CHINA: Beijing Daxing Airport Is GatewayTo China

Five years ago, Daxing was a dusty area of farmland to the south of Beijing, largely neglected by visitors to the city. That’s no longer the case, now that an enormous airport has emerged there to thrust China even closer to toppling the U.S. as the world’s biggest aviation market.

Beijing Daxing International Airport, an 80 billion yuan (US$11.2 billion) starfish-shaped structure hailed by state media as a “new gateway” to the country, opened this week, just in time for the People’s Republic of China’s 70th birthday.

A state-of-the-art terminal designed to eventually handle more than 100 million passengers a year is symbolic for President Xi Jinping, who faces a raft of challenges, including a trade war with the U.S., a slowing economy and mass protests in Hong Kong.

Xi has identified aviation as a key strategic industry. The president attended an official opening ceremony for the new airport, designed by the late Zaha Hadid, on Wednesday.

Within two decades, annual passenger traffic in China’s skies will reach 1.6 billion, according to the International Air Transport Association, more than the country’s population today.

China has set a goal of having 450 commercial airports by 2035, almost double the number at the end of 2018. It’s also developed a jet to compete with Boeing and Airbus.

The vast new airport should increase Beijing’s passenger capacity by 60% and help unclog the capital’s other international airport – the second busiest in the world behind Atlanta – to the north, which often has long delays despite a huge new terminal opening there ahead of the 2008 Summer Olympics.

Bottlenecks at Beijing Capital International Airport likely capped annual passenger traffic growth at an average of 4% from 2013 to 2018, Bloomberg Intelligence analyst Denise Wong said.

China has little option but to spend big and fast to have a shot at keeping up with demand. In its latest annual report on the commercial aviation market, Boeing said it expects airline passenger traffic in China to grow 6% a year.

McKinsey & Co. says the extra slots at Daxing – which will initially have four runways and eventually seven, including one for military use – could open new direct connections to places such as San Diego.

Beijing now joins major cities including London, New York and Tokyo with more than one international airport. The high-speed rail connecting Daxing to West Beijing will begin operations at the end of the month.

“It can get 10 if not hundreds of new destinations connected to Beijing over the years,” said Steve Saxon, a McKinsey partner in Shanghai. “This is the power of having large connecting hubs.”

Daxing also upends the government’s traditional one-international-route-per-airline model that left long-haul services from Beijing in the hands of Air China.

The new site will become a launchpad to Europe, Asia and beyond for the other two of China’s “Big Three” carriers: China Eastern Airlines and China Southern Airlines. They’ll both get their first-ever direct flights to cities including Paris and Moscow.

The goal is to restyle Beijing as an international transport hub as air travel surges with China’s expanding middle class and a greater desire to venture overseas.

The opening of Daxing, which will also help closer integrate Beijing with Tianjin and Hebei, should put China on a stronger footing to compete with traditional transits such as Singapore and Hong Kong, as well as younger hubs like Bangkok, Seoul and Kuala Lumpur.

China still trails many major aviation markets in Asia in terms of connectivity, according to a report by OAG Aviation Worldwide published Tuesday.

Singapore and Hong Kong are the region’s most internationally connected hubs, the report showed. Shanghai Pudong International Airport, China’s top entry, came in eighth.

IATA expects 4.6 billion people to take a flight in 2019, a figure that will almost double to 8.2 billion in 2037 as flying penetrates deeper into the enormous populations of India and Indonesia.

Daxing is just one of many airport projects underway in Asia, collectively costing more than US$100 billion, in a race to handle all those passengers. A new terminal opened at Shanghai Pudong International Airport on September 16.

The relaxation of China’s one-route, one-airline policy at Daxing will encourage Chinese carriers to apply for international routes once monopolized by their competitors, said Yu Zhanfu, a partner at Roland Berger Strategy Consultants in Beijing who focuses on aviation. Beijing will be a good spot to take a break without making a big detour.

Among the tons of steel and glass at Daxing, passengers will find five traditional-style Chinese gardens with ponds, wooden pavilions and stone bridges.

The new airport also has facial recognition and paperless check-in systems using technologies from companies including China Unicom and Huawei Technologies.

The Civil Aviation Administration of China is offering airlines incentives to use the new airport. They’ll get priority when it comes to obtaining rights for international flights, CAAC’s deputy director of transport department, Yu Biao, said in July.

