Hainan, a tropical island in southern China once hailed as a retail haven for domestic travellers, is facing a sharp downturn. Despite receiving years of preferential policy support from Beijing—including permission for tourists to purchase duty-free goods such as wine with proof of departure—the island’s once-booming duty-free sector has hit a wall.
New data from 2024 reveal a steep 29.3% drop in total duty-free sales, reflecting both weakened consumer sentiment and the fading allure of Hainan’s “tourism + duty-free” model.
Duty-Free Sector Under Pressure
According to Haikou Customs, total duty-free sales in 2024 fell to RMB 30.94 billion (US$ 4.31 billion), down from the previous year. The number of shoppers dropped 15.9% to 5.68 million, and total items purchased plummeted 35.5% to 33.08 million units.
First introduced in 2011 and significantly expanded in 2020, Hainan’s offshore duty-free policy allows travellers leaving the island by plane, train, or boat to purchase designated goods tax-free under strict quantity and value limits. The 2020 revisions raised the individual annual quota from RMB 30,000 to RMB 100,000 and expanded product categories from 38 to 45—wine and spirits among them.
The policy proved timely during the pandemic, capturing domestic luxury and alcohol demand that would have otherwise gone overseas. Sales surged in 2020 and 2021, growing by 103% and 83%, respectively. Although 2022 saw a dip due to strict lockdowns, 2023 rebounded with 25.4% growth—until the sharp reversal in 2024.
Even the policy’s biggest beneficiary, China Tourism Group Duty Free Corp (China Duty Free), reported a sharp slowdown. Annual revenue fell 16.4% to RMB 56.47 billion (USD 7.86 billion), and net profit slid 36.4% to RMB 4.27 billion (USD 594 million). Revenue from Hainan alone dropped 27.1% to RMB 28.89 billion (USD 4.02 billion).
China Duty Free commands the lion’s share of the island’s market, operating six duty-free outlets, including the world’s largest in Haikou and the second-largest in Sanya.
Tourists Look Abroad Once More
The drop in Hainan’s duty-free sales comes as outbound tourism resumes.
“This was entirely predictable,” said a wine importer with operations in Hainan, who asked not to be named. “Before 2023, travellers couldn’t go abroad, so Hainan became the next best thing. Now that outbound travel is back, Hainan just doesn’t have the same pull.”
While Hainan remains a unique domestic destination with its tropical climate, that rarity comes with a cost—literally. High prices, reports of forced shopping, and scams have dented its appeal. In one viral incident, a diver in Sanya claimed a photographer tried to coerce payment for underwater photos and even removed their mask when they refused.
The Hainan Tourism Price Index (TPI), published by the provincial Development and Reform Commission, recorded year-on-year declines in 10 out of 12 months in 2024. Meanwhile, Chinese outbound travel surged, with 146 million trips recorded—up 67.8% year-on-year, according to the China Tourism Academy.
China Duty Free’s earnings reflected the shift: while Hainan’s business struggled, its border port stores saw strong growth. The company also announced plans to accelerate overseas expansion in search of new revenue streams.
Smuggling Crackdown Hits Sales
Tighter enforcement on smuggling and grey-market reselling—long tolerated under the offshore duty-free scheme—also contributed to the downturn.
“When the duty-free expansion was rolled out in 2020, there was a boom in daigou buying for resale,” said Mily Huang, General Manager of Hainan Millon Trade Co. “But with stricter regulations now in place, bulk purchases have naturally declined.”
According to China’s Ministry of Public Security, 495 smuggling cases involving RMB 1.35 billion were investigated in 2024. Many involved “quota daigou,” where travellers pool their allowances to purchase goods for domestic resale, undermining the duty-free market.
Price Advantage? Not Always
There’s growing skepticism about whether Hainan’s duty-free goods are truly cheaper.
“Hainan has high operating costs,” said the same wine merchant. “Some items cost as much—or even more—than onshore platforms.”
Vino Joy News reviewed prices on the China Duty Free WeChat mini-program. A 2020 Sassicaia red wine was listed at RMB 1,959 (USD 272.71), the same as its price on JD.com’s official Italian wine flagship store. A bottle of Penfolds Bin 707 was priced at RMB 3,630 (USD 505.33), significantly higher than JD.com’s RMB 2,488 (USD 346.36).
Liu Rizhong, former head of duty-free channels at a major spirits company and now Managing Director of Grand Jin Yue Fine Wine in Zhuhai, added: “Entry fees for duty-free stores are so high that even without taxes, prices are hard to push down. Some brands even treat duty-free prices as a benchmark.”
With the domestic wine market still bloated with inventory and frequent discounts across e-commerce platforms, Hainan’s pricing edge continues to erode.
Nonetheless, retailers are ramping up promotions. Huang noted recent deals, including Salon 2013 Champagne offered at a 55% discount (RMB 4,410 / USD 613.92), and ongoing price campaigns for Dom Pérignon and Krug.
“Island-Wide Bonded Zone” Could Revive Market
Despite short-term setbacks, Hainan’s long-term outlook may change dramatically.
According to national policy plans, Hainan is expected to launch its “island-wide bonded zone” model by the end of 2025. Under the new framework, the entire island will be treated as a customs territory “outside” mainland China, with duty-free benefits extended to all imported goods entering Hainan.
This would allow not only tourists but local residents to purchase duty-free goods. More importantly, these products could be distributed beyond traditional duty-free shops—potentially through hotels, supermarkets, and instant retail platforms—intensifying competition and broadening access.
If fully implemented, the new model could create a much larger consumption landscape for imported wine and spirits, offering greater potential for wine brands and importers investing in Hainan’s evolving market.
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