China takes new approach to Covid-19

20 December, 2022

As the Chinese government abandons its zero-Covid policy, Joe Bates analyses what the sudden shift in policy means for Hainan’s rapidly growing duty free business.

Commentators have simply called it the World Cup effect. The spectacle on TV of thousands of fans from multiple countries openly mixing and enjoying themselves at the FIFA World Cup without a mask in sight was one of the driving factors behind the public protests against harsh Covid19 lockdowns which swept across the Chinese mainland late last year.

These often-violent demonstrations were the biggest challenge to the Communist regime in a generation, but they strangely merited barely a mention in the travel retail trade press. Yet this rare outburst of discontent did have profound effects, forcing Beijing to rapidly dismantle its zero-Covid policy and relax much-hated quarantine regulations and domestic travel restrictions.

It will probably be the second quarter of 2023 before international travel restrictions are further relaxed, but Hainan, China’s off-shore domestic duty free province, is likely to benefit from the pivot on domestic travel changes in the short term provided further lockdowns are not needed. Certainly, internet searches for flights to Sanya, Hainan’s capital, soared in the wake of the announcement of the rule changes.

Whether mainland travellers will continue to flock to Hainan once China does open up its borders is the burning question for the wider travel retail industry. So much time and money has been spent in supporting the growing number of duty free retailers on the island during the pandemic when the Chinese were not allowed to travel overseas, but there is undoubted demand for international travel to resume, especially among Millennial and Gen Z consumers.

I put that key question to Jeremey Speirs, Edrington regional managing director GTR, at a recent launch event of The Macallan The Harmony Collection Smooth Arabica, a new coffee-inspired travel exclusive, which recently went on sale at The Macallan’s Hainan boutiques and in pop-ups at the CDF Mall in Haitang Bay and at Haikou Meilan International Airport in partnership with China Duty Free Group.

“The general feeling is that Hainan is here to stay,” Speirs told me. “The Chinese government has been very overt about their messaging. They want to repatriate Chinese spending back to China. The pandemic has given them a beautiful opportunity to do just that. Hainan and travel retail have been huge beneficiaries of that. So, from our perspective, we are supportive of it.

Encouraging signs

Speirs went on to say that Edrington had “gone in hard” to the Hainan market, most recently opening a boutique in the massive Haikou International Duty Free Shopping Complex in the north of the island, its largest in Asia Pacific to date. “There are 1.4 billion Chinese and 70-80 million of them are going to Hainan annually. We do believe that even if the Chinese do start travelling there are still enough Chinese who don’t have passports or who don’t want to travel overseas who will want to come to the island to have a holiday or break.”

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