Foreign carriers can choose to operate in both airports in Beijing, or one of them, but those that switch to Daxing can acquire new routes or more convenient slots, Yu said.

Daxing expects one fifth of its passengers to be transfers by 2025. Among international flag carriers, British Airways said in July it plans to shift its direct Heathrow-Beijing flights to the new airport from October 27, helping it maximize a code-sharing agreement with China Southern.

China Eastern has kept its Beijing-Shanghai route at the old airport, which is closer to the central business district.

The next step will be for us to keep expanding new routes, said CAAC’s Yu. We’d like to see more foreign carriers operate in Daxing.

INDIA: Government To Lift Travel Advisory In Kashmir From Today, Tourists Welcome Back Inspite Of Protests

Indian authorities have announced that they will lift the travel advisory in Kashmir that has been in place for over two months. They also said they will gradually remove restrictions on movement in the disputed region.

Foreign visitors will once more be welcome in the India-controlled part of Kashmir, local governor Satya Pal Malik announced on Monday evening.

The travel advisory from the Indian government, which has been in place for over two months, will be lifted from Thursday onward.

On August 2, tourists were told to immediately leave the India-controlled part of the disputed region, named Jammu and Kashmir, following concerns about "terror threats."

More than 340,000 tourists and Hindu pilgrims were forced to scramble for buses and planes out of the region after the Indian government issued the travel advisory.

Malik said in a statement after a security meeting that these tourists would be welcome to return after Thursday, when the "Home Department's advisory asking tourists to leave the valley be lifted."

Only 150 foreign travelers have visited Kashmir since August 5, compared with half a million in the first seven months of the year. The lush Himalayan valley had been a popular holiday destination for Indians and other foreigners, describing itself as a "paradise on earth."

The travel advisory was first announced when Indian Prime Minister Narendra Modi's government scrapped the special autonomous status that Kashmir had long enjoyed.

Since then, India has imposed a clampdown on freedom of movement as well as a communications blackout, which is largely still in place.

Malik claimed in his statement that authorities were gradually lifting the curfew, along with internet and telephone restrictions, saying that all the security restrictions were removed in most parts of the region.

How safe the region has become is unclear. The UK and other countries still have travel advisories in place, and local media report that 10 people were killed in a grenade attack at the weekend.

Protests show no signs of abating

Unrest in the region remains widespread, with thousands marching over the last week towards the Line of Control, which divides India- and Pakistan-controlled Kashmir, demanding an independent Kashmir.

Meanwhile, Pakistani Prime Minister Imran Khan is in Beijing for talks with Chinese President Xi Jinping on the security situation in Kashmir.

Both India and Kashmir claim the territory in full. India has received widespread condemnation for its removal of the region's special status, which Prime Minister Modi described as necessary to integrate the region into the rest of India.

There are fears in the region that the removal of the curfew and blackout and a return to business as usual may lead to armed resistance and further protests.

India is to be a unified nation, says Indian Prime Minister Narendra Modi. People in Kashmir are experiencing what that entails. The region is a tinderbox, also because of Modi's politics.

In his Independence Day speech, Prime Minister Narendra Modi was quick to blow his own horn: Within 70 days he succeeded in doing what no other government had been able to achieve in 70 years. Make no mistake he got it done.

The only problem is that we do not know what exactly the Indian prime minister achieved. What he did manage was to cut off the Kashmir region from the rest of the world in as far as that is logistically possible.

However, these measures would not have been necessary if his policies had been popular with the region's population. But the people in Kashmir are not as important to Modi as those in the rest of India.

On Indian Independence Day, Modi spoke of India finally becoming one nation with one constitution. Language such as this sounds somehow threatening in such a diverse country. What exactly does Modi have in mind?

In Kashmir, people are just getting a taste of what it means to live in Modi's nation.

They have lost their autonomy at the stroke of a pen. Despite Delhi's promises of prosperity and a golden future, who could blame Muslims if they now feel discriminated against?

However, one should not idealize the past. Even decades of autonomy have not brought peace to Kashmir. However, a strong message has been sent to the Muslim population: Unity will be achieved through force.

There is every reason to fear that the dream of Modi and Hindu nationalists will claim many lives. Pakistan, the other player in the Kashmir conflict, is outraged by Modi's coup but until now, Prime Minister Imran Khan has shown verbal restraint.

He knows his country cannot match its neighbor's military might. Having said that, when he conjures up an ominous threat of a reaction from the Muslim world, his words are not untrue.

