Hainan province is expected to expand the network of duty-free shops across the island in a bid to build itself into a global shopping center and tourism destination, Luo Baoming, Party secretary of Hainan, said in an interview.

Luo Baoming, Party secretary of Hainan.

"It is a preliminary plan, and it still requires a lot of solid and detailed research and preparations," Luo told China Daily on the sidelines of the ongoing 18th National Congress of the Communist Party of China in Beijing.

"When the study is done, we will submit the proposal to the State Council," said Luo.

To stimulate consumption and enhance the popularity of Hainan as a tourist destination, the province implemented an offshore duty-free policy in April 2011 allowing travelers who leave the island by air to buy duty-free imported goods even if they do not leave the Chinese mainland.

The duty-free goods price cap was set at 5,000 yuan ($800) for each trip. Tourists could receive a partial rebate for amounts exceeding 5,000 yuan.

Currently, Hainan has opened two duty-free stores in airports in Haikou and Sanya, the two largest cities in the province.

"The policy has largely satisfied the demand of Chinese people to purchase imported goods, significantly boosting domestic consumption," Luo said.

Also, the policy has "effectively enhanced the attractiveness of Hainan as an international tourism destination".

According to the Haikou local government, more than 1.36 million tourists had purchased duty-free items worth 2.85 billion yuan by Nov 5. It is estimated that the annual sales of duty-free goods is twice the combined sales of the seven largest department stores in Hainan.

As part of measures to deepen the duty-free policy, the Hainan government recently raised the cap to 8,000 yuan and included three categories of goods into the list of duty-free goods.

"The adjustment of the policy is expected to substantially push up sales of duty-free imported goods, promoting Hainan's image," said Luo.

As Chinese people's disposable income is increasing, their spending on luxury goods has been rising quickly. China is expected to become the largest luxury consumer market by 2015.

But due to high import tariffs, luxury goods are sold at much higher prices on the Chinese mainland than overseas, which has sent quite a number of Chinese people overseas to purchase luxury goods.

Hainan is the fourth region that has adopted the offshore duty-free policy worldwide, following South Korea, Japan and Taiwan. The implementation of the policy in Hainan could partly keep Chinese spending domestically on luxury goods, said experts.

"We expect to build Hainan into a global shopping center," said Luo, who added that implementation of the policy is proceeding smoothly.

Besides the two duty-free stores, Hainan is constructing an international duty-free shopping center, with a cumulative investment worth 1.2 billion yuan, which is due to open in August 2014.

"When it opens, the shopping center will become the largest city duty-free shopping center worldwide," which will actively boost the provincial tourism industry, Luo said.

Partly thanks to the tax rebate plan, Hainan has witnessed rapid growth in tourism and registered tourism-related revenue of 32.4 billion yuan in 2011, a year-on-year rise of 25.8 percent despite the dire global financial condition and the European debt crisis.

"There is a long way to go before the province becomes a major tourist destination," said Luo.

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