In 2018, Chinese tourists spent $110 billion on their travels — nearly 40 percent in duty-free purchases. The pandemic may have decimated this market and removed one of its most lucrative customers, but inside China, the duty-free sector is flourishing on the back of a domestic travel rebound and targeted government policies. And China Tourism Group Duty Free is looking to capitalize.  

What happened?

China Tourism Group Duty Free (CTGDF) is planning a secondary listing on the Hong Kong Stock Exchange and hopes to raise $7 to 10 billion. 

What is China Tourism Group Duty Free? 

A state-owned enterprise that has long been the country’s dominant force in the glitzy realm of duty-free shopping. CTGDF is China’s only retail operator covering all duty-free channels and boasts 188 stores in 90 cities as well as international outlets in Cambodia, Macau, and Hong Kong. 

What is the state of China’s duty-free market?

China’s duty-free market has grown steadily in the past couple of years and is estimated to reach $25 billion by 2025. However, pre-pandemic, high taxes on luxury goods and customer limits had hindered the sector, thereby increasing the appeal of overseas shopping sprees. 

In mid-2020, having successfully contained coronavirus, domestic travel picked up and policy makers decided to capitalize on pent-up demand for luxury goods by loosening duty-free regulations, particularly in Hainan, which has become the country’s hottest destination in the past year.  

Individual quotas were tripled to $15,000, eligible duty-free categories increased to include tech products, item limits were increased and in some cases removed, and, most consequently, new duty-free licenses were issued to Chinese retailers. 

Blessed with a host of properties in Hainan, CTGDF emerged as the world’s largest duty-free retailer — at Haitang Bay Duty Free Shop, it generated $770 million in sales over 50 days, a global record.

Get original coverage of the cultural space directly in your inbox

Why does this IPO matter?

It signals CTGDF’s confidence even as its domestic market is becoming more competitive. If successful, it will likely herald a push to capture more of the globe’s duty-free shopping business, which would include Chinese tourists traveling internationally. Funds may well be used to establish a chain of global outlets, says Abhay Gupta, a longtime duty-free watcher and CEO at Luxury Connect: “With a large number of global outlets, they can cross-sell and make more products available, they can offer buy anywhere and deliver home in China services, they can control supply and take advantage of cheaper buying.”