BEIJING - The Chinese government said Monday it has allowed Hainan to set up a company to conduct duty-free business on the island as part of a trial aimed at making the island province a tourist hub.

The company "will help encourage proper competition, prevent a monopoly and facilitate the healthy development of the duty-free market in Hainan Province," the Ministry of Finance (MOF) said in a statement.

The company, intended to be solely state owned, will be the fifth major licensed duty-free operator in China, said the MOF.

It will be able to sell duty-free goods and set up duty-free stores in the province, according to the statement.

The Chinese government launched a pilot program in April to allow tourists and locals in Hainan to enjoy duty exemptions and tax refunds on certain imported products worth less than 5,000 yuan (about 765 U.S. dollars) before flying to other airports in China.

The move was part of efforts to lure more mainlanders on trips to the tropical island, and build it into a world-class tourist destination.

After deducting customs duties, value-added taxes and consumer taxes, products sold in the trial duty-free stores in Hainan will work out at 10 to 35 percent less expensive than those sold in other stores.