SANYA -- Just down the beach from the Sheraton and the Hilton, in the shade of the palm trees, you can still see the decaying remains of a fishing boat and a few old fishing nets.

It's a rare reminder of the old way of life, rudely shoved aside to make room for the fastest-growing tourist resort in China. The former homes of fishermen and farmers are now a vast expanse of luxury resorts and five-star hotels, exploiting China's new craze for beach holidays and fuelling a tourism boom of gigantic proportions.

Welcome to Hainan Island -- the tropical paradise that is swiftly transforming itself into the Hawaii of China. In the process, Hainan is showing how tourism can help China diversify away from manufacturing and begin to develop its weak service sector, which accounts for just 39 per cent of the Chinese economy.

Its biggest claim to notoriety came in 2001 when a U.S. spy plane was forced to make an emergency landing on Hainan after colliding with a Chinese fighter jet, sparking a long diplomatic battle.

Today, the white sandy beaches of Sanya are crowded with the biggest names in luxury hotels. The first was a 511-room Sheraton resort, which opened in 2003. Then came a 456-room Marriott in 2004, and then a Hilton in 2006 and a Kempinski this year, to be followed soon by a 550-room Shangri-La.

A couple of years ago, there were widespread fears that the dozens of five-star hotels in Sanya would remain mostly empty. Vacancy rates were high, and the beaches seemed overdeveloped.

But this year the hotels are packed. Even in early April -- far from the peak tourism season -- the luxury resorts were filled to the rafters. Several of the most expensive resorts were completely sold out, and flights were landing all day at Sanya's new international airport.

China's affluent new consumer classes have fallen in love with the tropical island. They cavort on the beaches in garish Hawaiian shirts and shorts, playing volleyball and snapping pictures with their digital cameras. Millions of Chinese tourists are travelling to Sanya every year.

With astute marketing tactics, including a Miss World contest and a top-calibre golf course, the Hainan resorts have also attracted thousands of tourists from as far away as Russia and South Korea. The Russians, in particular, are proving to be a lucrative source of business for the Hainan resorts. Many tourist signs are now written in Russian as well as English and Chinese.

Hong Kong billionaires and other investors are planning a series of huge projects in Hainan over the next few years. Some experts predict that Sanya could rival Bali and Phuket in the near future.

By 2020, China is expected to become the world's biggest tourist destination. It is also projected to become the world's fourth-biggest source of outbound tourists, with some 100 million Chinese tourists expected to be travelling abroad by 2020.

The tourism boom will help China to reduce its traditional reliance on the manufacturing and heavy-industry sectors. China is aiming for faster development of its service sector, and it hopes it will provide 50 per cent of China's GDP by 2020.

The construction of new roads and clearing of coastal trees and vegetation has left it vulnerable to erosion and wind. While the boom has helped to create jobs for Hainan's eight million people, the jobs have come with a heavy price.

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