Sansha Officials Discussing Large-Scale Commercial Development

The State Council raised the status of Sansha from county-level to a prefecture-level city on June 21

(Beijing) – Situated on a cluster of islands off Hainan Province, China's newest prefecture-level city may soon be offering more than just sun, sand and controversy. An inside source said local officials in Sansha are weighing commercial development plans ranging from a tax haven status to building casino resorts.

Vietnam and the Philippines have repeatedly stated their opposition toward Sansha since the State Council moved to elevate the status of the city from county-level to prefecture-level on June 21.

Sansha's new administrative status put disputed territories, including the Nansha, Xisha and Zhongsha islands, under its jurisdiction. The upgrade to a prefecture-level city mandates a switch from the military to administrative government system and the creation of a local National People's Congress branch.

But fishing and tourism, longtime revenue generators for Hainan Province, face barriers in Sansha. With the exception of military ships, only one official freighter travels between Hainan Island and Sansha's Yongxing Island every two weeks. Tickets are not for sale, and members of the public are only allowed to visit Sansha by official invitation, said Oriental Outlook, a news magazine affiliated with the official Xinhua News Agency.

Sansha officials are now flirting with plans to develop the area by building more ports, opening casinos and creating an offshore tax haven, said a source close to the former Administration Office for the Xisha, Nansha and Zhongsha islands.

"The local government expects to make a breakthrough in terms of development policies," said the source. 

Sansha is the country's smallest prefecture-level city by population with less than 1,000 people and a land area of 13 square kilometers. However, it is the largest in administrative scope, with territorial waters that cover 2.6 million square kilometers.

"It is within China's sovereign right to establish this city," said Wu Shicun, president of the National Institute for South China Sea Studies at the World Peace Forum in Beijing July 7. "Sansha will help China strengthen its claims over the South China Sea, and it could become a source of economic growth for Hainan Province."

Yongxing, the seat of Sansha's city government, is five times the size of Beijing's Tiananmen Square. The city center includes a hospital, a library, a telecommunication service center, a post office and two bank branches. In addition, the city has a port that can receive 5,000-ton ships and an airport.

The first official proposal to raise Sansha's administrative status was in 2007. But plans were shelved after hundreds of Vietnamese protested in front of China's embassy in Hanoi.

The establishment of Sansha as a prefecture-level city in late June was announced the same day Vietnam's National Assembly passed the Vietnam Maritime Law, which reaffirmed the country's claim to sovereignty over the Xisha and Nansha islands in the South China Sea.

On June 28, the Department of Foreign Affairs of the Philippines also protested Sansha's change in status, stating the city's jurisdiction infringes upon Philippine sovereign rights over the West Philippine Sea. 

Among Sansha's current obstacles to development is a slim budget entirely reliant on higher-level administrators. Books in the government libraries were donated and healthcare services are provided by the Hainan Public Health Bureau.

However, ongoing sovereignty claims could make the local government's shift to focus on economic policy in the area a risky endeavor.

Underlying geopolitical tensions may make Sansha too sensitive an area for large business ambitions, said an anonymous expert at the Development Research Center of the State Council.