In April, the Department of Natural Resources of Guangdong Province issued the trial measures for the sale of non-resident island use rights, according to which the Guangdong government will organize the bidding, auction or listing of islands for sale.
According to mainland China’s definition, non-resident islands are islands which do not implement Hukou (residency) registration for people, meaning that mainland residents are not allowed to use an address on the islands to register their residency. It does not mean that these islands do not have people living there.
However, although the measures indicated that any individual, even foreigners, can own an island in the Greater Bay Area (GBA), the investment returns may not meet investor expectations, especially as several Chinese island investment failures have been reported in recent years.
According to the measures, interested parties must submit a development plan for their ideal island before they purchase it, and the plan must comply with the island’s planned function, which was set up by the Guangdong government.
For example, an island for forestry purposes cannot be used for developing tourism resorts.
Besides the restrictions in terms of function, once an entity buys an island in the GBA, a plan must be implemented within two years, otherwise the right to use the island will return to the Guangdong government.
In 2011, Zhejiang sold the first non-resident island since the launch of China’s island protection law. The buyer was a Chinese company from Ningbo, which won an auction of a non-resident island with RMB20 million. However, in 2018, after around seven years of development without any concrete results, the island was sold to a second company.
In 2004, Wenzhou, Zhejiang’s province, sold, for the first time, a non-resident island to Chen Xiaoxian, a Chinese female businesswoman, who invested a total of three million yuan to develop the land. However, she withdrew from the island’s development in 2009, following five years of investments and a substantial financial loss.
Buying an island in China is not as expensive as in other countries.
According to the regulation of the Ministry of Finance and the State Oceanic Administration, the lowest price of a non-resident island’s for private use is calculated based mainly on the area of the island and on the island’s service life.
For instance, take a small island of one hectare. If an island located in Zhuhai is being used for tourism and entertainment purposes, and if the degree of renovation of the island is less than 10 percent, then the minimum price of the use of the whole island for one year is about 15,400 yuan, according to a report by Exmoo.
However, based on this minimum price, the mainland government will then evaluate the value of the resources on the island and will form another transfer price.
It may sound economical to buy an island in China, but the costs that come after buying it may end up being multiple times higher than the island’s outright purchase price.
Besides all the aforementioned conditions, the development of an island needs to comply with layers of dense policies, and any development risks being damaged by the passing of a single typhoon in the vicinity.