When China locked down the customs perimeter around Hainan and began full‑island “closed‑border” operations in December 2025, the island’s duty‑free sector supplied the first visible payoff. Sales and footfall surged through the winter holiday period as tourists and newly eligible local residents scrambled to redeem vouchers, try new product launches and queue at counters for cosmetics, jewellery and high‑end spirits.
The immediate numbers are eye‑catching. In the weeks after the move, customs reported roughly 585,000 duty‑free shoppers and RMB 3.89 billion in sales by early January — averages that outpaced the pre‑closure period. China Duty Free (CDF), the industry’s heavyweight, recorded single‑day omnichannel sales above RMB 300 million on January 1st, and operators across Sanya, Haikou and Wanning deployed large coupon pools and island‑only discounts to sustain momentum.
The policy changes that matter most began before the formal sealing of the customs line. A November 2025 revision widened the duty‑free catalogue, raised age thresholds for travellers to 18 and crucially loosened rules for island residents. Hainaners who leave the island at least once a year can now shop repeatedly in duty‑free stores through the year, creating what operators call a “one‑departure, year‑round” entitlement and converting locals from passive observers into a steady demand source.
That shift signals a structural change in the business model. Where duty‑free once relied almost entirely on inbound tourism and short‑term shopping trips, its core is moving toward a dual engine: tourist spending plus activated local consumption. The result is a stronger domestic anchor for an industry that between 2020 and 2024 fluctuated wildly with travel restrictions and recovery cycles.
Yet the early brightness masks persistent vulnerabilities. Operators and analysts warn that the December–January ‘opening boost’ reflected a bundle of temporary drivers — the novelty of the customs change, winter holiday travel, government vouchers and promotional subsidies — rather than an organic, sustainable re‑rating of demand. Price gaps with other markets remain uneven and assortments are incomplete, with some shoppers reporting popular SKUs out of stock at flagship malls.
Regulation and enforcement pose a parallel challenge. “Pack‑and‑resell” and daigou‑style resale schemes — known in Chinese as ‘taogai/gou’ — remain an enforcement headache despite intensified crackdowns. Customs and local police have continued targeted busts and prosecutions; one mid‑2025 court case ended with a jail term and fine for a reselling ring. The state’s need to curb illicit flows is the principal reason the government has retained a licensed, limited‑operator model rather than making Hainan wholly island‑wide duty‑free like Hong Kong.
Industry structure also concentrates risk. CDF dominates the market, operating multiple mega‑stores in Haikou and Sanya and leveraging an extensive logistics footprint. Competitors and new entrants are carving niches around cross‑border logistics, domestic brands and airport retail, but they confront deep incumbent relationships with global suppliers and a membership base that exceeds 45 million for CDF alone.
For global brands and local policymakers alike, Hainan is now a large, evolving experiment in domestic consumption policy. It has already increased China’s share of the global duty‑free market and reconfigured tourist flows on the island, but sustaining growth will require moving beyond short‑term pricing and subsidy levers to broaden product mixes, deepen service quality and convert novelty shoppers into repeat customers.
The longer horizon contains trade‑offs. Full‑island liberalisation would widen the market and could push annual sales past previously hypothesised thresholds, but it would also sharply raise the regulatory burden and create fresh incentives for diversion and smuggling. For now the government’s “one‑line open, two‑line controlled” framework keeps a careful balance between facilitation and containment, betting that licensed scale, stronger governance and better in‑market experiences will produce a durable tourism‑plus‑retail ecosystem.