At the same time, it is clearly a precautionary attempt to exonerate himself, Pakistan, and its intelligence services from any responsibility for further potential terrorist attacks and bloodshed.

The only realistic opportunity for Pakistan to influence the course of events is to make the issue a priority on the international agenda.

China backs Pakistan, whereas India sees it as a domestic issue. In his speech on Thursday, Modi did not mention neighbor Pakistan once.

However, his silence will do nothing towards bringing about a real prospect of peace to the region neither will his verbose vanity.

The dispute over Kashmir has poisoned relations between India and Pakistan since the two became independent countries in 1947. Here's an overview of how tensions have grown more dangerous over the past seven decades.

Like so many conflicts around the world, the dispute over Kashmir began with independence from a colonial power. In 1947, the United Kingdom gave in to the struggle for freedom in its Indian colony and granted it independence.

The retreating British left behind two states: the secular Indian Union and the Islamic Republic of Pakistan.

The partition of India in 1947 presented a problem to the then princely state of Jammu and Kashmir, located right along the two new states' northern border.

Traditionally, the state was ruled by a Hindu maharaja or local ruler, but the majority of the population was Muslim.

Hoping to be able to declare his territory independent, Maharaja Hari Singh initially did not join either India or Pakistan, both of which took an interest in this special social constellation in the Kashmir Valley.

To this day, India sees itself as a secular nation in which several religions coexist. This makes Jammu and Kashmir, the only province with a Muslim majority, an important part of India's religious plurality.

At the time, Pakistan saw itself as the home of all Muslims in South Asia. Its founding father, Muhammad Ali Jinnah, envisioned Pakistan and India as separate Muslim and Hindu nations on the subcontinent. Until 1971, Bangladesh, which is located to the east of India, was part of Pakistan.

While the maharaja hesitated to make Kashmir part of either country, in 1947, Pakistani guerrillas tried to bring the principality of Kashmir under their control.

Hari Singh turned to New Delhi for help, and it didn't take long for troops from India and Pakistan to face off.

The first war for Kashmir began in October 1947 and ended in January 1949 with the de facto division of the state along the so-called Line of Control (LoC), the unofficial border line still recognized today.

Back then, the UN sent an observer mission that is still on the ground today. Pakistan has controlled the northern special province of Gilgit-Baltistan and the sickle-shaped Azad Kashmir sub-region since 1949.

The Indian-held section became the federal state of Jammu and Kashmir in 1957, with special autonomous status allowing the state's legislature to have a say in legislation covering all issues except defense, foreign affairs and communications.

The following decades were marked by an arms race on both sides. India began to develop a nuclear bomb and Pakistan also started a nuclear program with the aim of being able to stand up to its giant neighbor.

Today, India and Pakistan have an estimated 140 and 150 nuclear warheads respectively. Unlike Pakistan, India has explicitly ruled out a nuclear first strike.

Pakistan also spends huge amounts on its nuclear program as the country tries to make sure it won't lag behind its neighbor in military terms.

In 1965, Pakistan once again used military force to try to change the borders, but lost to the Indian military. The neighbors clashed for a third time in 1971, but this time Kashmir was not at the center of the confrontation.

Instead, it was the independence struggle in Bangladesh that precipitated the war. India, which supported the Bangladeshi independence fighters, once again defeated Pakistan.

A year later, India and Pakistan signed the Simla Agreement that underlines the importance of the LoC and commits to bilateral negotiations to clarify claims to the Kashmir region once and for all.

In 1984, the nations clashed again; this time over the India-controlled Siachen Glacier. And in 1999, both sides fought for control of military posts on the Indian side of the LoC. In 2003, India and Pakistan signed a new ceasefire — but it has been fragile since 2016.

China, which has a long border with Jammu and Kashmir, also plays a role in this conflict. In 1962, China occupied a part of India that borders Kashmir and entered into an alliance with Pakistan.

Today, China and Pakistan trade via the newly constructed Karakoram Highway, which connects the countries via the western Kashmir region. As part of the multibillion-dollar China-Pakistan Economic Corridor (CPEC) project, that corridor is being expanded.

This former gravel road is currently being developed into a multi-lane asphalt highway that can be used all year long. China is investing $57 billion (€51 billion) in Pakistani infrastructure and energy projects, more than in any other South Asian country.

The economic alliance with its powerful neighbor has helped solidify Pakistan's claims to the Himalayan foothills.

