S China island resort to become shopping paradise with new tax-free program

( English.news.cn )

Updated: 2011-05-19

"I have never seen people lining for luxury goods," complains tourist Sun Ling outside a duty-free store in Sanya, a resort city in south China's island Hainan Province.

The store has seen a large jump in traffic since opening on April 20 as part of a duty exemption program aimed at the island's tourists.

The program allows tourists and locals alike to enjoy duty exemptions on certain imported commodities worth no more than 5,000 yuan (765 U.S. dollars) before flying to other destinations in China.

After deducting customs duties, value-added taxes and consumer taxes, the store's products are usually 10 to 35 percent less expensive than in other stores.

Records from the store show that more than 175,000 people visited the store over 11 days following the store's opening. Commodities with prices below 5,000 yuan accounted for about 90 percent of the store's sales.

International name-brand cosmetics and perfume are the most popular items, says Hao Wengang, marketing director of the China Duty Free Group (CDF), which supplies the store with some of its products.

"I have to come very early in the morning to line up, otherwise the shelves will be bare and nothing will be left," says Fang Gege, a student from Hangzhou.

The Hainan provincial government launched the program as part of its efforts to build the island into an international tourism destination.

The opening of the tax-free store allows Chinese tourists to splurge on luxury goods that they would usually purchase in Hong Kong or abroad, says Teng Rui, vice general manager of the Sanya store.

"Hainan is famous for its 'Three S's' - sea, sun and sand. Now, it can add a fourth 'S' - shopping," Teng says.

A report by consulting firm Bain & Company showed that China, the world's second-largest market for luxury brands, could overtake Japan for the top spot within a few years with the explosive growth of its middle class and increasingly large number of wealthy individuals.

However, Hainan's luxury goods industry is still lagging far behind Hong Kong, according to Hao. "Hainan has great potential for further exploration," Hao says.

An agreement to build a tax-free shopping center was signed in November of last year. The shopping center, with a planned investment of 5 billion yuan, will be located near Sanya's Haitang Bay.

Upon the completion of the shopping center, Hainan will take another large step towards becoming a top international tourism destination, says Xu Fengxian, a senior economic researcher from the Chinese Academy of Social Science.