Offshore duty free policy boosts economic vitality in S China's Hainan

The offshore duty free policy in south China's Hainan province has not only brought tangible benefits to visitors, but also pushed forward the tropical island's economic transformation, maximized consumption potential, and served as a crucial engine for economic development.

Photo shows two tourists selecting goods at a duty free shop in Haikou. (People's Daily/Wang Xinyue)

Over the past 10 years, Hainan has witnessed more than 100 billion yuan ($15.66 billion) in sales of duty free goods to more than 25 million shoppers, with the total number of items sold exceeding 120 million. Meanwhile, tourists have saved a total of 20 billion yuan in purchasing these products.

During this period, sales of duty free goods in Hainan grew at an average annual rate of about 44 percent, while the number of shoppers increased at an average annual rate of about 30 percent, while the number of items sold grew at an average annual rate of about 40 percent.

Since April 2011, when the offshore duty free policy was first implemented, the policy itself has been adjusted eight times. For instance, the rate of tax exemption continues to increase. In 2011, the duty free shopping quota for each tourist was only 5,000 yuan per year, which gradually went up and reached 100,000 yuan last year.、

Photo shows a duty free store in Hainan. (People's Daily/Wang Xinyue)

As of January 2021, the number of offshore duty free operators jumped to 6 from 2 in 2011, with a total of 9 physical stores currently in operation on the island.

Back in 2011, the offshore duty free store in Sanya, Hainan, was home to less than 100 international brands, mainly in the field of perfume and cosmetics, and more than 85 percent of its sales were reliant on these products.

Today, Hainan has introduced 650 international brands, including jewelry, watches, bags, clothing, and electronic products. Consumers can now purchase an increasing number of globally renowned brands without having to go abroad. Among them, sales from a single store of more than 20 global brands such as Estée Lauder, Cartier, Bulgari and Tiffany rank first among all duty free retail in the world.

During this year’s Labor Day holiday, the market for offshore duty free shopping in Hainan continued to boom. Statistics from the customs department in Haikou, capital of Hainan, indicated that from May 1 to 5, 1.345 million pieces of duty free goods with a total value of 993 million yuan were purchased by 121,000 shoppers, an increase of 229 percent, 248 percent, and 141 percent respectively year on year.

Photo shows tourists looking at goods at a cosmetics counter at a duty-free shop in Hainan. (People's Daily/Wang Xinyue)

"Duty-free shopping has become an important 'engine' for the development of Hainan," said Xia Feng, executive director of the Institute for Advanced Studies of Humanities and Social Sciences at Hainan University.

Xia further explained that Hainan’s economy crashed after its real estate bubble burst in the 1990s. It can be said that the offshore duty free policy is pivotal to the island's divorce from its economic dependence on the real estate sector.

Statistics show that in the first quarter of this year, the added value of the service industry in Hainan increased by 25.5 percent year on year, contributing 78.9 percent to economic growth. Out of this added value, that of the wholesale and retail industry increased by 64.2 percent over the same period last year, while the added value of the accommodation and catering industry increased by 42.5 percent year on year.

Photo shows the exterior of Sanya Haitang Bay International Duty Free Complex. (Photo courtesy of Sanya Haitang Bay International Duty Free Complex)

Furthermore, the offshore duty free policy has also served as an effective way of creating new jobs. Currently, there are a total of 9,541 employees in the nine duty-free shops in operation.

"Duty-free shopping has greatly stimulated economic vitality in Hainan," said Lei Jun, an associate professor at the School of Economics and Management of Hainan University.

Lei believed that with the continuous refinement of the offshore duty free policy, the enhanced quality and efficiency of tourism shopping consumption in Hainan, and effective adjustments in economic structure, tax-free shopping has emerged as a "golden business card" for the Hainan tourism sector.