The governments of neighboring states are no longer the only parties to the conflict in Kashmir, however. Using violence, militant groups have been trying to disrupt the status quo on both sides of the LoC since at least the 1980s.

Their attacks have contributed to a deterioration of the security situation.

At least 45,000 people have been killed in terrorist attacks over the past 30 years. And the total number of deaths resulting from this conflict is at least 70,000, according to estimates by human rights organizations.

Tourism Observer

RWANDA: RwandAir Goes To Guangzhou

RwandAir Monday launched its long-awaited flights to the Chinese city of Guangzhou.

It was ecstasy as the Rwandan national carrier’s Airbus A330 took off from the Kigali International Airport at exactly 00:52a.m, embarking on a 15-hour flight to China’s third largest city.

The inaugural flight on the new Kigali-Guangzhou route had been fully booked by mid-day Monday.

It had 234 passengers onboard, including State Minister for Transport Eng. Jean de Dieu Uwihanganye and RwandAir’s chief executive Yvone Makolo.

RwandAir will be operating three flights to what is now its third Asian destination – after Dubai and Mumbai.

The flights will be making stopovers in India’s commercial capital of Mumbai before making their way to Guangzhou Baiyun International Airport in Guangdong province.

Guangzhou becomes RwandAir’s 28th destination and comes after the airline launched flights between Kigali and DR Congo’s capital of Kinshasa in April.

A 29th route to Israel’s city of Tel Aviv is on the horizon with the national carrier expected to open that route next week.

Guangzhou, known as the Canton City, is a port city northwest of Hong Kong on the Pearl River.

It is one of the major shopping destinations for merchants, is known for popular tourist attractions such as the iconic Canton Tower and Guangzhou Chimelong Tourist Resort.

Zhang Wenping, the director of the political section at the Chinese Embassy in Rwanda, said the flights will make travel between the two countries shorter and more convenient.

It has been taking up to 24 hours to travel from Kigali to Guangzhou, but the new route will reduce this time, she said.

She added that RwandAir’s flights will make it easier for Chinese and Rwandan businesses and tourists to travel either direction, thus boosting economic activity between the two countries.

I think this will be a catalyst for stronger tourism relations between China and Rwanda, she said. We have noted that more and more Chinese are coming to Rwanda and can only expect more to come in the future especially now the new route makes travel easier.”

In July last year Rwanda signed a raft of agreements with Beijing during Chinese President Xi Jinping’s state visit to Rwanda – the first visit to the central African nation by any Chinese Head of State – to step up bilateral ties across various sectors, including civil aviation transport.

Later in November, the country also signed three deals with China’s leading e-commerce conglomerate Alibaba Group to help scale up trade and tourism ties between the two countries.

The development is expected to boost Rwanda’s reputation as a top investment destination, with Chinese companies initiating more than 21 projects, worth US$420 million, between 2006 and 2008, according to Rwandan government official figures.

In Rwanda, most Chinese investors are involved in tourism, mining, hospitality and construction, among other sectors.

Guangzhou, a major source of merchandise for the African market, including Rwanda, is regarded as China’s transport, industrial and commercial hub.

Benjamin Gasamagera, a Rwandan businessman and former head of the country’s private sector umbrella body, is one of the many Rwandan traders who deal in goods imported from China.

He says the Kigali-Guangzhou flights will make it easier for people like him to travel and do business between the two countries.

This is exciting for us because some of the biggest problems we have been facing recently are delays and cancellation of flights. There was no predictability of our travels and this was hurting business, he said.

With RwandAir, it will be easier to be certain about when to travel and when to reach to the final destination. Even if there are delays and cancellation, it is easier to find out than using a foreign airline, he added.

Figures show that Guangzhou Baiyun International Airport was China's third-busiest and world's 13th-busiest airport by passenger traffic in 2017, handling 65,806,977 passengers that year alone.


Tourism Observer

CHINA: Air China Starts Flights To North Korea Again

Air China has resumed its flights between Beijing and Pyongyang.

The Beijing-based carrier has announced the restarting of all its flights to the North Korean capital city following a lengthy suspension that began in November following a United Nations mandate.

North Korea has been relying on China for most of its imports and exports.

The service has now resumed due to subsequent meetings between the leaders of both countries, Xi Jinping and Kim Jong-un.

Data suggests that the route will operate three times per week, on Mondays, Wednesdays, and Fridays.

