Island's duty-free shopping sees blowout growth under fine-tuned policies

By Yuan Shenggao | China Daily | Updated: 2021-05-06

China's enhancement of offshore duty-free shopping policies has boosted the growth of local tourism consumption and trade in South China's Hainan province and promoted the construction of the Hainan international tourism consumption center, said officials with the provincial government.

Hainan has sold about 98 billion yuan ($15 billion) in duty-free goods in the past 10 years. At that time, more than 25 million people shopped and about 120 million items were sold, according to a recent news conference marking the 10th anniversary of offshore duty-free shopping in the tropical island province.

Data from the Hainan provincial commercial department showed that the tax-free sales volume in Hainan reached 15.39 billion yuan in the first quarter of this year, a year-on-year increase of 416.6 percent.

The offshore duty-free policy was introduced on April 20, 2011, to boost development of the island as an international tourist destination. It has been continuously adjusted and upgraded regarding per person duty-free shopping quotas, the number of shopping items and times, and ranges of commodity varieties for the benefit and convenience of tourists, officials said.

The latest move was made on July 1, 2020, which increased the annual tax-free shopping allowance per person from 30,000 yuan to 100,000 yuan. Meanwhile, the range of tax-free categories has been expanded from 38 to 45, adding electronic products and liquor, with a limit on the number of items purchases per visit for cosmetics, phones and liquor. The quota for each tourist was only 5,000 yuan when the policy was launched.

The loosening up of policies has turned the island into a duty-free shopping hub, and the nation has vowed to build the tropical island into an international tourism consumption center.

In 2020, more than 4.48 million shoppers visited the nine duty-free centers in Hainan, spending 27.48 billion yuan on duty-free goods, an increase of 103.7 percent and 87.4 percent, respectively, according to Haikou Customs.

"In 2020, Hainan became the epicenter of the global duty-free industry, a 'lighthouse' in an otherwise darkened sector," said Martin Moodie, founder and chairman of The Moodie Davitt Report.

The first offshore duty-free shop, which opened in 2011 on the tropical island, was only 7,000 square meters. Now, Hainan boasts the largest single duty-free shop in the world－the 120,000 sq m Sanya CDF Mall－a duty-free shopping center under China Tourism Group at Haitang Bay in northeastern Sanya, a landmark in the coastal city. The number of duty-free shops has increased to 10. Five are located in Sanya, four in Haikou, and one in Boao, the permanent site of the Boao Forum of Asia.

Hainan introduced mail delivery services for tourists to the island in early February, in addition to the original option of airport pickup when leaving the island. Since its official launch, the Hainan branch of China Post has received and mailed more than 100,000 duty-free items, with a daily maximum of more than 3,500 items. The pickup-assisting measures are expected to boost duty-free sales going up, said local post office officials.

"Starting from scratch, the offshore duty-free shopping business is growing rapidly in Hainan. The local customs supervision now covers all links－imports of duty-free goods, their stocking, marketing and delivery to the customers. Risk control and product inspection are being strengthened to ensure all duty-free goods are safe and genuine," said Huang Tingting, head of the supervision department with Haikou Customs.

Huang said Haikou Customs has cracked down on 79 smuggling gangs in the past two years, involving goods worth 250 million yuan in total value. It has also enforced tighter controls over the gray market driven by daigou, professional shoppers who buy duty-free goods from shops in Hainan on behalf of customers in other parts of the country. More than 8,000 individuals who were found to have engaged in illegal daigou shopping in Hainan have been punished since July. They are not allowed to use the duty-free shopping policy in Hainan for three years.

Offshore duty-free sales in Hainan, known by some as China's Hawaii, are expected to reach 60 billion yuan this year. It would double the annual record for the second year in a row, as fine-tuned policies continue to draw more consumers, said Hainan Provincial Governor Feng Fei.

He said the duty-free sales networks around Hainan island will be expanded to better meet domestic needs for imported goods in the 14th Five-Year Plan (2021-25). The sales volume of duty-free items is expected to hit 300 billion yuan in the next five years.

Supported by a comparatively fast economic recovery and preferential policies, the tropical resort island has become a rare bright spot in the global luxury market, which has been hit hard by the coronavirus pandemic, experts said.

Analysts with Bain & Company said even when Chinese shoppers can travel again, they will continue to buy at home as overseas brands are investing in more stores in China and expanding their e-commerce offerings.

A new duty-free shopping city is under construction on the western coast in Haikou. Spreading more than 324,000 sq m with an investment of 12.86 billion yuan, it will be a new shopping paradise when completed in 2023, said officials of the city government.

Meanwhile, the first China International Consumer Products Expo, which is scheduled to open in the provincial capital of Haikou on Friday, will showcase the latest items of many luxury brands from around the world.

It is expected to spur new optimism among overseas brands and inject new enthusiasm among Chinese retailers and consumers.

Ma Zhiping contributed to this story.