Page 332 - 2022 White Paper on the Business Environment in China
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2 White Paper on the Business Environment in China

demand, ordering door-to-door gift deliveries for stores today. It is one of the six entities that have
their parents living in different cities. Such orders permits to operate on the island (Lee).
on online delivery services provider Meituan have
experienced growth, with orders in some cities As part of its 14th five-year plan and 2035 vision,
skyrocketing by over 200% compared with those China will spend five to 10 years developing a
in September, 2021 (Xinhua, “Holiday Spending number of international consumer center cities,
Further Vitalizes China’s Consumer Market”). with Beijing, Shanghai, Guangzhou, Tianjin and
Chongqing playing a leading role. Both Beijing and
Apart from domestic use, the duty-free aspects Shanghai said they had already laid out plans to
of Hainan are something that China hopes will attract more international brands, increase the
bring in more tourist revenue. China Tourism number of duty-free shops, allow more categories
Group Duty Free, the world’s largest travel retailer of duty-free goods and increase duty-free shopping
by sales, is hoping to capture a slice of the growing quota per consumer. Vice-commerce minister
multibillion-dollar spending by Chinese consumers Wang Bingnan confirmed all five cities had already
in the offshore tax-free shopping zone on Hainan all stepped up their plans. The expansion of duty-
Island. China Tourism filed its listing application free shopping can lift spending as it appeals to
with the Hong Kong stock exchange in June, 2021, both local shoppers who enjoy shopping as one
and aimed to make its debut in the last quarter of the perks of international travel and also attract
of 2021, people familiar with the matter said. The future shoppers from overseas. The plan is also in
application is still awaiting approval of the Hong line with a tone-setting commentary from Beijing
Kong stock exchange’s listing committee. With in October, 2021 which outlined consumption
government policies directed at boosting Hainan’s and investment as important “dual engines” to
offshore duty-free sector, China’s southernmost drive domestic demand. The saving on taxes can
province is developing into a shopping destination, be significant, and for the savvy shopper, it can
with retail revenues forecast to grow to US$46.5 be a deal-breaker to pay more for the same type
billion by 2025. This will help Hainan compete with of goods. Chinese consumers spent more than
Okinawa in Japan and Jeju in South Korea, the only 180 billion RMB (US$28 billion) overseas on duty-
other islands in Asia with similar offshore duty- free products in 2019, accounting for 40% of total
free markets, analysts said. In the meantime, as global duty-free sales. But China’s duty-free market
international travel has yet to take off because of only accounted for 8% of total global duty-free
travel restrictions amid the COVID-19 pandemic, sales, showing the limitations of what the domestic
Chinese tourists who traditionally visit duty-free market offers compared to the massive spending
stores overseas have since turned to Hainan as power of Chinese consumers. To fill this gap,
an alternative, China Tourism Group said in its Beijing is exploring more ways to support its so-
filing. Chinese residents spent over 700 billion called dual circulation strategy, which aims to boost
RMB (US$108.4 billion) on duty-free and duty- the economy with more domestic consumption, in
paid products overseas in 2019, about 14 times addition to strengthening its global connections.
the spending on China’s duty-free market during But ongoing Chinese regulatory crackdowns
the same year, according to research firm Frost could turn off international brands and restrict
& Sullivan. Some of the money that has been the development of consumer cities, added Lim.
redirected back home has not been triggered solely China’s final consumption expenditure in 2020 only
by the pandemic. An offshore duty-free sector is accounted for 54.3% of gross domestic product,
part of the government’s plan to develop Hainan according to the National Bureau of Statistics,
as a free-trade port, a key plank of President Xi significantly lower than developed countries and
Jinping’s policy to boost domestic consumption. even neighbors such as Vietnam with 75.2% or
Sales of consumer goods in China for the first eight Indonesia at 68.3%. In the third quarter of 2021,
months 2021 rose 3% from a year ago. The Beijing- consumption contributed around 64.8% to China’s
based company claims to have almost 100% share economic growth, investment around 15.6%
of the offshore duty-free retail market in Hainan, and exports around 19.5%. During the “golden
where it opened its first offshore duty-free store in week” seven-day national holiday at the start of
downtown Sanya in 2011. This has grown to five October, sales at nine duty-free shops in Hainan

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