The Chinese Government is planning to open duty free arrival shops at 30 airports, border posts and ferry ports to boost the slowing domestic economy, as well as stimulate existing airport retail sales revenues and reduce overseas shopping expenditures by Chinese travellers.

 

Details have now emerged regarding the government’s new arrivals shopping initiative that was decided at a recent meeting of the ruling State Council presided over by Premier Li Keqiang in November. This approved a package of new policies to increase domestic consumption as part of various measures the government has identified to support economic growth.

 

“Two ministries are involved – the Ministry of Finance and the General Administration of Customs. They are just beginning this new business after it was determined by the State Council,” a reliable Beijing-based duty free industry source told TRBusiness.

 

REGULATIONS BEING FORMULATED NOW

The well-informed source said: “They are drawing up regulations now, including how to operate duty free arrival shops, how to award arrival shop licenses; also duty free quotas and shopping allowances for arrival shop customers. It’s part of government plans to keep more tourist spending in China.”

 

Duty free arrivals shops are currently available at three mainland airports: Beijing Capital International Airport, Shanghai Pudong International Airport and Shanghai Hongqiao International Airport. All departures and arrivals duty free shops are operated by the privately-owned Sunrise Duty Free company at all three locations.

 

 

These airports were originally granted licenses to open arrival duty free shops in 2008 under a special State dispensation to improve tourist facilities for foreign visitors attending the Beijing 2008 Summer Olympic Games.

 

However, sources say this newly-sanctioned policy initiative is designed to encourage China’s fast growing outbound travellers to use part of their vacation travel budget to buy luxury goods at arrival shops on their return – rather than in overseas shops while holidaying abroad.

 

CHINESE TRAVELLERS SPENT $157BN IN 2014

Mainland tourist spending overseas has grown rapidly in recent years. More than 100m Chinese travelled overseas in 2014, spending more than RMB 1 trillion (US$157bn) during their overseas trips, according to China’s Ministry of Commerce.

 

While government officials have told senior Chinese duty free industry executives that 30 airports, border crossings and ferry ports will be approved, there is currently no information as to which locations are being selected and under what timetable.

 

“Arrival duty free shopping is a brand new business for most airports here. Detailed regulations are not out yet. The government is setting up the rules now,” the duty free industry source said.

 

 

“Maybe the government will use bidding to choose companies to get arrival shop licenses. Maybe they will choose several duty free companies to bid for the arrival shop projects.”

 

At least two companies and possibly more are expected to gain approval to operate duty free arrival shops.

 

Those tipped to win approval include China Duty Free Group (CDFG). Founded in 1984, CDFG currently operates airport departure duty free shops in all of China’s international airports that have licenses, with the notable exceptions of Beijing Capital Airport and Shanghai’s Pudong and Hongqiao airports.

 

HOT CONTENDERS FOR NEW LICENSES…

CDFG, in addition, operates duty free shops on China’s land border crossings, seaport duty free shops and the downtown Haitang Bay Duty Free Shopping Centre near Sanya in Hainan Island, which the company claims is the world’s largest duty free shop.

 

China National Service Corporation for Chinese Personnel Working Abroad (CNSC) is another potential contender to gain approval to operate duty free arrivals shops.

 

Founded in 1983, state-run CNSC currently operates 11 downtown arrival duty free shops in China and is the sole organization licensed to sell duty free goods in downtown stores to mainland travellers returning from overseas travel or employment.

 

CNSC is presently scheduled to open a downtown duty free arrivals shop in Shanghai in 2016.

 

In addition, it has already submitted a series of applications to open downtown duty free shops in 15 major cities, including provincial capitals across the country.

 

Originally established as an independent state-owned enterprise, the government changed CNSC’s status in 2012 to become part of state-owned Sinopharm (China National Pharmaceutical Group Corporation) as part of a wider reorganization scheme to expand Sinopharm and its activities.

 

 

With annual sales exceeding RMB200bn in 2013, Fortune 500-ranked Sinopharm is the largest pharmaceutical and healthcare group under the State-owned Assets Supervision and Administration Commission (SASAC) of China’s ruling State Council.

 

Sunrise Duty Free is another potential contender to operate airport duty free arrival shops. However, it is not clear at present whether the government intends to extend privately-run Sunrise’s duty free operating license.

 

As mentioned, this currently covers the departures and arrivals duty free shops in Beijing Capital Airport and Shanghai’s Pudong and Hongqiao airports.