Air China will deploy a Boeing 737-700 on the route, with a seat configuration of eight reclining First Class seats and 120 seats in Economy.

An Air China official said that these flights are continuing due to market reasons but did not provide any further comments.

However, the fact that Kim Jong-un traveled to Singapore on June 12 for the summit with other leaders suggests that the political tensions in the region might be tuning down, re-opening the door for direct connectivity with other international destinations.

Air China’s service to Pyongyang launched had frequently been canceled or disrupted due to what had been unspecified problems, according to Chinese media.

Noth Korea’s national airline, Air Koryo, is also planning to open a new route between Pyongyang and Chengdu. However, there are no official confirmations in this regard.

This is a significant move for both China and North Korea, as this route opening could enable a relief on sanctions.

It is something that will have to be observed over the next few weeks as Kim Jong-un steps further onto the world stage and starts to provide the positive dialogue that the other world leaders are seeking to achieve.


Tourism Observer

CHINA: Hainan To Become Asia’s Hawaii,US Granted Visa-free Access

China’s government has opened up to visitors from 59 countries, giving them visa-free entry to Hainan island, in an unprecedented move to spur economic growth and boost tourism in the backwater province.

Starting May 1, passport holders from the UK, the US, Canada and scores of other European and Asian countries were allowed to enter Hainan for stays of up to 30 days, according to an announcement Wednesday by the State Immigration Authority.

Absent from the list are African countries, countries on the Indian subcontinent, as well as three members of the Association of Southeast Asian Nations (Asean): Vietnam, Laos and Cambodia.

The latest move is an expansion from a 2000 policy that permitted tour groups from 21 countries to enter Hainan visa-free for up to two weeks.

The new move lets individual travelers enter Hainan and extends the period of stay.

The move is likely to benefit Chinese airlines, including the island’s flagship carrier, Hainan Airlines, a unit of the troubled Chinese conglomerate, HNA Group.

The policy was expected to sharply increase the number of international tourists traveling to Hainan, and to help the island province eventually become Asia’s Hawaii.

Meanwhile, the new policy would benefit companies who have operations there, including airlines and developers, he said.

Long promoted as China’s Hawaii, the 35,000-square-kilometre tropical island in the northwest of the South China Sea with Vietnam to the west and the Philippines to the east, has historically been regarded as a backwater and afterthought.

It has a long way to go to become an international destination.

The number of international tourist arrivals only crossed the one million mark last year. That was a mere 1.6 per cent of the 60 million domestic visitors that arrived in 2017.

Bali, which is one-sixth the size of Hainan, greeted more than 5 million foreign visitors last year.

Hainan’s tourism revenue totalled 81.2 billion yuan in 2017.

But it is now at the centre of one of Chinese President Xi Jinping’s initiatives to further open up the country’s tourism and financial sectors to attract more foreign investors, part of which is to transform Hainan into an international tourism destination and a free trade port.

Hainan’s service industry accounts for more than half of its 446.3 billion yuan (US$70.9 billion) gross domestic product (GDP) in 2017, according to mainland state media reports.

Revenue for the tourism sector, foreign and domestic arrivals totaled 81.2 billion yuan.

Although it has been China’s biggest special economic zone since 1988, the island has trailed rival zones such as Shenzhen in development and status.

In the five years through 2017, it attracted less than US$10 billion in foreign investment, only 1.5 per cent of China’s total and has struggled to find its place in the nation’s economic landscape.

Resorts such as Fosun-owned Club Med has built the 10 billion yuan (US$1.6 billion) luxury Atlantis Sanya resort in Sanya, which is expected to attract international family tourists.

Department store operators and Retail businesses including Wangfujing Group and Dalian Wanda could benefit from more tourists visiting.

Property developers such as China Evergrande, China’s third-largest developer by sales, is building Ocean Flower Island, a cluster of hotels, theme parks, malls and conference centres on an artificial archipelago off Hainan’s northwest coast.

Airlines like Hainan Airlines Holding and rival domestic carriers could benefit from more domestic and foreign tourists.

The Chinese government’s grand plan to open up Hainan is not only politically and economically significant for the province itself, but it will also to some extent affect Macau’s position as a casino and tourism hub in southern China in the coming decades.

The plan is ambitious. In a guiding opinion to comprehensively deepen Hainan’s reform and opening up, jointly released by the State Council and Communist Party’s Central Committee this month, the government recognises the island’s achievements as a special economic zone.

