Chinese Downtown Duty-Free Shops Gain Momentum... Rapid Growth Driven by Consumption Promotion and Market Opening Policies

[Asia Economy Beijing=Special Correspondent Park Sun-mi] Wangfujing Group, a major department store company in China, has obtained a duty-free shop business license from the Ministry of Finance, expanding the number of downtown duty-free shops for Chinese customers in Beijing to two. Due to the Chinese government's policy direction aimed at capturing both the expansion of domestic consumption and market opening, the duty-free shop business is rapidly gaining momentum.

On the 10th (local time), Wangfujing Group announced through a stock exchange disclosure that it had acquired the duty-free shop business license from the Chinese Ministry of Finance. Wangfujing Group is a large enterprise operating more than 54 department stores and shopping malls in 33 cities across China, including Beijing Department Store.

With Wangfujing Group obtaining the duty-free shop business license, the number of duty-free shops available for Chinese customers within downtown Beijing will increase to two. Chinese nationals who have returned from overseas within 180 days can shop duty-free up to 5,000 yuan at downtown duty-free shops.

Including Wangfujing Group, only eight companies in China have been granted duty-free shop business licenses by the Ministry of Finance, but the prevailing view is that this number will rapidly increase in line with the government's policy direction to expand the duty-free shop business. Guangzhou City in Guangdong Province also entered the government approval application process last month to establish its first downtown duty-free shop.

The expansion of the duty-free shop business in China is closely linked to the government's policy direction. The Chinese government faces the challenge of revitalizing the economy hit by COVID-19. In the first quarter of this year, China's gross domestic product (GDP) decreased by 6.8% and retail sales dropped by 16.2% due to COVID-19.

China believes that expanding domestic consumption and opening the market to foreign companies can offset the economic damage caused by COVID-19. In April, the Ministry of Commerce announced that as part of the plan to promote domestic consumption, it would rationalize duty-free policies and support an increase in the number of airport and downtown duty-free shops. Chinese Premier Li Keqiang’s report at the National People's Congress last month, stating that encouraging domestic consumption will stabilize the economy and be a major growth driver this year, also supports this government policy direction.

According to China International Capital Corporation (CICC), as of 2018, Chinese consumers purchased over 180 billion yuan worth of duty-free goods overseas, while the scale of duty-free purchases within China was only 40 billion yuan. The Chinese government believes that expanding downtown duty-free shops for Chinese customers will effectively redirect some of the overseas spending back to domestic spending.

The Hong Kong South China Morning Post explained in a related article on the 11th that "China's expansion of the duty-free business will also help fulfill its promise to open the market to foreign companies," adding that "many foreign companies that have entered China have long expressed dissatisfaction with unfair treatment."

However, some voices express uncertainty as to whether the expansion of the duty-free shop business will immediately lead to increased consumption, given the disruption to Chinese overseas travel caused by COVID-19. Sales at downtown duty-free shops in Hainan, which is attempting to transform into a free trade port, decreased by 30.3% in the first quarter due to the impact of COVID-19.

This content was produced with the assistance of AI translation services.