Shanghai encourages ‘duty-free economy’ as part of consumer push

The Shanghai government will support companies applying for approval to sell duty-free goods, and encourage duty-free shops to be set up at airports, hotels, malls and other commercial venues, municipal authorities said.

The development of a “duty-free economy”, which will encourage spending on imported products, including heavily-taxed luxury goods, was outlined in a 2021-2025 consumption plan released on Saturday.

Presently, duty-free spending in China is largely concentrated in the southern island province of Hainan, where the annual limit on individual duty-free spending was hiked to 100,000 yuan (US$15,467) last year from 30,000 yuan previously.

Tariffs on imported consumer goods vary in China, with taxes on some luxury items such as perfumes and watches exceeding 30 per cent.

Lured by the substantially lower prices, millions of domestic tourists flock to Hainan’s malls each year, and the numbers have been boosted by restrictions on overseas travel resulting from the Covid-19 pandemic.

Otherwise, there are more than 300 duty-free shops across the country selling products from fragrances and cosmetics to clothing and shoes. China Tourism Group Duty Free Corp is the dominant player, with nearly 200 stores.

Annual duty-free spending is in the tens of billions of yuan.