"Duty-free gold 1g for 1,271 yuan. With tax, 1g for 1,450 yuan"
At 10 a.m. on the 14th (local time), a sign with this message stood out upon entering the Zhou Dafu gold jewelry store on the first floor of the Haikou international duty-free shop in Hainan, China's premier tourist destination. Based on 1 don, it was about 150,000 won cheaper than mainland department stores. A store representative said, "Although it is a duty-free product, you can receive and open the product immediately after purchase at the store, not at Haikou airport."
◇ Duty-free shopping moves from airports to downtown
A placard at the store entrance explained Hainan's duty-free policy. According to the notice, as Chinese authorities fully overhaul Hainan's duty-free policy as of Nov. 2025, anyone age 18 or older with confirmed plans to leave Hainan island can shop duty free up to 100,000 yuan (about 21.75 million won) per person annually. The number of product categories has increased to 47 in total, and for purchases under 20,000 yuan (about 4.35 million won), items can be picked up at the store immediately, not at the airport, on the condition that they are taken out of Hainan.
Notices like this were posted at the entrances of all stores regardless of category, including luxury accessories, watches, sportswear and electronics. For Jung Kwan Jang red ginseng products, a popular Korean specialty in China, applying additional discounts to the duty-free price made them cheaper than Korean duty-free shops and similar to the lowest online prices.
Currently in Hainan, such downtown duty-free stores are also in Sanya and Boao, including Haikou. Duty-free shopping has shifted from being airport-centered to being centered on tourist destinations. This move is seen as intended to redirect spending that had been flowing overseas back into the domestic market. The idea is to absorb Chinese shoppers' demand for overseas shopping trips to Korea, Japan and Europe into Hainan and convert it into domestic consumption.
◇ An opening experiment expanded to an island-wide "customs sealing"
The core of the Hainan policy goes beyond a simple expansion of duty-free offerings. Authorities began the Hainan "customs sealing (封关)" regime on Dec. 18 last year, operating the entire island as a special customs zone separate from mainland China. The crux is to simplify customs clearance and administrative procedures within Hainan to make the movement of goods, capital and people more free. As part of building the Hainan free trade port, it aims to significantly open trade with overseas markets while strictly managing transactions between Hainan and the mainland to minimize impacts on the mainland market.
According to reports, with the customs sealing in place, most goods brought into Hainan are exempt from tariffs and value-added taxes. The number of tariff-free items has jumped from about 1,900 to 6,600, reaching 74% of all tax categories, and a "processing value-add (加工增值)" system has been introduced that exempts tariffs even when selling finished goods to the mainland if imported raw materials are processed locally to raise added value by 30% or more.
These measures target not only boosting consumption but also attracting foreign capital and fostering industries. Some service sectors restricted on the mainland and the use of pharmaceuticals not approved on the mainland are permitted, and tax incentives are drawing in corporations and talent. While the corporate tax rate is 25% on the mainland, it is 15% in Hainan, and personal income tax rates for executives and technical personnel are also more favorable than on the mainland.
These policies also align with mid- to long-term economic strategy. The 15th five-year plan (2026-2030), passed at the Two Sessions (the National People's Congress of China and the Chinese People's Political Consultative Conference) last month, is designed to make domestic consumption a key pillar of growth while expanding openness and nurturing advanced manufacturing. The Hainan customs sealing aims to stimulate domestic demand by drawing in consumption with duty-free offerings, while expanding openness by attracting foreign-invested corporations through duty exemptions and tax benefits.
◇ Despite 100-day results, a task of "sustainability"
According to the Global Times, since the customs sealing began, Hainan has seen increases in inflows of people, trade and investment. During the first 100 days after the sealing, visa-free tourists to Hainan rose 54.2% from a year earlier, total imports and exports increased 32.9%, and the number of newly established foreign-invested corporations grew by more than 30%. Six Korean corporations also decided to make new investments.
However, there is caution about the policy's sustainability. Hainan's manufacturing base is relatively weak and its market size is limited, and with the decline in foreign investment continuing, some say it is uncertain whether the policy will deliver the expected results.
The Financial Times (FT) said, "For Hainan to reach the level of a competing trade hub like Singapore or Hong Kong, much broader reforms are needed," citing Professor Ying Zhou-bing of the University of Malaya as saying, "Hainan's policies have advanced greatly in legal terms, but there are still limitations as it is perceived as a peripheral region even within China. Foreign investors will approach more cautiously."