Hainan to take on HK

09:03, December 28, 2010      

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News that a tax refund in Hainan will not apply to all tourists sent the stock price of China International Travel Service (CITS) — currently the only licensee for running duty-free shops in Hainan — down 8.53 percent from the previous trading day.

Markets had anticipated that all tourists would enjoy the new tax refund policy, but Monday's announcement from the Ministry of Finance made it clear that the first stage of the plan would not include tourists from other mainland provinces and municipalities.

CITS had been reportedly signed an agreement in November to develop the Hainan International Duty-Free City.

"The market had been expecting a broad tax refund policy to boost duty-free shop sales in Hainan, but the majority of domestic tourists are not covered in today's policy, that's why the market reacted pessimistically," Sun Yan, a tourism analyst with Hongyuan Securities, told the Global Times.

Effective from January 1, 2011, foreigners and visitors from Hong Kong, Taiwan, and Macao traveling to south China's Hainan — a tropical province in China — can get 11 percent tax refund from the items bought in designated duty-free shops, according to the official announcement of the Ministry of Finance Monday.

About 95 percent of Hainan's visitors are domestic tourists and only 5 percent come from overseas, said Xia Feng, head of Hainan Research Insti-tute under Hainan-based China Institute for Reform and Development.

"Today's policy is only the first step, more tax-refund policies are expected to be unveiled, including those for domestic visitors and even local Hainan residents," Xia told the Global Times.

But the timetable for further policy modifications remains unknown, he said, adding Chinese decision-makers tend to issue policies step by step and it also takes time for coordination among Customs and the business community, and also for improvement of the shopping environment.

The tax-refund policy is in alignment of the State Council's strategy to build Hainan into an international tourism attraction, said Hainan Research Institute's Xia.

The country had been looking for an ideal place similar to Hong Kong to boost domestic consumption, and Hainan proves to be the best candidate as it is the unique tropical island to domestic tourists.

About 30 to 40 percent of shoppers in Hong Kong and Seoul airports are Chinese tourists, building Hainan into an international tourism destination will keep purchasing at home, he said.

Source: Global Times
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