As China bids to make the island province of Hainan into a giant free trade zone on par with Hong Kong, plans include a big bet on blockchain, according to recently released documents.

Why it matters: China has talked about using blockchain in plenty of other places, but Hainan, an island province in southern China, is going to be a center for that activity.

  • The central government has cast blockchain for a leading role in economic development plans, with initiatives such as a nationwide Blockchain Services Network and a national committee on blockchain standards.
  • Hainan, and its nationally supported free trade zone, could serve as a testbed for regulatory innovation around blockchain. A free trade zone could be a good place to test politically challenging applications like cross-border payments.

Details: A new master plan for the free trade zone reveals international ambitions for Hainan’s blockchain efforts. The plan also covers a variety of changes in tariffs, customs, and business practices.

  • On June 1, the central government released its master plan for turning Hainan into the country’s largest free-trade zone, according to Xinhua (in Chinese).
  • The official plan calls for using blockchain technology in intellectual property transactions, in modernizing governance systems, and in finance, among other areas.
  • It also proposes (in Chinese) that by 2025, China should build a “National Blockchain Technology and Industrial Innovation Development Base” in Hainan.
  • By 2035, the plans calls for Hainan to “actively participate” in setting international standards on cross-border data flows and blockchain finance.

Context: Hainan has been a focal point for China’s maritime and blockchain dreams for some time, but some level of caution is advised.

  • China’s first blockchain pilot zone opened in Hainan’s capital, Haikou, in October 2018, drawing big names like Baidu and Huobi to set up local offices.
  • And the province is also home to the Oxford-Hainan Blockchain Research Institute, also founded 2018, which according to its website, researches “digital civilization” built on the technology. The institute derives its name from a connection with the University College Oxford Blockchain Research Institute.
  • The island’s maritime and digital transformation takes place as the US talks of removing special recognition of Hong Kong’s trade status, making for speculation that Hainan is meant to replace or supplement Hong Kong.
  • Experts speaking to the South China Morning Post cast doubt on the possibility that Hainan could make itself “a second Hong Kong,” citing reasons like a hostile international environment and limited economic reform.
  • Experts have previously told TechNode that Hainan’s tourism-based economy provides a weak foundation for the blockchain industry. Private sector blockchain investment is concentrated in traditional tech hubs like Beijing, Hangzhou, Shanghai, and Shenzhen, as startups tend to locate near businesses that can incorporate their services.
  • A report from research firm Equalocean found that startups in these four cities captured 70% of blockchain-related private equity and venture capital investments in China between 2014 and 2019.

Shaun Ee is a Yenching Scholar at Peking University and nonresident fellow with the Atlantic Council, working at the intersection of geopolitics, tech, and national security. Before moving back to Asia,...