It also sets a goal of turning Hainan into a free-trade port, with major elements of the system in place by 2020.

The plan calls on Hainan to position itself strategically as a transit point for the central government in Beijing to implement the Belt and Road Initiative, and to remake itself into not just an international tourist draw, but also a centre for sustainable ecological development.

In addition, the directive encourages Hainan to develop its free-trade zone by liberalising some rules, such as by allowing hotels access to foreign TV channels, and improving its infrastructure.

Most importantly, the government proposes the development of beach and water sports, as well as horse racing, and to explore the development of sports lottery and instant lottery on major international events.

Finally, the directive urges Hainan to develop local talent and cooperate with Hong Kong and Macau in maritime affairs, while also forging closer cooperation with other economies in the Greater Bay Area and Taiwan.

The message from Beijing is very clear. Hainan is going to learn to combine the Hong Kong and Macau models in developing the island’s tourism, horse racing and lottery industries.

As well as position itself as a prosperous transit point for China to reach out to economies in the Indian Ocean and other parts of Asia, under the nation’s belt and road plan.

The implications for Hong Kong and Macau are equally obvious.

While Hong Kong’s horse racing industry is likely to face some competition from a new horse racing lottery in Hainan, if and when it materialises.

Macau’s casino industry may lose some mainland tourists to Hainan, where its hotels are likely to experiment with gaming on a smaller scale.

Though the government directive did not mention the word casino, it made a point of noting the need for Hainan to tighten its measures to deter money laundering, implying that casinos would perhaps be allowed in the province sooner or later.

In 2013, Hainan authorities shut down a casino bar that had been operating illegally after a report drew attention to it.

A year later, the local government firmly stated that no casino operations would be tolerated. But that was then.

Now, with Beijing’s pledge at the Boao Forum for Asia that it would continue to open up its economy, the time is politically ripe for the designation of Hainan as a tourism hub in the vein of the Hong Kong and Macau models.

The establishment of casinos in Hainan would be a matter of time, given the logical implications of setting up a sports lottery in the province in 2020.

Macau’s casino industry cannot escape being affected somewhat.

Development of gaming in Hainan will mean that Macau is no longer be the only gambling hub in China.

Mainland Chinese tourists who used to go to Macau may opt to go to Hainan instead.

As well, mainland Chinese entrepreneurs may also decide to invest in Hainan rather than in Macau’s casino industry.

In 2002, mainland business people were discouraged from investing in Macau’s casino sector to give Macanese business people more opportunities to win a stake in the casino concessions that the government was granting.

Giving Hainan the chance to develop its tourism hub will provide a window of opportunity for mainland Chinese capital to expand to the province.

This will lead to a balanced model of economic and tourism development in the southern border regions of China, stretching from west to east, and from Hainan to Fujian.

The ultimate geopolitical target is perhaps Taiwan, which would be under tremendous pressure to join the economic union in the Greater Bay Area in southern China.

As for Hong Kong, its horse racing industry, which attracts tremendous interest from mainlanders, will surely serve as a model for the Hainan horse racing lottery.

Over the past decade, mainland academics studying the sports lottery industry and casino development have been paying close attention to the models of Hong Kong and Macau.

The establishment of the lottery hub in Hainan is a testimony to the late Deng Xiaoping’s remark that China would create many Hong Kong-style cities in its drive for economic modernisation.

Macau and Hong Kong need to embrace the development of more mainland cities and regions, in parallel to their own more liberal economies, as it would benefit the region as a whole.

Hainan’s development from 2020 onwards may give Hong Kong and Macau some competition, but it will not constitute a threat to the two economies.

Knowledge transfer from Hong Kong and Macau to Hainan should also be encouraged, as it will do a lot to help the special economic zone modernise in this next phase of its development.

Both Hong Kong and Macau will have to integrate more closely with other economies in the Greater Bay Area, to fully use the space, talent and technological advancement of the mainland, and to cooperate with Hainan in developing cruise and tourism industries.

Amid the new challenges that will come from the repositioning of Hainan, Macau and Hong Kong must continue to strengthen themselves economically, and position themselves as the unique casino hub and financial and monetary centre, respectively, in southern China.

China is drafting a proposal to allow gambling on Hainan Island, in what would be an unprecedented move that could reshape gaming in China's territories and transform the economy of a strategic southern province.

