South China's island province of Hainan hasseen exponential growth in duty-free sales a year after a new policy wasimplemented.

Hainan's offshore duty-free sales hit 46.8billion yuan (7.2 billion U.S. dollars) from July 1, 2020 to June 30, 2021,surging 226 percent year on year, the Haikou Customs said on July 3.

Duty-free shops in Hainan received morethan 6.2 million customers, and sold over 60 million duty-free items, up 102percent and 211 percent year on year, respectively.

According to Haikou Customs, the top threegoods in terms of sales volume were cosmetics, watches and jewelry, accountingfor 71.5 percent of the total duty-free sales in the same period.

Salessurges as duty-free policy kicks in

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

Meanwhile, the categories of duty-freegoods have been expanded from 38 to 45, with the addition of electronicproducts such as mobile phones and laptops.

As part of the core policies of theconstruction of Hainan Free Trade Port (FTP), the new policy in duty-free shoppinghas made Chinese consumers more willing to spend than ever before. Thedividends of the duty-free policy were also further realized over the past yearwith the opening of five more duty-free shops.

Qin Lin, a tourist from south China'sGuangxi Zhuang Autonomous Region, was buying cosmetics at a duty-free shop indowntown Haikou, the capital of Hainan. It was her first visit to Hainan andduty-free shopping was an important part of her itinerary.

"With the duty-free shopping quotaraised significantly, we can buy more kinds of stuff," said Qin, notingthat with overseas travel hindered by the epidemic, Hainan offers consumers aconvenient alternative for duty-free shopping.

Hainan also introduced mail deliveryservices for tourists to the island in early February, in addition to theoriginal option of airport pickup when leaving the island.

Since its official launch, the Hainanbranch of China Post has mailed more than 2.08 million duty-free items for231,000 customers. The measures have boosted duty-free sales, local post officeofficials said.

Located in Haitang Bay, Sanya, a touristresort in Hainan, Sanya International Duty Free City is the world's largestsingle duty-free shop, with an area of 120,000 square meters. Home to more than350 international luxury brands, it has become a popular attraction fortourists.

Gao Xujiang, deputy general manager of theChina Duty Free Group (CDF), which operates the shop in Sanya, said despite theepidemic in 2020, the shop has become the top single commercial complex induty-free sales in China and the world. The CDF has also become the largestduty-free retailer in the world, according to Gao.

China Duty Free Group Co Ltd, a state-ownedenterprise operating duty-free business, reported that its operating revenuejumped by 83.85 percent year-on-year to 35.5 billion yuan in the first half ofthe year, the company said in a statement filed with the Shanghai StockExchange.

The company has attributed the robustgrowth to China's effective control of the COVID-19 epidemic, the introductionof new offshore duty-free policies, as well as the low-base factor last year.

Haikou International Duty Free City, aworld-class tourism and shopping complex being built by the CDF, is expected toopen in June next year.

As fine-tuned favorable policies continueto draw more consumers, the island's offshore duty-free sales are likely toexceed 60 billion yuan in 2021, quadrupling from 2019, said Shen Xiaoming,Party chief of Hainan, at a press conference in April.

A report jointly released in May by KPMGChina and the Moodie Davitt Report said the enhanced shopping policy in July2020 gave tremendous impetus to brands in the channel as other duty-freemarkets fell into a deep pandemic-driven slump.

The report predicted that, with the newshopping policy giving tremendous impetus to overseas brands, the Hainan freetrade port will likely become the world's biggest duty-free market in the nearterm if it continues on its current growth curve.

HainanFTP gives impetus to duty-free shopping

China released a master plan last June tobuild the island province into a globally influential and high-level free tradeport by the middle of the century.

As part of the master plan for theconstruction of the Hainan Free Trade Port released by the central governmentlast year, the newly adjusted duty-free shopping policies have sparkedremarkable enthusiasm among consumers, said Xie Xiangxiang, an associateprofessor of tourism at Hainan University.

"Duty-free shopping is becoming thenew blockbuster growth point for Hainan's tourism industry and for thedevelopment of Hainan as an international tourism center," he said.

Feng Fei, governor of Hainan, saidduty-free sales networks around the island will be expanded to better meetdomestic demand for imported goods during the 14th Five-Year Plan period(2021-25), with sales of duty-free goods expected to reach 300 billion yuanover the next five years.

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

The new policy has significantly boostedduty-free consumption in Hainan, and won back a great deal of overseasconsumption, which will help promote the construction of Hainan as a majorattraction in international tourism, said Liu Feng, director of the ResearchCenter for Free Trade Port with Chinese Characteristics of Hainan NormalUniversity.

The offshore duty-free policy was introducedon April 20, 2011, to boost development of the island as an internationaltourist destination. It has been continuously adjusted and expanded in terms ofindividual duty-free shopping quotas and the range and number of items on saleto cater to the needs of tourists, provincial government officials said.

Hainan has sold about 98 billion yuan ofduty-free goods in the past 10 years. During that time, more than 25 millionpeople shopped, and about 120 million items were sold, according to officialstatistics.

China's Hainan province is also consideringimplementing a new short negative list management model, this time for foreignwork permits, in a move to attract talent from around the world to Hainan, FengFei said. In general, China's negative list includes industries that foreignersare not allowed to invest in.

Feng said luring professional talent,especially overseas talent, is a core issue for the construction of the HainanFTP.

"Hainan is offering visa exemptions tocitizens of 59 countries. We will further improve the level of facilitation andextend the length of the visa-free stay," Feng said at a news conferenceoutlining the newly released law for the Hainan FTP in Beijing on June 21.

On June 10, China passed a law makinginstitutional arrangements for the construction of the FTP at the nationallegislative level. The law stipulates measures promoting trade, investment andenvironmental protection and enables market entities, especiallyforeign-invested companies, to enjoy more opportunities as it features ashortened negative list.

The law also stipulates visa and workpermit facilitation for international talent, aiming to gather talent fromaround the world to Hainan.