LONDON — The luxury retail sector in China‘s duty-free promised land, Hainan Island — which officially became a Special Customs Supervision Zone on Dec. 18 — reported encouraging figures in the first few weeks after a slew of beneficial policies kicked in that were designed to stimulate high-end consumption.
These included allowing zero tariffs on many goods entering the province.
According to Haikou Customs, offshore duty-free shopping turnover reached 1.1 billion renminbi, or $157 million, in the first week that the island became a free-trade zone, up 54.9 percent year-on-year. Visitors totaled 165,000 in the period, up 34.1 percent.
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At the top shopping mall, CDF Sanya International Duty Free Shopping Complex — which offers a comprehensive range of luxury brands including Gucci, Cartier, Prada, De Beers, and Brunello Cucinelli — sales and foot traffic during the first seven days grew over 80 percent and over 60 percent, respectively, year-over-year, fueled by promotional incentives.
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Gold jewelry, which is priced 180 to 300 renminbi per gram lower than in mainland China; electronics; premium cosmetics, and luxury goods have been among the top-selling categories.
According to Moodie Davitt, gold retailers, including Chow Tai Fook and Luk Fook, each recorded growth exceeding 300 percent following the Hainan Free Trade Port’s island-wide customs closure.
The retail resurgence continued into the new year. Haikou Customs said offshore duty-free sales reached 712 million renminbi, or $101.3 million, during the three-day national holiday between Jan. 1 and 3, up 128.9 percent year-on-year.
In Sanya, China National Service Corporation reported a 183 percent jump in sales and a 109 percent increase in footfall at its branch in the coastal city in the same period.
Since raising the annual tax-free shopping quota from 30,000 renminbi to 100,000 renminbi per person in July 2020, the tropical island on the southern tip of China has been on a rollercoaster ride with the duty-free retail sector.
Following a boom brought by pent-up demand during the COVID-19 era, the island’s duty-free sales in 2024 dropped 29.3 percent due to a crackdown on daigou [surrogate shopping], the return of international travel, and overall weak consumer confidence in mainland China.
In the long run, according to a report from KPMG, Hainan’s travel retail market is poised for development and is expected to become an important global hub, attracting high-quality customers from mainland China, as well as those from Malaysia, Thailand, South Korea, Vietnam, Australia, and Russia.
“From a market perspective, as China continues to open up its tourism market and the global tourism market continues to expand, Hainan’s travel retail industry is reaching a broader range of consumers from around the world,” the report said. “The province will strive to gain a more important role in the global travel retail market by attracting high-quality domestic customers and pleasing consumers who choose the island over overseas destinations.”
Case in point: Hainan authorities told local media that the provincial capital Haikou and the top leisure and shopping destination Sanya recorded China’s fastest growth in inbound flight bookings last Thursday, rising more than 300 percent and 500 percent, respectively.
Later in the year, the island’s duty-free sector is set to heat up even more when DFS, the LVMH Moët Hennessy Louis Vuitton-owned travel retail operator, unveils its first “seven-star” luxury retail and entertainment destination in the region.
DFS Yalong Bay will stretch over 1.38 million square feet and carry more than 1,000 luxury brands, including those from LVMH. The site will also boast immersive concepts spanning categories such as fashion and apparel, beauty and fragrance, watches and jewelry, wine and spirits, fine dining, and food and beverage.
Swire Properties in 2026 is also expected to unveil part of its large-scale, 2.1 million-square-foot, duty-free retail complex in Sanya’s Haitang Bay, in partnership with China Tourism Group.
The new project will become the third segment of the Sanya International Duty-Free Complex. A network of bridges will connect it to phases I and II of the project, which opened in 2014 and 2020, respectively.