Construction of Hainan FTP gives impetus to duty-free shopping

South China's island province of Hainan has seen exponential growth in duty-free sales in the year after a new policy was implemented.

Hainan's offshore duty-free sales hit 46.8 billion yuan ($7.2 billion) in the period from July 1, 2020 to June 30, soaring 226 percent year-on-year, provincial Customs said in Hainan's capital Haikou on Saturday.

Duty-free shops in Hainan sold over 60 million duty-free items to more than 6.2 million customers during the period, up 211 percent and 102 percent year-on-year, respectively.

Since July 1, 2020, Hainan has raised its annual tax-free shopping quota from 30,000 yuan per person to 100,000 yuan. The previous tax-free limit of 8,000 yuan for a single product has been lifted, and the duty-free purchase limit for cosmetics was raised from 12 items to 30.

In addition, the categories of duty-free goods were expanded to 45 from 38 with the addition of electronic products such as mobile phones and laptops.

As part of the key moves of constructing Hainan Free Trade Port, the new policy in duty-free shopping attracted more consumers and triggered more spending. The dividends of the duty-free policy were further bolstered in the past year with the opening of five more duty-free shops.

Qin Lin, a tourist from the Guangxi Zhuang autonomous region, was buying cosmetics at a duty-free shop in downtown Haikou. It was her first visit to Hainan, and duty-free shopping was an important part of her itinerary.

"With the duty-free shopping quota raised significantly, we can buy more kinds of stuff," Qin said, adding that with overseas travel hindered by the COVID-19 pandemic, Hainan offers consumers a convenient alternative for duty-free shopping.

Covering an area of 120,000 square meters, the Sanya International Duty Free City in Hainan's Haitang Bay is the world's largest single duty-free shop. With settlement of more than 350 international luxury brands, the place has become a top attraction for tourists from home and abroad.

Gao Xujiang, deputy general manager of the China Duty Free Group, which operates the shop in Sanya, said despite the pandemic last year, the shop has become the top single commercial complex in duty-free sales in both China and the world, making CDF the largest duty-free retailer in the world.

Apart from the one in Sanya, another world-class tourism and shopping complex－Haikou International Duty Free City－is being built by the CDF and is expected to open next June.

As fine-tuned favorable policies continue to draw consumers, the island's offshore duty-free sales are seen exceeding 60 billion yuan in 2021, quadrupling from 2019, Shen Xiaoming, Party secretary of Hainan, said at a news release in April.

A report jointly released by KPMG China and the Moodie Davitt Report in May said the enhanced shopping policy in July 2020 gave tremendous impetus to brands as other duty-free markets fell into a deep pandemic-driven slump.

The report predicted Hainan Free Tade Port will likely become the world's biggest duty-free market in the near term if it continues on its current growth curve.

China released a master plan last June to build the island into a globally influential and high-level free trade port by the middle of the century.

The plan also took aim at Hainan building itself into an international tourism and consumption destination. Duty-free shopping has already become one of the core competitive features of Hainan's tourism consumption.

The new policy significantly boosted duty-free consumption in Hainan, and won back a great deal of overseas business. This will help promote the construction of Hainan as a major attraction in international tourism, said Liu Feng, director of the Research Center for Free Trade Port with Chinese Characteristics at Hainan Normal University.