Opinion / Will China’s Hainan island kill the duty free industry? International shopping sprees are out now the tropical paradise lets domestic travellers leave with US$15,000 of tax free goods

Jun 3 , 2021

Haikou City is the capital of Hainan province, a free zone and major tourism destination that aims to displace international destinations as the luxury goods marketplace of the world. Photo: Shutterstock

Gen Z are profiting from new regulations allowing each local visitor to buy several Louis Vuitton or Gucci products tax-free after a short domestic flight

South Korea, New York, Los Angeles, Paris and Milan will all lose out as Chinese consumers visit the ‘Hawaii of China’ to stock up on luxury goods

This article is part of Style’s Inside Luxury Column

To many people in Europe or North America, the word “Hainan” would draw a complete blank. The smallest and southernmost province in China, it is comprised of Hainan island, the largest and most populated island in China, along with various smaller islands.

Hainan is often referred to domestically as the “Hawaii of China” thanks largely to its subtropical to tropical climate. In June 2020, the Chinese government announced an ambitious plan to transform the entire island into a free trade port, making it the largest special economic zone in China.

Hotels like the Atlantis Sanya demonstrate that ambition, featuring an underwater suite and the Ossiano underwater restaurant. The Beauty Crown Grand-Tree Hotel in Sanya is another example, opening in 2016 and consisting of nine enormous treelike structures. The still-to-be-completed Phoenix Island already boasts futuristic, sail-like skyscrapers. Ocean Flower Island is another vast reclamation, an archipelago of three islands costing US$24 billion which recently opened its first attractions and will include the Island Marine Park, a Snowberg Water Kingdom and Fairyland.

All of this points to China’s ambition to replicate the success Dubai had establishing itself as a luxury destination by offering Chinese and foreign tourists a breathtaking, immersive and inspiring destination, catering for the tastes of wealthy Asian visitors, offering family entertainment, relaxation and shopping.

Atlantis, Hainan’s top integrated resort with over 1,300 luxury rooms, a huge water fun park and the largest natural seawater aquarium in China, in August 2020. Photo: Steven Ribet

It is shopping though that will be Hainan’s trump card. Until now, many Chinese consumers have travelled abroad to buy luxury brands, taking advantage of lower taxation, duty-free shopping and exchange rate gains. The vast number of Chinese consumers made South Korea the world’s largest duty free shopping destination, ideal for a quick weekend turnaround. New York, Los Angeles, Paris and Milan have also been top destinations for Chinese luxury shoppers. When the pandemic hit and international travel was disrupted, all these locations were impacted in an unprecedented way, as some stores lost 80 per cent or more of their footfall.

As a result, 2020 saw unprecedented growth in local luxury shopping in mainland China and in the first quarter of 2021 much of all growth in the global luxury market came from China. For Hainan, there could be no better timing for global travel disruption, catapulting it to the top of the list for Chinese travellers.

An aerial photo taken in April 2020 shows the Atlantis resort in Sanya, Hainan. Photo: Xinhua