Customers shop at a duty-free mall in Sanya, South China's Hainan Province. Officials from Hainan said on Monday that sales of duty-free goods amounted to nearly 100 billion yuan ($15 billion) in the past 10 years, and the number of shoppers exceeded 25 million. Duty-free sales account for about 40 percent of Hainan's domestic tourism revenue. Photo: cnsphoto

Hainan, the tropical resort destination known as China's Hawaii, is on track to become the biggest duty-free market in the world in the next two years, a report released on Friday showed, illustrating how China's policy of building a world-class shopping haven has converted overseas shopping to domestic consumption, strengthening the plan of building Hainan into a free trade port on par with Dubai and Singapore.

The report, jointly released by KPMG China and Moodie Davitt Report at the ongoing China International Consumer Products Expo (CICPE), said Hainan's offshore duty-free sector has been "the rising star" of global duty-free and travel retail since its inception in 2011.

The growth was further boosted by the introduction of an enhanced shopping policy in July 2020, which raised the annual shopping limit from 30,000 yuan ($4,644) to 100,000 yuan per person, bringing the offshore duty-free business to approximately $5 billion by the end of 2020.

The data is in sharp comparison of other duty-free markets such as Switzerland-headquartered Dufry and South Korea's Lotte Duty Free, which fell into a deep pandemic-driven slump.

China Duty-Free Group or Hainan's dominant duty-free player climbed to the top by the end of the first half of 2020, ahead of Lotte Duty Free. In 2019, the Chinese player only ranked No.4 in the world behind Dufry, Lotte Duty Free and The Shilla Duty Free (also South Korean), according to a report released by The Moodie Davitt Report.

A 29-year-old consumer surnamed Li who often goes on shopping tours to Hainan, told the Global Times on Friday that the duty-free market there has offered her more possibilities for luxury products such as LV and Hermes at a reasonable price.

Although she could also buy things at large malls like SKP in Beijing, where she has access to an even greater variety of luxury brands, the market in Hainan has a price advantage, which makes the place shine, especially when traveling abroad is still impossible amid the global epidemic.

Such prediction on Hainan is driven by supportive policies, such as the duty-free policy and tax burden reduction, and the huge pent-up demand from domestic consumers, Zhang Jianping, from the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Friday.

Official data showed that in the past May Day holidays, the province welcomed 2.95 million travelers, a growth of 121 percent from the same period last year, and travel revenue stood at 4.1 billion yuan, or more than three times the previous year. 

In 2019, over 83 million tourists, most of them from the Chinese mainland, visited the island, driving some $15 billion in tourism revenue. Even in COVID-ravaged 2020, the 'Eastern Hawaii' attracted 64.6 million visitors, down just 22.2 percent from 2019.

Despite the reduction in arrivals, sales at Hainan's offshore duty-free shops rose 127 percent year-on-year in 2020 to around 32.74 billion yuan. The province aims to make sales climb to at least $15.5 billion by 2022 and $46.5 billion by the end of 2025 in line with Hainan Province's 14th Five-Year Plan.

Chinese market watchers said the good sales performance in Hainan is also an example of the country's purchasing power, which has become the core driving force for economic development, and has been a global consumer boutique display and trading platform for the recovery and growth of the world economy. 

Observers also connected the robust consumption performance to China's ambitious plan of building Hainan into a free trade zone, which was first released in June 2020. The blueprint mulls to build Hainan into a globally-influential high-level free trade port by the middle of the century. A free trade port system focusing on trade and investment liberalization and facilitation will be "basically established" by 2025 and become "more mature" by 2035.

To achieve the goal, Hainan will boost its local industries, including tourism and consumption, as well as ease market access for foreign companies, analysts said. 

Bai Ming, deputy director of the international market research institute at the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce, told the Global Times on Friday that the establishment of a mature free trade port, with preferential policies, is likely to further mobilize international trade and investment, attracting enterprises with high growth potential from other countries. 

"The southern island could also coordinate with the Hong Kong Special Administrative Region, cementing China's position as the world's largest trading center and an economic powerhouse," Bai said,