormous transportation costs for the construction material needed to develop the island. It’s also costly to equip the islands with electricity and clean water,” Tang says.

Thirty-five-year-old Chen Xiaoxian couldn’t agree more. The Wenzhou native was the first in the area to rent out the 80,000 sq m Zhuyu Island located near to the city seven years ago. “It was much more difficult than I expected,” says Chen.

“My investments of over 1 million yuan was, like the water absorbed by the sands in the desert, gone in seconds.”

Even in well-established private island regions like the Caribbean and the United States, island owners are often caught by surprise when faced with the heavy financial and logistical challenges posed by island development. Necessities such as clean water, power, communications technology and a construction crew – all relatively straightforward with mainland development – can have heavy premiums attached when it comes to islands. And in China, as in most other areas, island developers will have to be particularly sensitive to environmental concerns.

Islands in Zhejiang Province

Last March, China instituted the Island Protection Law, outlining the various steps required to develop this ecologically-sensitive type of land. Local government and state ecologists must approve the plans, and according to Gu Zijiang, marine planning director at the Zhejiang Ocean and Fisheries bureau, leasees will not be permitted to dramatically alter the basic topography and physical features of the island. Also involved in the approval process is Liu Shunbin, deputy director of the Zhoushan Ocean and Fisheries Bureau, who maintained that approval to rent an island would not be given unless investors are able to articulate a “reasonable and convincing plan” to develop the land.

Many hurdles lay before those who are brave and enterprising enough to take on the task of developing Zhejiang’s small islands – but for those who succeed, the rewards could be substantial. Currently, many Chinese nationals seeking a true “private island” experience look south or east – to Thailand, French Polynesia or Fiji. Located close to several large metropolitan areas, and with an abundance of sites that already attract upwards of 40 million of tourists each year, Zhejiang is ideally positioned for new and exciting developments.  As long as investors remain aware of the potential challenges ahead, this move by China’s government may herald a new and exciting era for one of the country’s most beautiful provinces.

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