During the pandemic, Hainan emerged as China’s most popular duty-free shopping destination thanks to preferential government policies and a raft of new openings from international luxury brands. But with pandemic-era restrictions a thing of the past, will Hainan retain its duty-free crown?
Hainan’s location in the warm waters of the South China Sea has long made it a haven for fishing and agriculture and, in more recent years, tourism. However, over the past couple of years, a series of beneficial import and trade policies have made China’s southernmost province a consumer hotspot and put it on the radar of companies looking to grow their business in China.
Foreign and domestic travellers departing from Hainan (but not China) have an annual duty-free shopping allowance of RMB 100,000 (£11,458) – the most generous in the world. The allowance covers product categories such as cosmetics, luxury goods, alcohol and even electronics (when purchased from dedicated duty-free stores). With a saving of up to 35% on prices in the rest of China, there has been a strong incentive for consumers to make Hainan their main shopping destination.
“Consumers are entering a new era of duty-free shopping,” says Rocky Chi, head of planning at Emerging Communications, a leading Chinese marketing consultancy. “The Chinese government will continue to push for duty-free shopping, and as for consumers, they are spoiled for choice by such an easy way of shopping.” Indeed, the Chinese government plans to make the whole island duty free by 2025, not just the select malls currently offering the perk.
Certainly, the island’s appeal doesn’t seem to have waned since the lifting of Covid-era travel restrictions. During the 2024 Lunar New Year holiday, duty free spending in Hainan reached a record RMB 2.49 billion (£274.75 million) according to Haikou Customs, with shoppers spending an average of RMB 8,358 (£922) per person. “With projects around the island still being developed, there is definitely potential for Hainan to attract even more attention,” says Ran Guo, Director, Consumer Economy China, CBBC.
Hainan may be taking a greater share of travel and duty-free spending than five years ago, but Chinese consumers are still keen to travel abroad and plan to spend when they do. According to Dragon Trail Research’s recently-released Chinese Traveler Sentiment Report, 64% of survey respondents are planning to travel outside of China in 2024, and a similar proportion spend at least RMB 2,000 (£220) on shopping during a single outbound trip. During the recent Labor Day holiday from 1-5 May, Japan and Hong Kong – both popular for shopping – were among the most-visited destinations.
So, what does all of this mean for British companies? Certainly, Hainan’s continued appeal presents an opportunity for British consumer brands, especially those with an established presence in the market. “Hainan may not be a market to build brand loyalty, but it is a good place to launch new products,” says Ran Guo. The fact that people are visiting the island for leisure makes them open to trying new things or treating themselves to something they wouldn’t normally buy.
To tap into this willingness to buy, brands could consider creating an exclusive product or promotional packaging for the Hainan duty free market, especially around festivals like Lunar New Year or shopping events like Singles’ Day.
Going forward, British consumer brands will have to keep Hainan in mind when they consider their China market strategies. As KPMG and The Moodie Davitt Report’s 2024 Hainan Travel Retail Whitepaper points out, for Chinese consumers, “there are no barriers to visiting Hainan. And many incentives.”
