Duty-free shopping surges in popularity in China

While luxury sales growth on the mainland is slowing down, business at domestic duty-free shops is entering a golden age.

In September, the world's largest duty-free shopping centre will open its doors in Sanya's Haitang Bay on Hainan Island, one of the most popular holiday destinations on the mainland. Covering a gross floor area of 120,000 square metres, the super-large mall will use more than a third of its total area to sell top-brand duty-free goods, ranging from perfume, skincare products, jewellery, fashion and leather goods.

Running the five billion yuan (HK$6.29 billion) commercial complex is China Duty Free Group (CDFG), a subsidiary of China International Travel Service Corp. The state-owned company is so far the only operator authorised to run duty-free businesses nationwide, and it generates about 40 per cent of all industry revenues.

Smaller player Sunrise Duty Free operates shops in Beijing and Shanghai's airports, while regional operators in Shenzhen, Zhuhai and Hainan have shops in each of these cities.

"Haitang Bay shopping centre will be more luxurious and include more top brands than any other duty-free shop in the country," said Fu Bo, a CDFG spokesman.

The centre is expected to provide a boost to China's duty-free industry, which started to thrive in 2011. That year, CDFG opened its first shop in downtown Sanya, Hainan, after the central government introduced a policy allowing tourists to buy up to 5,000 yuan of duty-free goods before leaving the island. The cap was later raised to 8,000 yuan.

The shop has proved to be a big success as the number of visitors jumped from 2.59 million in 2011 to 3.42 million in 2013. Accumulated sales revenue from the store reached seven billion yuan by March this year.