China’s Hainan free-trade port plan off to fast start as duty-free shopping soars in first week
- Tourists, the vast majority of whom were Chinese, spent 450 million yuan (US$64 million) on imported goods at Hainan’s four duty-free malls in the first week of July
- The annual per person tax-free limit increased to 100,000 yuan (US$14,300) on July 1 to attract Chinese tourists in particular to spend money at home rather than abroad
Duty-free sales on China’s island province of Hainan surged in the first week of July after Beijing raised the annual tax-free shopping limit for tourists as part of its new free-trade port plan.
Tourists, the vast majority who were Chinese, spent 450 million yuan (US$64 million) on imported goods at Hainan’s four duty-free malls in the first week of July, according to the Hainan Customs Administration, after taking advantage of the new 100,000 yuan (US$14,300) annual per person tax-free limit.
The new limit, which was raised from 30,000 on July 1, only applies to purchases made by tourists at Hainan’s four duty-free malls and not duty-free goods purchased overseas and then imported into China. The number of goods covered was also increased to 45 from 38, meaning cellphones, tablet computers, alcoholic beverages, and tea are now included.
The sales for the first week were 58 per cent above the daily average during the first half of the year, as shoppers saved over 65.7 million yuan (US$9.4 million) in taxes, the government estimated.
Some 155 million Chinese travelled abroad in 2019, up 3.3 per cent from the previous year, according to the Ministry of Culture and Tourism, while in 2018, Chinese citizens spent US$277 billion overseas, beating the United States and Germany combined.
Since the start of July, around 10,000 tourists per day have shopped at Hainan’s four duty-free malls, spending around 6,000 yuan (US$857) each on average, based on Customs Administration statistics.
Cosmetics were the most popular duty free purchase, accounting for 51.3 per cent of total duty free sales, followed by jewellery with 14.1 per cent and watches with 11.9 per cent.
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Last year, shoppers made a total of 3.84 million purchases worth 13.61 billion yuan (US$1.94 billion) at Hainan’s duty-free malls.
Hainan appears to be benefiting from the recent global lockdowns caused by the coronavirus pandemic as, according to a survey released earlier this month by the Joint Tourism Big Data Lab of China Tourism Academy and travel agency Ctrip, over 57 per cent of respondents said they would contemplate taking more domestic trips if outbound travel did not recover during the rest of 2020.
Competitive prices also appear to be helping Hainan, particularly when compared to Hong Kong, once one of the top destinations for Chinese tourists to shop.
A Burberry shoulder bag sells for 17,300 yuan (US$2,470) at the Sanya mall, compared to HK$20,500 (US$2,644 yuan) in Hong Kong’s Times Square.
Shoppers can also purchase an iPhone 11 Pro 512G for 10,210 yuan (US$1,458), which is 20 per cent below the standard selling price of Apple stores in mainland China, and cheaper than the HK$12,499 (US$1,612) in Hong Kong.
Tourism has long been a big service trade deficit item on China’s balance of international payments.
China reported a total service trade deficit of US$88.2 billion in the first five months of 2020, of which US$73.3 billion, or 83.1 per cent, came from tourism spending abroad, according to official data.