Trouble in China’s shopping paradise as Hainan’s duty-free spending slumps Reuters

BEIJING (Reuters) – Duty-free spending in China’s island province of Hainan fell 29.3 percent last year, from LVMH to global luxury players. Dry (EPA:) They set up shop as a weak economy causes the number of domestic visitors to drop sharply.

Consumers visiting Hainan, with its beautiful beach hotels and sandy beaches, 2018 They spent 30.94 billion yuan ($4.24 billion) on duty-free goods in 2024, down from 43.76 billion in 2023, according to customs data.

From 6.756 million in 2023, their number dropped by 15.9% to 5.683 million.

“The depreciation of foreign currencies such as the Japanese yen, combined with attractive travel policies such as visa-free entry to Malaysia, has led many Chinese consumers to seek lower prices,” said consultant Oliver Wyman.

While retail spending in Hainan is not critical to China’s economy, the declines are a big hit for foreign luxury brands.

In the year They are counting on a post-pandemic brand that has tripled sales from 2019 to 43.76 billion yuan by 2023, helped by the increase in purchase limits at 12 duty-free malls in Hainan in 2020.

Major global beauty players such as L’Oreal and others Estee Lauder (NYSE: ) are also exposed in Hainan, where beauty products account for more than 40% of duty-free sales by 2023.

“Falling consumer confidence has significantly affected Chinese consumers’ willingness to spend on luxury and discretionary goods,” Chow added.

“This is especially true for popular beauty brands, which have seen significant declines.”

Hainan’s 2010

That expansion allows brands to operate their own duty-free stores instead of relying on partnerships with local players like China Duty Free Group.

A fully duty-free Hainan will draw Chinese consumers away from duty-free overseas hubs such as Japan, Singapore and South Korea, which it hopes will help kick-start consumption in China’s south.

Domestic consumption has returned to a downward trend, especially in the second half of 2024, as the wave of “revenge spending” fades after the Covid pandemic.

Total retail sales rose just 3.0% in November, well below the 4.6% expansion analysts had expected.

Last year, top officials in the ruling Communist Party called for a boost in consumption by 2025 and expanding domestic demand “in all directions.”

($1=7.2994 renminbi)