The changes will add urban duty-free stores to the existing six in Beijing and coastal cities, bringing the total number of urban duty-free stores to 27.
According to the guidelines, duty-free shops in urban areas will mainly serve travellers, including Chinese nationals, who plan to leave China within the next 60 days.
Shoppers must collect their purchases at a designated collection point within the departure customs area of the airport or seaport before departing the country.
There are no purchase limits on duty-free items, but shoppers must comply with customs rules, which state that goods must be for personal use and in “reasonable quantities.”
The guidelines, which will come into effect in October, encourage stores to sell trendy domestic products and products that “contribute to the promotion of China’s fine traditional culture”.
Analysts at Huaxi Securities, led by Xu Guanghui, say China’s urban duty-free market has become a key growth area with huge potential due to policy constraints and a previously weak inbound tourism market.
A report released earlier this month found that sales at urban duty-free shops accounted for less than 1% of China’s total duty-free sales in 2019, suggesting that the duty-free system is flawed.
The chances of overseas consumption returning to China remain high. Xu Guanghui, Huaxi Securities
“In the current situation where global consumption is relatively weak, the price advantage of the duty-free channel is significant,” Xu said.
“The potential for overseas consumption to return to China remains high, and with the rapid development of inbound tourism, new policies for urban duty-free shops are likely to be implemented soon.”
According to the National Immigration Administration, 14.64 million foreign tourists visited China in the first half of this year, up 152.7 percent from a year earlier.
However, the new policy is aimed primarily at travelers looking to leave China, and is therefore unappealing to domestic consumers.
“I don’t think I’ll buy from those stores because the new policy doesn’t allow travelers to check in goods at the port and pick them up upon entry, so it’s inconvenient for departing Chinese nationals to bring goods back with them,” said Jenny Ye, a white-collar worker in Shanghai who often shops at the airport’s duty-free shops.
Previously, domestic consumers could shop at 13 foreign currency exchange duty-free shops by presenting their entry and exit records from the past 180 days.
Many consumers took advantage of the policy by purchasing duty-free goods after returning from overseas.
China Duty Free Group, China’s largest state-owned distributor of duty-free goods, reported a drop in net profit and sales for the first half of this year.
Its half-yearly financial report released last month showed revenue fell 12.81% year-on-year, while net profit fell 14.94%.
Analysts said sales in the southern island province of Hainan, which accounts for 60 percent of total revenue, were falling amid sluggish consumer spending.
China is eager to develop Hainan into the world’s largest free trade port by offering tax incentives and easing visa requirements for tourists and business travelers.
The Hainan market has boosted China Duty Free Group’s performance during the coronavirus pandemic, but overseas duty-free sales in the first seven months of this year fell 30.4% year-on-year to 20.1 billion yuan (US$2.8 billion), according to data from Haikou customs.
Following Tuesday’s policy adjustment, stocks related to the duty-free sector, including Beijing’s Wangfujing department store, got off to a strong start on Wednesday, with shares of Zhongbai Group and Friendship Apollo hitting the daily limit of 10 percent.
