(By New York times)

China''s leaders once picked Hainan, off the country''s southern coast, to be one of five experimental laboratories for capitalism. This sunny island was supposed to compete to become a new Hong Kong, even a future Singapore.
 
But more than a decade later, even as China''s hot economy bubbles over with success in places like Shanghai and Shenzhen, Hainan is, well, still an experiment, like a lone laggard.
 
It seems as though this place, despite its postcard-perfect views and year-round summer sheen, might be called one of China''s earliest glitches on the road to capitalism, an isolated patch of somewhat undeveloped land that once captured leadership attention, wads of cash and many talented Chinese wanting to strike it rich.
 
"The early 1990s experiment in Hainan was a failure," said Li Renjun, a professor of economics at Hainan University in Haikou. "It has taken Hainan almost 10 years to recover from that failure."
 
The vast sums of capital that flowed into Hainan never built factories or drew migrant workers to its shores, experts say. Instead, the money mostly lured speculators, real estate developers and financiers - many of whom dashed away when things began to collapse in the mid-1990s.
 
Now Hainan is hoping to be reborn as a different sort of place; optimists here like to call it the next Hawaii.
 
Rather than buck the speculators'' first instincts, officials here are trying to work with them. After years of helter-skelter, boom-and-bust development, Hainan - a province of eight million people - is shedding its loftier ambitions of becoming an industrial center. It is still betting on property developers, but it is lowering its sights and rebranding itself as a playground for China''s new rich. And in this reincarnation, it is finding some long-sought success.
 
This island in the South China Sea, about 20 kilometers, or 12 miles, from the mainland, is busy erecting resorts, golf courses, multistory condominiums, villas and some shopping malls.
 
Sanya, a former fishing village on one of the island''s most scenic shores, has been transformed into a bustling tourist haven. Five-star hotels now cling to the emerald beaches of this southern resort, which has been the site of the Miss World pageant.
 
And a spectacular international conference center in a resort called Bo''ao is being promoted as China''s answer to Davos, Switzerland, which each January is the site of the annual World Economic Forum of business leaders, government officials, activists and intellectuals.
 
"We want Hainan to be a vacation spot for China and the world," said Zhu Huayou, an official in Hainan''s Foreign Affairs Office. "Bali has done something that fits the needs of its customers. We want to do something similar here."
 
Few visitors will mistake Hainan for Bali, the Indonesian island with its rich traditional customs as a backdrop to hundreds of resorts catering to visitors from all over the world. But millions of tourists, mostly from China and Russia, are beginning to frequent this relatively inexpensive and less developed island of magnificent beaches and lush mountain landscapes.
 
Investors have taken notice. Li Ka-shing, the Hong Kong billionaire, is scouting development projects here. And Citic Pacific, a Hong Kong conglomerate, plans to spend hundreds of millions of dollars over the next few years to develop residential and commercial property in Bo''ao.
 
Western hotels are coming, too. Starwood Hotels & Resorts Worldwide - the operator of Sheraton, Westin and W Hotels - has already opened one resort in Sanya and plans to open another in Haikou, the provincial capital.
 
Marriott International and Hilton Hotels are also newcomers, as is Shangri-La Hotels & Resorts, which is planning a resort in Sanya, a village that three years ago did not have a single Western-operated hotel.
 
"Our target is to open up the expat and meetings market here," said Robert Lohrmann, general manager at the Sanya Marriott Resort and Spa. "We see Sanya as a serious competitor to Bali and Phuket in the next five years."
 
The number of wealthy Chinese is growing rapidly, with an estimated 236,000 dollar millionaires in the country, according to Merrill Lynch. That is far more than in Russia and India combined, and a lot of that wealth has filtered down to hundreds of thousands of less affluent but increasingly comfortable Chinese as well.
 
They are purchasing luxury items, buying cars and going on vacations.
 
Hoping to tap into that wealth, investors and government officials here are again trying to engineer a real estate boom. Hundreds of buildings that sat uncompleted for a decade, relics of the 1990s real estate bust, are finally being finished in Haikou.
 
In the northwestern part of town, construction is going on around the clock on high-rise developments with names like Sunshine Classics and Dragon Pearl New City.
 
Yet on some of the city''s busiest streets, one can still see stretches of uncompleted buildings, eerie reminders of the previous start of a boom.
 
"A lot of the buildings on this street went dark in ''93," Hu Hui, deputy chief editor of The Securities Daily, a Haikou business newspaper, said as he drove down Guomao Road. "You should have seen what this area looked like three years ago."
 
Today, luxury apartments along the sea are selling briskly for $80,000, according to local real estate brokers.
 
For a brief time in 1992, Hainan was China''s fastest-growing economic region. People came from all over the country to make their riches in this free-wheeling capitalist outpost. Prostitution and underground gambling flourished.
 
But after 1993, when the government began to rein in some of the excesses, real estate prices plummeted, and investors realized Hainan''s economy was built on sand.
 
Developers once sold apartments for as much as $1,500 a square meter, or about 11 square feet.
 
Now, those same apartments sell for as little as $200 a square meter. And villas that were priced at $1 million are now listed at about $100,000.
 
The province''s freedoms, tax breaks and duty-free provisions also often gave rise to illegal car smuggling, government corruption and, for a brief time, even the opening of an illegal stock exchange.
 
State-backed real estate ventures flopped. And a series of scandals in the 1990s destroyed some of the province''s biggest financial institutions.
 
Today, Hainan is no longer considered a pioneering province. Instead, it is a laggard in a nation of growing economic might, an island of lost opportunities. While other export-driven coastal provinces, like Zhejiang, Guangdong and Fujian, are soaring, Hainan is in recovery.
 
But after a series of leadership shake-ups, Hainan''s provincial government is looking to turn things around by pushing clean and sustainable growth.
 
"Because of 1988 and the special policies, Hainan got really hot," said Zhu of Hainan''s Foreign Affairs Office. "Now, we don''t think about it.
 
"We just want Hainan to have a good life quality and a good environment."
 
Some residents worry that tourism and real estate are not enough to sustain the local economy.
 
"Hainan doesn''t have anything of its own; everything comes from outside," said Tang Fengyu, an entrepreneur in Haikou. "People just wait for the central government to act. But they don''t want to pollute, so how can it have industry?"
 
Developers are more optimistic. They say foreigners, including Japanese, South Koreans and Americans, Germans, French are coming to Hainan to purchase vacation homes.