Beijing, Nov.9 (People`s Daily Online) -- Duty-free goods will soon be available on Hainan island through a company created by the state.

Recently the State Council authorized the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation of China to examine and approve a plan in which a state-owned company solely operated by the Hainan province invests in and establishes the Hainan Duty-Free Goods Co., Ltd.

They also examined and approved the articles of the corporation, authorized Hainan province to establish the Hainan Duty-Free Goods Co., Ltd. and gave Hainan province a duty-free goods concession.

Hainan SOE is main investor

Currently, it has been confirmed that the China Duty-Free Group under the CITS Group Corporation will operate the offshore duty free stores in Sanya. The pilot store was officially launched on April 20, 2011. In 2011, the Hainan Province proposed an application that a state-owned company solely operated by Hainan province invests and establishes the Hainan Duty-Free Goods Corporation Ltd., and relevant departments, including the Ministry of Finance, examined and approved the application. They gave the Hainan Province the duty free goods concession and authorized it to trade duty free goods and establish stores of duty free goods within Hainan Province according to the prescriptions.

Concession helps control profits, generate revenue

An official explained that, in the duty-free goods business, the central taxes of import links, including the tariff, value-added tax and consumption tax, are exempted, the business operators have very strong advantages and their profits rely on the special policies of the country.

China uses the mode of a duty-free goods concession, and it means that the Ministry of Finance of China can adjust the profits of enterprises trading in duty-free goods by collecting the concession fee. Currently, this form of concession setup could also be found in duty-free businesses of many other countries.

There are mainly five nationally-recognized duty-free operators on the Chinese mainland: Zhuhai Duty-Free Enterprise Group Co., Ltd, Shenzhen State-Owned Duty-Free Commodity (Group) Co., Ltd, China Duty-Free Group Co., Ltd, Foreign-invested Sunrise Duty-Free (China) and the newly established Hainan Duty-Free Co., Ltd.

The government will not approve the establishment of new duty-free operators in other regions. To offer special supporting policy measures to the offshore duty-free policy in Hainan, the government has approved the establishment of the Hainan Duty-free Co., Ltd and provided it with a duty-free product franchise.

The offshore duty-free policy is an exclusive policy introduced by the central government to Hainan province instead of a universal policy. Furthermore, because duty-free product operations are a type of state-run franchise sector, they should be under strict control. Therefore, the government has no plans to approve the establishment of new duty-free product operators in other regions.