CHINA. Foreign duty-free sales in Hainan province soared to 46.8 billion RMB (US $ 7.24 billion) year-round following the introduction of purchase allowances improved on July 1, 2020, an increase of + 226% year-on-year, Hainan Customs reported yesterday.
The main changes to the overseas duty-free purchasing policy over the past year include:
- The overseas purchase quota is increased from 30,000 RMB to 100,000 RMB (US $ 15,500).
- The number of categories has increased from 38 to 45 (including wines & spirits).
- The limit of 8,000 RMB (US $ 1,250) for a single purchase has been removed.
- The number of cosmetic references that can be purchased has increased from 12 to 30
Hainan’s offshore duty-free sector, also boosted by a proliferation of retailers since late 2020, is on track to break all previous records in calendar year 2020.
Last year, revenues (including duty-free sales) increased + 127% to around 32.74 billion RMB ($ 5.05 billion). Duty-free sales alone reached 27,476 billion RMB (US $ 4.25 billion).
Local authorities had forecast that combined sales would exceed $ 9 billion this year, to reach at least $ 15.5 billion by 2022 and $ 46.5 billion by the end of 2025, according to the 14th plan. quinquennial of the province of Hainan.
Based on customs figures to date and its own June projection of 4.2 billion RMB (US $ 650 million) for duty-free / duty-paid sales, Goldman Sachs estimates first-half duty-free revenue 2021 to 27,383 million RMB (approx. US $ 4.24 billion) – an increase of over + 265% year-on-year – with combined pre-tax and duty-free revenues reaching 29,985 million RMB (4.64 billion US dollars).
âBased on the current execution rate (i.e. 30 billion RMB in 1H21), we believe that the Hainan government’s target of reaching 60 billion RMB ($ 9.3 billion ) this year would still be achievable, âGoldman Sachs said in a note.
The conversion rate for buyers (excluding Hainan residents) hit a good 57% in May, the company said. Average spend per buyer was 5,078 RMB (US $ 785) in May, then 4,385 RMB (US $ 678) in June.
To note: Fortnightly, the Moodie Davitt Report publishes Hainan Curated, in association with Foreo, a selection of all recent stories from the offshore duty-free sector in Hainan Province.
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