The retail market in Hainan has been on a steady upward trajectory, driven by local consumption and duty-free growth since 2011 when the Hainan off-island duty-free policy was first introduced. In 2020, a combination of travel restrictions, the reshoring of luxury spending and new duty-free policies helped Hainan record a 1.2% year-on-year (YoY) growth in retail sales, 5.1 percentage points (ppts) above the national average, which brings the total value to RMB197.5 billion. Boosted by duty-free and automobile sales, Hainan has seen a strong recovery in consumption, where the retail sales of enterprises above designated size rose by over 20%, while cosmetics and jewellery sales surged over 100%.

Tourism, one of Hainan’s twelve key industries, is the third-largest tertiarysector industry after real estate and education, accounting for 7.3% of Hainan’s GDP in 2020. The strategic positioning of Hainan as an international tourism and consumption centre means tourism retail and tourist consumption will remain a focus of policymaking and industry development.

Hainan has accounted for a growing share of duty-free sales in China since 2011. The nearly absent international travel in 2020 and the subsequent impact on duty-free sales at airports in Beijing and Shanghai means Hainan’s share in duty-free sales could exceed 50%, up from 25% in 2019.

Haikou and Sanya are the two largest consumption markets in Hainan, accounting for 42% and 19%, respectively, of Hainan’s total consumption in 2020. They are also among the few cities in Hainan to recover rapidly from the pandemic, with YoY increases in retail sales—1.5% for Haikou and 12.1% for Sanya.

Hainan aims to roll out a zero-tariff regime across the island by 2025 when imported goods outside the imported taxable commodities catalogue will be exempt from import duties, according to the Master Plan for the Construction of Hainan Free Trade Port (hereinafter referred to as “the Master Plan”) released in June 2020. The thriving duty-free scene in world-class destinations like Hong Kong and Dubai means there is much potential for Hainan over the longer term. The overall retail market, on the other hand, will likely see accelerated growth as household income increases on the development of emerging industries and the inflow of talented young people.