Government agencies under a party reform group headed by President Xi Jinping are considering allowing online gaming, a lottery or sports betting in Hainan, said the people, who asked not to be identified because the discussions aren't public.

The proposal, which is still in an early stage, could open the door to physical casinos over the long term, two of the people said. China currently bans gambling and casinos on the mainland.

The proposal is part of a wider plan that includes relaxing visa rules and building a new airport to draw more foreign tourists to Hainan.

That comes as the province faces a fiscal deficit and contends with the debt woes of HNA Group Co., its biggest conglomerate, which is facing pressure from creditors after a global acquisition spree.

An index of Macau casino stocks tumbled on the news. Sands China Ltd. and MGM China Holdings Ltd. dropped as much as 6 per cent, and Wynn Macau Ltd. fell as much as 6.7 per cent.

I think investors were shocked, I'm a bit surprised, said Sam Chi Yung, a Hong Kong based strategist with South China Financial Holdings Ltd.

It's difficult to say what the impact will be on their profits as it all depends on China's policy and how they arrange the license. But what's sure is that people going to Macau to gamble will drop.

Hainan, roughly the size of Switzerland, is often referred to as China's Hawaii for its beautiful beaches. It also serves as a jumping off point for Chinese naval and air force patrols in the South China Sea.

The people didn't comment on what laws would need to change or the timeframe for implementation. Provincial officials were preparing for a possible visit by President Xi in the coming months to promote development on the island, two people said.

That trip would kick start events marking the 40th anniversary of China's embrace of foreign investment under Deng Xiaoping, they said.

The Hainan plan would mark a dramatic shift in China's approach towards gambling and could directly threaten the $33 billion casino industry in Macau, the world's largest gaming hub with revenues five times larger than Las Vegas.

Macau has been shifting to attract Chinese tourists and families to the territory, which is the same market that Hainan currently draws.

China's leaders have agreed to build a new international airport in the area of Dongfang city on Hainan's western coast, according to the people familiar with the situation, who didn't share more specifics on plans to ease visa requirements.

The island now has three international airports, all located on the eastern coast.

China bans gambling everywhere except Macau, a former Portuguese colony, and Hong Kong, which was once ruled by Britain.

Currently, it's against the law to open casinos, organize gambling, profit from gambling, set up online betting websites and market overseas casinos to Chinese citizens.

It's also illegal to sell lottery tickets without approval from the Chinese government.

Allowing gaming on the mainland would be one way for Chinese authorities to limit capital outflows and ensure gaming revenue benefits the provincial economy.

Mr Xi's corruption crackdown in 2014 sent Macau gaming revenue into a slump for more than two years, prompting it to become a more family-friendly destination to target leisure gamblers and tourists.

About 70 per cent of Macau visitors are from mainland China.

Chinese authorities have also cracked down on gambling related activities. More than 10 employees of Australia-based Crown Resorts Ltd., controlled by billionaire James Packer, were arrested in 2016 and sentenced to months in jail for illegally promoting gaming.

Although gambling is illegal throughout China, the concept isn't new to Hainan. The State Council encouraged Hainan to explore a betting-type sports lottery in 2009 guidelines to turn it into an international tourism island.

A casino bar with baccarat tables opened in the resort town of Sanya in 2012 where players earned points they could trade for accommodation and shopping.

It was shut down shortly after the report. The owner, Zhang Baoquan said the government monitored the casino to test the market.

While China is the world's biggest tourism spender, it has had a tougher time attracting travelers from abroad.

In 2016, it drew 31 million visitors, less than half of the number welcomed by the US.

China has already poured billions of dollars into new highways, high-speed railways and other projects in Hainan, attracting prominent chains such as Hilton, Westin and St. Regis.

Still, Hainan took in far fewer overseas visitors than other premier Asian tourist destinations such as Bali, Phuket or Jeju in South Korea.

Chinese officials have shown a particular interest in Hainan in recent months, suggesting a coordinated effort to promote the island.

Vice Premier Liu Yandong urged local leaders to work to attract international tourists during a Jan 13 visit.

Foreign Minster Wang Yi is scheduled to address an event Friday in Beijing on presenting Hainan province.

One hurdle is the state of conglomerate HNA, which owns the province's airline and two of its airports.

HNA told major creditors and provincial government officials last week that it expects a potential shortfall of at least 15 billion yuan (S$3.14 billion) in the first quarter.

