Economic Watch: China’s duty-free market expands amid overseas consumption return

China’s duty-free market has been gathering steam with overseas consumption flowing back to the home market due to the impact of the COVID-19 pandemic.

China’s southern island province of Hainan recorded 1.5 billion yuan (about 229.7 million U.S. dollars) in offshore duty-free spending during the Spring Festival holiday this year, double the figure from the same period in 2019, official data showed.

Offshore duty-free sales in Hainan are expected to double in 2021 for the second year in a row, as fine-tuned favorable policies continue to draw more consumers, Shen Xiaoming, Party chief of Hainan, told a press conference Monday.

The island’s offshore duty-free sales are likely to exceed 60 billion yuan in 2021, up from 30 billion yuan last year, which had doubled from 15 billion yuan in 2019, Shen told the press conference.

The province previously increased the annual tax-free shopping quota per person from 30,000 yuan to 100,000 yuan starting from July 1, 2020.

The categories of duty-free goods have also been expanded from 38 to 45, with electronic products such as mobile phones and laptops added to the duty-free list.

By 2025, China’s duty-free market is expected to top 150 billion yuan, according to a research note by CITIC Construction Investment Securities.

A large number of listed Chinese companies, attracted by the huge growth potential, applied for qualifications covering duty-free businesses in the cities of Beijing, Shanghai, Guangzhou and Wuhan last year.

Apart from duty-free businesses at airports, ports and offshore islands, the new model of cityside duty-free shops is attracting considerable attention.

“Cityside duty-free stores, usually located in urban areas, benefit from greater transportation convenience and longer effective purchase periods,” said Wang Yun, a researcher with the Academy of Macroeconomic Research.

Citing prospects of such stores amid the country’s further opening-up of the service trade sector, Wang said developing the duty-free economy will drive the coordinated growth of the local catering and tourism industries