100 Days In, Is Hainan's Duty-Free Experiment A Success?

    Despite skepticism whether mainland shoppers would head to Hainan over other shopping havens like Hong Kong, the city government of Sanya claimed on its official website this week that the program has been a runaway success.
    Jing DailyAuthor
      Published   in Finance

    Sanya Duty-Free Store Attracted 1.3 Million Vistors Since April 20#

    Sanya Duty-Free Shop (Image: Hainan Online)

    As Jing Daily previously noted this April, Hainan island -- China's southernmost province -- recently launched a pilot duty-free program designed to boost high-end shopping, allowing domestic Chinese tourists to claim tax refunds on imported luxury goods purchased in Hainan up to a value of 5,000 yuan (US$762), with reduced tax rates for purchases exceeding 5,000 yuan. Despite skepticism whether mainland Chinese shoppers would head to Hainan over other shopping havens like Hong Kong, this week, as the program nears its 100th day, the city government of Sanya claimed on its official website that the program has been a runaway success.

    According to statistical data released by the Sanya government, the Sanya Duty-Free Store (三亚免税店) attracted 18,800 visitors on the first day of the program alone, among whom 5,619 purchases were made. As of August 10, the city government said, the store has received more than 1.3 million visitors since the launch of the program. With the store recording an average of 11,500 visitors per day, a total of 340,000 transactions have been completed since April. As the figures went on to point out, among the sales made at the duty-free shop this summer, 94.7 percent were eligible for duty-free status, and 88.16 percent of duty-free items sold were priced below 5,000 yuan (US$782) -- the program's cut-off point.

    Travel agents have been quick to promote new Hainan travel packages heavy on duty-free shopping, and based on official Hainan tourism figures, the lure of cheaper luxury shopping may be enough for many mainland Chinese visitors. Hainan province recorded a total of 2.2 million tourists this May, an increase of 15 percent over the previous year, an increase that the local government said was driven largely by the new duty-free program.

    Despite the Hainan government's back-slapping over the program's success, as some industry insiders have been quick to point out, Hainan's luxury market is far less developed than that of Hong Kong, with far fewer brands having a presence on Hainan island and the program's cut-off point of 5,000 yuan too low to cover even an entry-level Louis Vuitton handbag. Still, the program shows potential, and even though Hong Kong likely has little to fear -- mainland Chinese tourist-shoppers still line up for hours, in many cases, outside Gucci or Chanel stores in the former British colony -- it's not beyond the realm of possibility that success in Hainan could eventually convince Beijing to someday support the creation of more duty-free shopping districts in cities like Shanghai or Guangzhou.

    Discover more
    Daily BriefAnalysis, news, and insights delivered to your inbox.