Road to Recovery

A game-changing move in Hainan

The rise and rise of the Hainan offshore duty free business is set to be boosted further by a leap in shopper allowances for visitors – a landmark moment for travel retail in the province.

Major changes to the offshore duty free shopper allowance on Hainan Island, announced this week, are the latest steps in a bold national and provincial vision for the resort location.

As we reported, the annual allowance for visiting shoppers is to be raised from RMB30,000 (US$4,215 at current exchange rates) to RMB100,000 (US$14,050).

Alongside news that the range of duty free categories is also being expanded (with details to emerge soon), this marks a game-changing move for travel retail in China and Asia.

The Hainan Free Trade Port plan represents a huge opportunity for the duty free industry

The planned allowance increase is of course good news for China Duty Free Group (CDFG), whose acclaimed CDF Mall in Haitang Bay is currently the sole global hot spot for travel retail sales. CDFG has big ambitions for its business in Hainan, and is accelerating the completion of the magnificent Haikou International Duty Free Mall, which will be completed within the next three years. That, alongside other big duty free projects on the island, is timed to respond to anticipated soaring domestic visitor numbers.

The increased allowance follows soon after another major boost to the offshore business was announced. Last month CDFG introduced a new scheme allowing Mainland visitors to Hainan to spend any of their unspent RMB30,000 (US$4,240) annual allowance online for up to 180 days once they arrive back – and have the goods couriered to their home.

The move to build on Hainan’s rich potential has been government policy for some time. In April 2018 Chinese President Xi Jinping announced the national government’s support for the pilot Free Trade Zone, embracing the entire province.

The plan marks the latest step in a far-sighted strategy for the resort island, with domestic and international visitor numbers set to soar

This week’s news was announced as part of a hugely ambitious Hainan Free Trade Port Overall Plan, released by the Hainan Provincial Bureau of International Economic Development. The Provincial Bureau described the Free Trade Port as “a flagship of China’s opening up and a key opening door in the new era”.

The Free Trade Port plan will include a new visa-free policy for foreigners and reduced restrictions on cross-border services. By 2025 the island will become an independent customs territory with zero tariffs, which should present opportunities for brands, retailers and department stores.

It will provide for trade and investment across various sectors, from aerospace to the cruise & yacht industry. The tourism industry will be built with integration between tourism and culture, sports and healthcare and a new Sanya Cruise Port will be developed, among other projects. Airlines will be encouraged to use Hainan as a base to develop their international connections.

Tourism and trade are at the heart of the ambitious Hainan vision through to 2050

With Chinese domestic tourism set to soar in coming years, and the offshore duty free allowance being more than tripled, China Duty Free Group is accelerating the completion of the magnificent Haikou International Duty Free Mall on Hainan island. The project, which began in 2019, will be completed within three years.

Timeline of recent industry developments on Hainan Island

26 January: China Duty Free Group (CDFG) closes CDF Mall in Sanya and Haikou downtown store for health reasons

19-20 February: Duty free stores re-open

21 March: CDFG President Charles Chen tells The Moodie Davitt Report of his high expectations for summer travel and spend on Hainan, from May through to the mid-Autumn festivals and national day in October. Crucially he flags up a potential positive change to the treatment of duty free allowances, with visitors to be permitted to maximise their quotas online.

22 March: Hainan’s provincial government announces a CNY150 million (US$21.2 million) rejuvenation plan for the island’s beleaguered tourism industry with duty free shopping at the heart of its plans.

7 April: Haikou Customs says sales picked up encouragingly in the period from 19 February to 30 March, hitting around 80% of previous year levels at the island’s four duty free stores.

11 April: CITS and Hainan-headquartered aviation-to-leisure giant HNA Group sign a strategic cooperation agreement in Haikou. The two parties will cooperate across various sectors, including aviation, duty free retailing and asset projects to promote the upgrade of the Hainan Free Trade Zone port.

13 April: Two new offshore duty free shops open on Hainan Island.

15 April: China unveils plans to permit visa-free travel to Hainan from May. The policy allows travellers from 59 countries to visit Hainan for 30 days visa free.

29 April: CDFG introduces scheme allowing Mainland visitors to Hainan to spend any of their unspent RMB30,000 (US$4,240) annual allowance online for up to 180 days once they arrive back.

1 May: Seasonal holiday begins, with Hainan travel bookings and sales showing strong recovery.

2 June: News emerges that the annual offshore duty free allowance for shoppers visiting Hainan Island is to be raised from RMB30,000 to RMB100,000 as part of sweeping government plans for the creation of Hainan Free Trade Port.

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The Moodie Davitt eZine

Issue 280 | 3 June 2020

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