New duty-free policy

According to him, the only reason duty-free goods need to be picked up at the airport is to protect products that are not duty-free. "Think about it. If the same product has different price tags in the same shop, what would happen to the ones that are not duty-free? We're doing what overseas duty-free shops do. It's an international convention." Duty-free commodities are exempted from import duty, import linkage excise tax and import linkage value-added tax. They are not only available at airports, but also on flights, at borders, on ocean-bound ships, at ferry terminals, at railway stations and in downtown duty-free shops.

CDF is the only State-owned enterprise specializing in the duty-free business. It was established in 1984 and now has more than 200 outlets in 29 provinces, municipalities and autonomous regions in China.

The difference between duty-free shops in Hainan and Jeju Island in South Korea, according to Zhou Jun, a spokeswoman for Korea Tourism Organization's Shanghai office, is that the former are State-owned enterprises and the latter are managed by private companies in a relatively free market.

"There is no such a thing as 'the only duty-free company' in Jeju, and two of the biggest ones are Lotte and Shilla, both privately-owned. The fact that the market is rather flexible benefits travelers coming here and improves our service," said Zhou.

"To take a simple example, duty-free shops in the island extend their opening hours specially for travelers on cruise ships from 8:30 PM to 10:00 PM, simply because they have the biggest spending power."

According to the commerce department of Hainan provincial government, all duty-free outlets, whether already open or yet to be opened in the province, have to be run by CDF.

"We'd like to attract both domestic and foreign investors if possible so that the service and competitive power of the industry are guaranteed," said a spokesperson for the department, who declined to give his name.

In its defense, CDF said enjoying duty-free status was a concession by the State and if it was not controlled by a State-owned company, nobody could assure customers about the discount.

Tourists to Hainan

No matter who ultimately benefits, Hainan's tourist market is bound to grow. Hainan is expected to become a global tropical island resort destination by 2020, and the tourism industry is expected to contribute 12 percent of Hainan's gross domestic product by then.

The major local airline, Hainan Airlines, increased by 25 percent the number of its domestic flights going to Sanya from this summer to winter. "Now we have around 84 flights heading to Sanya from all around China every week," said Tan Hui, spokesman for Hainan Airlines.

"New routes from Urumqi, Lanzhou, Changsha and Wuhan (to Sanya) are expected in the future," he said. "Some of them will have an in-flight duty-free service."

(China Daily December 27, 2010)