China’s duty-free market is forecast to grow fourfold to 258 billion yuan (US$40 billion) in 2025, a new report says, as the government looks to boost domestic consumption to shore up the economy. The duty-free market in China was estimated to be worth 66 billion yuan last year, according to a report by The Economist Intelligence Unit (EIU) published on Saturday. But it is poised to quadruple in value in three years’ time, provided Beijing clears strict quarantine mandates for international travel by late this year. The report added the island province of Hainan, which has been declared a free-trade port and a duty-free hub, will account for half of the domestic duty-free market by 2025. Chinese consumers spent more than 180 billion yuan overseas on duty-free products in 2019, accounting for 40 per cent of total global duty-free sales. But China’s duty-free market only accounted for 8 per cent of total global duty-free sales, showing the limitations of its offerings compared to the massive spending power of its consumers. Beijing is seeking to address this and turn the focus of economic growth in the future to domestic consumption through its so-called dual circulation strategy . “If some of Chinese consumers’ overseas spending on duty-free items could be repatriated successfully to the domestic market and maintained, even once borders reopen to international travel, it would significantly boost the size of the duty-free market in China,” the report said. In July last year, Hainan increased the duty-free quota from 30,000 yuan to 100,000 yuan (US$5,000-16,000) per person each year and expanded the tax-free goods categories to include electronic products and wine. Living with zero Covid in China, 2 years and counting Since then, monthly duty-free sales on the island have boomed , growing at an average rate of 200 per cent year on year. After the government last February allowed duty-free items bought in Hainan to be delivered to customers after their departure, duty-free sales shot up by 954 per cent that month from a year earlier. During the “golden week” seven-day national holiday at the start of October last year, sales at nine duty-free shops in the island province increased by 359 per cent to 1.64 billion yuan compared to same time in 2019 before the outbreak of the coronavirus, according to Hainan’s department of commerce. The boom of the domestic duty-free market during the pandemic has largely resulted from Chinese people unable to travel overseas, said Zhou Mingqi, founder of tourism consultancy Jingjian Consulting. The duty-free market in Hainan is still lagging behind on product ranges and price competitiveness The EIU But The EIU report said: “The Chinese duty-free market will face intense competition from other economies once travellers no longer need to quarantine upon their return. “The duty-free market in Hainan is still lagging behind on product ranges and price competitiveness, especially for mid-to-high-end products. The official limits on the value of purchases also prevent shoppers from buying big-ticket items in Hainan.” The EIU said that duty-free shops in city centres, including Guangzhou, Xian, Chengdu, Tianjin and Wuhan, are expected to be the next growth engine of China’s domestic duty-free market, and duty-free sales in city centres will achieve a triple-digit compound annual growth rate during China’s 14th five-year plan from 2021 to 2025. As part of its 14th five year plan and 2035 vision, China will spend five to 10 years developing a number of international consumer centres , with Beijing, Shanghai, Guangzhou, Tianjin and Chongqing playing a leading role. The plans include attracting more international brands, increasing the number of duty free shops, allowing more categories of duty-free goods and increasing the duty-free shopping quota per consumer.