Hainan Island Raises Duty-Free Limits To Spur Luxury Consumption

China’s Southernmost Province Bills Itself As High-End Shopping Destination

18 months after the launch of a pilot duty-free program aimed at boosting high-end shopping and expanding consumption among mainland Chinese tourists in April 2011, later this month customs authorities are set to raise the duty-free allowance for domestic and international visitors to Hainan island from 5,000 yuan (US$795) to 8,000 yuan ($1,273).

Met with overwhelming success in the wake of its grand opening, China Duty Free Group’s Sanya Duty-Free Store (三亚免税店) achieved sales of $1 billion yuan (US$159 million) worth of luxury goods between April 2011 and January 2012. Now, in the hopes of building on last year’s takings, the Group is set to open an even larger downtown duty-free outlet in 2014 with the completion of the Haitang Bay International Shopping Complex.

Competitor Hainan Provincial Duty Free Co., which opened a 2,200 square meter duty-free shop at Haikou Meilan International Airport last year, will likely also welcome the raised allowance with open arms, as sales have shown a positive correlation following the program’s launch last year.

Part of a series of policy decisions that have jump-started Hainan island’s burgeoning duty-free business, more than anything this month’s moves highlight tourism authorities’ eagerness to compete with other popular regional destinations like Hong Kong, Thailand, Singapore and Bali on the luxury shopping (rather than just sightseeing and accommodations) front. Still, though Hainan is expected to become a tourist draw on par with Singapore by 2021 (according to a recent World Travel & Tourism Council report), we’d say it’s a stretch to expect the island to be neck-and-neck with offshore luxury duty-free shopping hotspots like Hong Kong — or overseas destinations like Paris or New York — any time soon.