Companies linked to HNA secured 7.8 billion yuan in long-term loans from Chinese banks to finance an expansion project in Meilan Airport in Hainan, according to a filing with the Hong Kong stock exchange.

Half of the loan will be allocated to HNA Infrastructure Co. and the other half to Haikou Meilan International Airport Co., with the loan being guaranteed by HNA Holding Group.



Tourism Observer

World Tourism News

I.The year of 2016 received 1.2 billion international tourists, a record high
The number of international tourists exceeded 1.2 billion in 2016. Despite the global economic downturn, the tourism industry including cross-border tourism has shown strong momentum for growth.

II.Chinese President Xi Jinping supports the Toilet Revolution, drawing global attention and praise
On his inspection tour to Yanbian, Jilin province, Chinese President Xi Jinping proposed to “launch the Toilet Revolution in rural China”. China’s Toilet Revolution has made the headlines of overseas press in the UK, the USA, France and India. Financial Times in the UK wrote in April that, “With the support of the Chinese leadership, a movement to build tens of thousands of public toilets in tourist attractions has opened the golden age for toilet construction in China.”

III.China initiates and co-hosts the 1st World Conference on Tourism for Development with UNWTO
The 1st World Conference on Tourism for Development, co-hosted by the Chinese government and the UNWTO, was a high-level tourism gala in response to the UN’s 2030 Agenda for Sustainable Development. Chinese Premier Li Keqiang attended and addressed the opening ceremony and Vice Premier Wang Yang attended and addressed the G20 Tourism Ministers’ Meeting.

IV.The World Tourism Day of 2016 focuses on tourism accessibility
On September 27, nearly 500 representatives from 60 countries gathered in Bangkok, Thailand to celebrate the World Tourism Day themed on “Tourism for All – Promoting Tourism Accessibility”. UNWTO Secretary General Taleb Rifai sent the congratulatory message. On the same day, the Declaration of Bangkok, a guideline on promoting tourism accessibility, was adopted.

V.Olympic Games lures nearly 600,000 tourists to Rio, more than expected
During the 2016 Summer Olympic Games, a total of 572,961 foreign tourists visited Brazil, far more than it was expected before the Games. Another survey report by the Brazilian Tourism Institute found that 84% of the inbound tourists, most of whom were from the United States, had business to do with the Olympic Games, and they spent 424.62 reais (about USD 131.32) per day on average.

VI.The United States and Cuba restore diplomatic relations with groundbreaking tourism exchange
On May 3, a cruise carrying 700-plus tourists set off from Miami to Havana, the capital city of Cuba, the first commercial cruise from the United States to Cuba in 38 years. In March, the U.S. government loosened restrictions on visits to Cuba and President Obama announced the opening of airlines and cruise lines between the two countries.

VII. China climbs up to the world’s second place in terms of tourism revenue, keeps its status as the world’s biggest outbound tourism consumer
According to the data released by the UNWTO on May 9: in 2015, China overtook Spain and became the world’s second biggest tourism earner with the revenue of USD 114 billion. Chinese tourists spent USD 292 billion, up by 25%; China received a total of 128 million visitors, up by 10%. Since 2012, China has ranked the world’s biggest outbound travel consumer for years, contributing more than 13% of the global tourism revenue per year.

According to David Scowsill, President & CEO of the World Travel & Tourism Council: (China’s) outbound tourism has been growing robustly, ranks the world’s second place in terms of size, and in the next decade, will grow by 7% per year, above the global average growth rate of 4%, and overtake that in the United States by 2024.

VIII.The tourism industry in the shadow of tourist attacks
Millions of tourists have given up the plan to visit the pyramids in Egypt, the Eiffel Tower in Paris, the coastline in Tunisia or the Hagia Sophia in Istanbul which are the high-profile targets of terrorist attacks.

IX.As the pound goes down after Brexit, tourists flock to the UK
The Brexit has produced “immediate, positive impacts” on the British tourism industry. Within 28 days after the referendum on Britain’s exit from the European Union, the number of flight tickets to the country increased by 4.3% from the same period last year.

X. Cross-border self-guided tours challenged by the refugee wave to Europe
According to a statistical report released by the United Nations High Commissioners for Refugees, in the first nine months of 2016, more than 300,000 refugees and immigrants from the Middle East and North African regions including Syria and Libya had crossed the Mediterranean to reach the European cost. Sweden and Denmark had tightened border control and the free personnel flow under the EU’s Schengen Agreement will be challenged