Can Hainan Island's Duty-free Policy Spark China’s Travel Retail Market?

    Hainan island's new offshore duty-free policies will disrupt Asia’s travel retail market and bring huge opportunities to global investors and brands alike.
    Hainan will be the next lucrative travel retail market thanks to the newly issued Hainan Free Trade Port Development Plan that substantially increases the offshore duty allowance for shoppers. Photo: Courtesy of Shutterstock.
      Published   in Finance

    What happened

    Chinese authorities released a comprehensive development scheme for the Hainan free trade port on June 1. The measures formulated include raising annual offshore duty-free quotas for shoppers visiting Hainan island from $4,215 (30,000RMB) to $14,050 (100,000RMB) and expanding categories for duty-free goods. Meanwhile, preferential policies for air transportation will be implemented to increase international flight routes and fuel offshore business. The free trade port policies are expected to be established by 2025 and will “become more well-developed” by 2035.

    The Jing Take

    While China’s domestic travel restrictions have been gradually loosened, global travel bans remain strict worldwide, making Hainan one of the more popular destinations for local travelers. Travel retail in the region had been heavily impacted by COVID-19, but its in-store foot traffic and e-commerce businesses are now quickly recovering.

    The new policy marks China’s determination to further open up Hainan island, which should bring opportunities to global investors and brands that focus on the travel retail business. It will boost the luxury duty-free business and encourage shoppers to purchase larger amounts of goods, especially when it comes to hard luxury products. Yet it also means local duty-free operators like China Duty Free Group will likely emphasize their shopping malls even more by partnering with fashion and beauty brands to build more experiential shopping events for international travelers.

    The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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