China is planning to turn a tropical island province roughly the size of Belgium into the world’s largest duty-free shopping zone, as it tries to persuade shoppers to buy their luxury goods at home and stimulate a lagging domestic economy.
Policymakers aim to establish a single duty-free zone with a separate customs system in Hainan, China’s southernmost province, as early as next year. Shoppers in most Chinese jurisdictions pay high taxes on foreign luxury goods, making low or duty-free zones particularly attractive, and Beijing hopes to turn Hainan into an engine for domestic consumption that can compete with rival duty-free destinations such as South Korea’s Jeju Island as well as duty-paid stores in Europe.
Authorities have already reduced Hainan’s income tax rate for certain companies to 15 per cent, from 25 per cent in most of the country, and scrapped import duties on some goods. It has also extended visa-free access to citizens of 59 countries. The creation of a separate customs zone next year will further simplify taxes on luxury purchases in Hainan.