Chinese duty‑free reforms unlock retail potential

China is once again reshaping its travel retail landscape with a further set of measures designed to stimulate consumption, expand product offerings and improve passenger convenience. The changes were jointly issued on 30 October by five regulatory authorities: Ministry of Finance, Ministry of Commerce, Ministry of Culture and Tourism, General Administration of Customs and the State Administration of Taxation.

The measures are intended to boost overall consumption, especially of Chinese products; repatriate travelling shopping from abroad; attract foreigners to enter the country for shopping; and promote the healthy and orderly development of the duty-free retail business.

Championing Chinese products

One of the key elements of the policy is to optimise the tax-refund and exemption regime for domestic goods sold through duty-free channels. Duty-free retailers, including foreign-invested enterprises approved for duty-free business in China, are encouraged to procure “high-quality and Chinese-characteristic” domestic products. According to the policy notice, such goods will be treated as exports for the purposes of VAT and consumption-tax refund or exemption.

Customs supervision will treat these domestic goods as duty-free goods once they enter duty-free warehouses, thereby streamlining the process for retailers. The policy also specifies that duty-free shops must allocate not less than one quarter of their business area to domestic products, which include time-honoured brands, cultural and creative goods, and items of intangible heritage.

Category expansion

The new measures also expand the range of products allowed in duty-free stores.

Newly approved categories include mobile phones, micro-drones, sporting goods, health foods, over-the-counter drugs and pet food. In addition, relevant departments should optimise the supervision of imported duty-free goods and speed up the progress of overseas ‘hot-selling goods’ reaching the shelves of China’s duty-free shops. International brands are encouraged to launch the latest products and hot sellers through China’s duty-free channels.

Simplifying the business

To facilitate business operations, the policy relaxes approval and layout requirements for duty-free shops. Provincial finance departments, commerce, culture, tourism and other local departments are tasked with coordinating approvals for departure duty-free stores. The measures also allow for the optimisation of operating areas and layout based on local conditions and themes, giving operators more flexibility in how they design and run their stores.