China’s Hainan hosts duty-free shopping spree under new customs regime

A customs scheme covering the entirety of Hainan, China’s southern island province, appears to have triggered a surge in consumption since its inception last week, with the province’s tourism hub Sanya recording more than 500 million yuan (US$71.25 million) in duty-free sales over five days.

Analysts cautioned, however, that the greater significance of the policy lies less in short-term spending boosts than in whether Hainan can diversify its economy beyond its previous reliance on real estate and establish higher-value growth drivers to rival established consumption hubs Singapore and Hong Kong.

From December 18 to 22, Sanya logged a combined 535 million yuan in duty-free sales, with daily turnover exceeding 100 million yuan for five consecutive days. This was a year-on-year increase of more than 50 per cent, pushing the city’s cumulative duty-free sales for the year past 20 billion yuan, according to the Sanya Municipal Bureau of Commerce.

“Hainan has the potential to grow into a globally influential leisure destination, supported by strong policy incentives such as visa-free access and duty-free shopping, as well as solid physical infrastructure,” said Li Yingtao, a partner at the Shanghai-based consulting firm MCR.

“In the near term, Hainan is well positioned to capture some high-end consumption that would otherwise flow to Hong Kong or Singapore.”

The city’s duty exemptions now cover most categories associated with international retail travel, including cosmetics, fashion, electronics, jewellery, food and other lifestyle products. To further stimulate demand, local authorities have also rolled out consumption vouchers spanning duty-free shopping, retail outlets and dining.

South China Morning Post