The government has approved plans for the country's fourth harbor area with preferential tax rates, in a major step towards a free-trade zone with the Association of Southeast Asian Nations (ASEAN).

The State Council authorized the Yangpu Bonded Harbor Area in the Yangpu Economic Development Zone, South China's Hainan Province, covering 9.21 sq km and to be completed in three stages.

The first phase of construction had already started, Hainan Vice-Governor Jiang Sixian, said.

Fifty billion yuan (US$6.45 billion) will be spent on construction and the area will host industries with a total output value of 100 billion yuan (US$12.9 billion), generating 12 billion yuan (US$1.54 billion) in taxes annually by 2012.

Three other bonded harbor areas are located in Yangshan of Shanghai, Dongjiang of Tianjin and Dayaowan of Dalian, Liaoning Province.

Yangpu Economic Development Zone is on the 150-sq-km Yangpu Peninsula in northwestern Hainan, 40 km north of the provincial capital, Haikou, and covers 30 sq km.

Established in 1992, the zone was originally planned as an export-oriented industrial district focusing on advanced technology and the development of tertiary industry.

The 1997 Asian financial crisis, however, had a negative impact on Yangpu from which it never fully recovered.

To attract overseas investors, the Yangpu Economic Development Zone has been allowed to offer preferential policies.

Li Lanxue, chief of Haikou Customs, said the Yangpu Bonded Harbor Area would offer tax breaks on imports and rebates on China-made commodities, while trade between companies inside the harbor area would be exempt from value-added and consumption taxes, in addition to preferential policies granted to Yangpu Economic Development Zone.

The establishment of the Yangpu Bonded Harbor Area is important to regional economic development and energy strategies, Jiang Sixian said.

"This will help to advance economic development of this province and of the Beibu Gulf between Hainan and ASEAN member states."

(China Daily/Xinhua News Agency October 12, 2007)