HAIKOU /China/, July 29. /TASS/. The implementation of the free trade port construction program in the southern Chinese province of Hainan led to a rapid development of duty-free trade, growth of consumption and other sectors of the island's economy, according to Li Yong, Deputy Director of the Investment Promotion Agency of the Ministry of Commerce.
"The construction of the free trade port in Hainan province has led to the rapid development of duty-free trade, as well as the growth of tourist consumption and other related industries," he said in his video message to the participants of the international consumption forum held on the margins of the 2nd China International Consumer Products Expo, which is taking place in Haikou.
Along with the forum, the expo included a series of thematic events where experts, government and business representatives discussed the development of the consumption sector in the current environment, the success of building a free trade port in Hainan, of attracting highly qualified professionals from other regions in China and from abroad, and the preferences and tax benefits the province offers to Chinese and foreign enterprises in the field of business taxation.
Moreover, the world's largest consulting companies participating in the expo presented their vision for economic development of Hainan and the province's success in implementing a free trade port program and turning the island into an international tourism and consumption center.
Positive outlook
The long-term outlook for the duty-free market in the southern Chinese province of Hainan "remains very positive as Hainan continues to develop as a global leader in duty-free sales targeting Chinese consumers," according to a report KPMG presented at the show.
"We have seen in the last year the announcement of a number of other ‘duty free’ areas being established in China looking to position themselves as potential options for customer and brands. These areas do have their merits but we see Hainan maintaining its own competitive advantage due to its natural resources (sun, sea and leisure), fast-growing retail industry and forward looking vision," the report says.
Despite some economic slowdown associated with the Omicron strain in the first half of this year, the duty-free market rebounded in the second quarter thanks to China's successful anti-epidemic policy, as evidenced by an increase in shoppers and spending in June this year, the company said.
Attracting new brands
According to the report, more than 700 brands were snow being sold across all categories in Hainan in the middle of 2021. According to KPMG's forecast, this year their number will increase by 30%, to about 900.
Brands are more willing to enter Hainan because of the measures taken by local authorities, which are fighting counterfeiting and illegal imports, KPMG analysts said. "The Hainan authorities are building a strong consumer trust in Hainan among Chinese consumers as a place to purchase authentic products from international brands at reasonable retail prices," the report said.
Consumption and tourism
The company notes that the world's biggest brands are wondering where Chinese tourists and consumers will go once the borders open. "From our perspective, we are seeing increasing signs that Chinese consumers are looking at Hainan as a key destination," the paper says.
According to a KPMG survey on where Chinese residents would like to travel once the borders open, Tokyo (45% of respondents) and Paris (37%) ranked first and second in popularity, respectively. The third place is divided between three destinations: Singapore (29%), Hainan (28%) and Hong Kong (28%). "This proves the quite amazing development that has happened in Hainan in the past few years that it is now considered an equal of Hong Kong and Singapore and ahead of London and New York in the eyes of Chinese travelers," the report stresses.
It also notes that many analysts are wondering what will become of Hainan's duty-free sector once China eases restrictions on outbound tourism and Chinese tourists head overseas. "The short answer is that whatever happens to outbound travel, Hainan’s offshore duty free sector is here to stay," the document states. As it points out, this is due in part to well-placed promotion of tourism, business and investment by Hainan Provincial Bureau of International Economic Development and others.
"We expect further preferential and supportive policies to boost the island’s duty-free industry. Importantly, too, heavy investment in tourism infrastructure on the island is happening at pace. Far-sighted retailers’ realization that duty free cannot exist in isolation will ensure that offshore duty free continues to flourish," the paper points out.
Support measures
The report states that the introduction of additional duty-free policy measures in Hainan on July 1, 2020 has had a positive impact on the sector. For example, the quota for duty-free purchases was increased to 100,000 yuan (about $14,77,000 at current exchange rates), the number of categories of goods sold duty-free was expanded from 38 to 45, and the previous restriction that the maximum price of goods purchased under this program could not exceed 8,000 yuan (about $1,18,000) per unit was abolished.
"In our view, this policy decision ranks as one of the most far-sighted, consumer- friendly, business-supporting measures to date," KPMG said. In the two years since the duty-free policy was adjusted, duty-free stores on the island have brought in "tremendous volumes" of sales, the report stresses.
The expo stimulates consumption
The paper said government support for the duty-free retail sector is also reflected in the 2nd China International Consumer Products Expo. As noted, the expo reflects that duty-free trade is a key part of Hainan's plan to build a free trade port, which will see the island establish a system to ensure free trade and investment by 2025.
"This hugely ambitious event offers an important opportunity for international exhibitors and visitors to gain a deeper understanding of Hainan’s Free Trade Port policy. Simultaneously, the Expo will create many business opportunities for Chinese and international companies, positively impacting the province’s duty free industry," it said.
About the expo
The 2nd China International Consumer Products Expo will be held from July 25 to 30 and will feature over 2,800 brands from more than 60 countries and regions around the world. Over 600 kinds of products will be unveiled during the expo. As expected, the exhibition will be visited by more than 40 thousand businessmen. France is the guest of honor at this year's event.
The opening ceremony marked the start of the Expo's business program. The exhibition itself started on Tuesday: from July 26 to 28 the exhibition will be open only for the business community and mass media, and on July 29-30 it will open its doors for the general public.