Chinese department store operator Wangfujing Group has created a new wholly owned subsidiary duty free company after being awarded a duty free license by the Chinese Ministry of Finance last month, as first reported by TRBusiness.

The Beijing-based group, which operates more than 40 department stores announced the establishment of the new Beijing Wangfujing Duty Free Management Co. Ltd on the Shanghai stock exchange today (9 July).

According to the announcement,  which was seen by TRBusiness, the new company will have registered capital of RMB500 million. In addition to operating duty free shops it will sell daily necessities, automobiles medical devices and other items.

Wangfujing Group said: “With the continuous development of China’s economy in recent years and the further liberalisation of tax free policies, China’s tax free market has great potential for development.

“The Group’s investment in the establishment of a duty free operating company is in line with the organisation’s strategic development direction. This is conducive to expanding the company’s main business scope, its entry into the tax free market and promotion of the tax free business.”

OPERATIONAL AND CAPITAL RISKS

Regarding the possible impact of the new duty free company on overall Group revenue Wangfujing commented: “Since the duty free operating company is yet to carry out any specific business, it is impossible to predict the impact of this investment on the company’s future financial situation and operating results.”

As a new Chinese duty free player, the Group is mindful of the initial operational and capital risks. “We will actively study policies related to tax free business, accelerate the formation of a professional management team, give full play to the company’s existing resource advantages and promote the implementation of related businesses as soon as possible.”

Meanwhile, Wangfujing could be joined by another newcomer to the Chinese duty free market in the form of Shanghai Bailian Group Co. Ltd. A state-owned enterprise in Shanghai, its main business includes department stores, shopping malls, supermarkets and convenience stores.

A further Shanghai stock exchange announcement on 7 July, also seen by TRBusiness, said the company’s controlling shareholder, Bailian Group Co Ltd, had applied to the government for a duty free license. The application remains in progress and the company is uncertain if it will be successful.

Shanghai Bailian Group said: “The company’s main business is still the retail of taxable goods. Production and operating conditions have not changed.”

On the day of the announcement, the company’s stock price rose by 9.99%, a significant increase from the previous period.