China's Hainan free-trade port plan off to fast start

China's Hainan free-trade port plan off to fast start

Duty-free shopping soars in first week

A man wearing a face mask walks near a screen showing a public health announcement reminding people to wear masks in public at a shopping area in Beijing on Monday. Duty-free sales on Hainan island surged in July. (Reuters photo)
A man wearing a face mask walks near a screen showing a public health announcement reminding people to wear masks in public at a shopping area in Beijing on Monday. Duty-free sales on Hainan island surged in July. (Reuters photo)

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 (2 billion baht) 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 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.

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The sales for the first week were 58% above the daily average during the first half of the year, as shoppers saved over 65.7 million yuan in taxes, the government estimated.

Beijing announced in early June its plan to transform the tropical island into the world's largest free-trade port, with one of the main goals to tempt the growing numbers Chinese middle-class tourists to spend more of their money at home rather than abroad.

Some 155 million Chinese travelled abroad in 2019, up 3.3% 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 each on average, based on Customs Administration statistics.

Cosmetics were the most popular duty free purchase, accounting for 51.3% of total duty-free sales, followed by jewellery with 14.1% and watches with 11.9%.

Last year, shoppers made a total of 3.84 million purchases worth 13.61 billion yuan 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% 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.

China's massive Hainan free-trade port plan raises questions over global trading rules compliance, experts say

A Burberry shoulder bag sells for 17,300 yuan (78,000 baht) at the Sanya mall, compared to HK$20,500 (83,400 baht) in Hong Kong's Times Square.

Shoppers can also purchase an iPhone 11 Pro 512G for 10,210 yuan, which is 20% below the standard selling price of Apple stores in mainland China, and cheaper than the HK$12,499 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%, came from tourism spending abroad, according to official data.


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