CHINA. China is to turn Hainan into an international free trade zone in a pilot scheme. The programme could have profound repercussions for travel retail, not just on the resort island but elsewhere in Asia.

Chinese President Xi Jinping is hoping to drive tourism to the island province, and more “open and convenient” duty free shopping policies will be adopted there.

President Xi announced the decision today (13 April) during a speech in Hainan, as reported by Xinhua News Agency, the official press agency of the People’s Republic of China.

President Xi Jinping announced new measures for expanding reform and opening-up China earlier this week at the Boao Forum
Photo: Xinhua News Agency

Xinhua said China and Hainan would “gradually explore and steadily promote the establishment of a free trade port with Chinese characteristics”. Policies and institutional systems for the free trade port will be promoted “step by step and in stages”, President Xi stated.

Xi welcomed investors worldwide to invest and start business in Hainan and participate in the building of a free trade port there, Xinhua reported. Establishing a free trade zone will give foreign companies greater economic freedom on the island province.

Xi was speaking at a gathering celebrating the 30th anniversary of the founding of Hainan Province and the Hainan Special Economic Zone.

He said priority would now be given to implementing a proactive opening-up strategy and hastening the establishment of a new system for an open economy.

China Duty Free Group’s magnificent off-airport store at Haitang Bay

In a report this weekend, Bloomberg Technology commented: “The new policies will give a needed jolt to the US$13 billion tourism industry, with domestic operators like Tunju Corpo which is linked to Hainan’s HNA Tourism Group, getting a boost. Duty free shops also likely to sprout across the island, with state-owned China Duty Free Group enjoying an incumbent advantage over new rivals.”

It continued: Hong Kong retail sales, having rebounded from a two-year slump, may be at risk if Chinese families find it more attractive to vacation and shop in Hainan.”

“It is inevitable that Chinese shoppers will divert purchases of pricier items from Hong Kong to Hainan,” said Bloomberg Intelligence analyst Catherine Lim. “This is bound to hurt Hong Kong retail sales going forward.”

Bloomberg noted that any shift in China’s approach toward gambling could threaten Macau’s US$33 billion casino industry, as well as other casino hubs in Asia. DFS, ultra-powerful in Macau, will be monitoring developments closely.

Conversely, travel retail giant Dufry could be a beneficiary. Xi’s plan will be welcome news for Dufry minority shareholder HNA Group, the debt-laded Hainan conglomerate. HNA is the ultimate parent of Hainan Duty Free (HNDF Haikou Meilan Airport Duty Free Shop) and would likely benefit (along with China Duty Free Group) from any proliferation of licences.