Tired of Housing Bubbles, China's Hainan Tries a Shift in Focus

(Bloomberg) -- China’s tropical island of Hainan, famous for booms and busts in housing, has a plan to shift its economy in a different direction.

The local government will “reclaim” or rezone a swathe of land to industrial use from residential, according to media reports this week citing officials. Instead of housing, the real estate will be used for ventures such as tourism and high-tech projects.

To get a sense of the scale, the 21 square kilometer area amounts to more than six of New York’s Central Parks. It exceeds all the land Hainan’s government sold to developers over the past seven years, according to Bloomberg calculations based on statistics bureau data.

“This policy shift shows that the government is determined that another property frenzy won’t happen again,” said Zhang Xiaoduan, Cushman & Wakefield Plc’s head of research in southern China. “The authorities intend to make better use of land.”

Hainan last year rolled out the nation’s toughest property curbs, including province-wide home-buying restrictions, to counter a speculative frenzy as President Xi Jinping pledged to transform the island, bigger than Belgium, into a free-trade zone.

Won’t cutting supply just increase pressure for price rises? “No,” said Sam Xie, CBRE Group Inc.’s head of research in China, “In the foreseeable future, the provincial-wide buying restrictions will keep curbing demand.”

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