Hainan Island Set To Launch Tax-Exempt Luxury Shopping: Can It Compete With Hong Kong?

Long-Discussed Plan To Make Hainan A Duty-Free Shopping Haven May Slowly Come To Fruition

Hainan tourism officials are taking great pains to portray the island as the "Hawaii of China" (Image courtesy Mandarin Oriental)

Hainan tourism officials are taking great pains to portray the island as the “Hawaii of China” (Image courtesy Mandarin Oriental)

Jing Daily has previously written about the Chinese government’s plan to turn China’s southernmost province, Hainan island, into a high-end international resort destination. While Beijing announced this plan to great fanfare nearly two years ago, setting off fears of a property bubble in Hainan and stoking unease in neighboring countries like Vietnam (which question China’s intentions in disputed waters), Hainan hasn’t really been in the news much lately, though not by lack of trying. To stoke up more interest in Hainan tourism in the run-up to the summer season, the provincial government has sought to associate the island with luxury, welcoming events like the Hainan Rendez-Vous (April 1-4) and creating the “Sunshine Awards” to entice Chinese creatives to help promote Hainan tourism.

However, tourism is a cut-throat business, and Hainan lacks a couple of features common to nearby competitors like Macau and Hong Kong, namely, the casinos that populate the former and the duty-free luxury shopping that makes the latter a Mecca for mainland Chinese shoppers. However, soon the Chinese government’s long-discussed plans to gradually introduce tax-free high-end shopping to Hainan will finally come to fruition, as the island will kick off a pilot program on April 20 offering tax exemptions for imported luxury goods worth up to 5000 yuan (US$762). The scheme is scheduled to be formally implemented on May 1. From NetEase (translation by Jing Daily team):

From an industry viewpoint, after the implementation of its new tax policies, Hainan Island will certainly see an increase in tourists, which will have a positive effect on local hotels, airlines, and travel agencies.

Chen Yanyi of [Chinese online travel agency] Ctrip said that Hainan’s tax-free policy is good news for both this international destination and for the domestic Chinese tourism market. Hainan is a famous resort destination, and domestic Chinese tourists account for most of the island’s visitors, but the amount they tend to spend on shopping and consumption is very low. The introduction of a tax exemption for tourists there should increase the attractiveness of higher consumption levels, helping the Hainan tourism industry move from [the promotion of] “3-S” (Sun, Sand, Sea) towards “4-S” (Sun, Sand, Sea, Shopping).

While tour operators and Hainan officials seem broadly excited about the new program, it’s not clear whether tourist-shoppers will be lining up to head to Haikou rather than Hong Kong. Much will depend on the island’s brand selection and how much cheaper it’ll be than other popular destinations. The problem at the moment is a lack of clarity about what shoppers there can expect after May 1. As regular outbound tourist-shopper Bai Lingzhou told reporters, “if [shopping in] Hainan is cheap, then I won’t have to leave the country to shop.” As someone who typically shops in Hong Kong, Bai said, “at the moment I don’t know if Sanya’s duty-free stores will have major brand names, the newest items, the complete range of styles. These are the key things I need to know before I can say whether I’ll go to Hainan to shop.” While NetEase points out that shoppers can expect most luxury goods to cost anywhere from 15-35 percent less in Hainan when tax exemptions are factored in, it’s unclear whether this will be enough to entice Hong Kong-bound shoppers.

A Fujian-based travel agency representative also voiced reservations about the new program, noting that Chinese tourists from major cities like Shanghai see Hainan as a destination for buying “fruit and other local products,” rather than luxury goods, and that the 5000 yuan tax exemption is too low. While the government has already hinted that this threshold may be raised, it might not be enough to satisfy the Birkin-hungry among China’s tourist-shopper contingent. (Although this demographic probably has no problem flying to Paris for their shopping sprees.) Others, however, are more optimistic, with several travel agencies already preparing specialized Hainan tourism/duty-free shopping packages.

 

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