‘Structurally hurt’: why are Chinese tourists spending less overseas than before?

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By Yeon Woo Lee

Published January 14, 2026

China’s outbound travel sector has bounced back from the pandemic, but the era of duty-free shopping sprees appears to be over.

Chinese tourist numbers are recovering across Asia after a pandemic-era contraction, buoyed by the expansion of visa-free policies and a stronger yuan. But one thing has not returned: the spending sprees that used to boost duty-free retailers around the world.

The trend can be clearly seen in South Korea, which relied on Chinese travellers for 70 per cent of its duty-free sales before Covid-19. Around 5 million visitors from China arrived in the country during the first 11 months of 2025, a recovery to 92.3 per cent of 2019 levels.

But duty-free sales not only failed to rebound; they actually fell to levels last seen in 2015. Sales at South Korea’s duty-free shops declined 12 per cent year on year to US$80.6 billion between January and November last year, according to the Korea Duty-Free Shops Association.

In a sign of the times, two of the country’s duty-free retail giants – Shilla Duty Free and Shinsegae Duty Free – gave up parts of their concessions at Incheon International Airport in September and October, citing sluggish sales and soaring rental fees. The licences were once among the most coveted assets in the country’s travel retail sector.

“South Korea is one of the clearest examples of a duty-free market that has been structurally hurt,” said Subramania Bhatt, CEO of the travel marketing and technology firm China Trading Desk. “The old model of suitcase shopping and tour bus spending [by Chinese travellers] is structurally weaker.”

Visits to duty-free stores are often included in the itineraries of Chinese group tours, making shopping almost mandatory. But all-inclusive tours are losing appeal as China’s travellers – especially the younger generation – increasingly venture abroad independently, allowing them to focus more on the local culture and niche brands.

Japan is also feeling the effects of this shift, with duty-free sales showing a clear downward trajectory.

The decline had already set in before a diplomatic dispute erupted between Beijing and Tokyo in November, after Japanese Prime Minister Sanae Takaichi indicated the country might intervene in the event of a military conflict in the Taiwan Strait. The furore has since driven away many Chinese travellers.

Duty-free sales in Japan totalled 464.5 billion yen (US$2.9 billion) in the first 10 months of 2025, down 15 per cent year on year, according to data from the Japan Department Stores Association. A September report by KPMG attributed the drop “mainly to a decrease in per capita spending by Chinese tourists”.

Other Asian destinations such as Thailand and Singapore are also showing sluggish retail performance despite having seen a recovery in Chinese arrivals, according to Catherine Lim, a senior equity analyst at Bloomberg Intelligence who focuses on China’s retail and e-commerce sectors.

“Duty-free conversion rates and spending per capita remain below their pre-2019 peaks,” Lim said.

A host of social and economic shifts are contributing to the downturn, analysts said. Chinese consumers are cutting back on spending amid an economic slowdown, and young people especially are now more likely to splash out on cultural experiences or unique local products than the kinds of goods found in big duty-free shops.

A new generation of Chinese travellers has moved past the ‘duty-free equals bargain’ mindset

Moqian Sun, The Harvest

Meanwhile, the need for China’s shoppers to buy up foreign products while abroad has reduced, as they can now often purchase the same goods on Chinese e-commerce platforms or in domestic duty-free outlets.

“A new generation of Chinese travellers has moved past the ‘duty-free equals bargain equals must-buy’ mindset,” said Moqian Sun, founder of marketing and consulting strategy firm The Harvest. “Those stuck in the past will likely face a permanent contraction.”

China has moved to repatriate travel retail in recent years. Before the pandemic, daigou – personal shoppers who bought luxury goods abroad in bulk to resell in China – played a key role in driving growth across the region’s duty-free sector. But Beijing has since cracked down on the trade and allowed more domestic duty-free retail.

The duty-free-on-departure market in China has grown steadily, with monthly tax-refunded sales in Beijing alone now reaching 100 million yuan (US$14.3 million), according to KPMG.

Policy momentum continues to build. In December, China designated the southern Hainan province as an island-wide duty-free zone, slashing import duties, value-added tax and consumption tax on most overseas goods entering the region. Then, on January 1, Swiss retailer Avolta became the first foreign operator to run duty-free outlets at Shanghai Pudong International Airport.

In many markets, Chinese tourists’ per capita spending is unlikely to return to pre-pandemic levels any time soon, although overall duty-free revenues may rise as traveller numbers continue to rebound, analysts said. Instead, the sector will become increasingly polarised.

Wealthy Chinese consumers will continue to spend heavily on premium international brands in duty-free shops, according to Lim, especially in areas where price gaps and authenticity still matter. But interest in mid-tier or less globally recognised brands – such as Korean beauty labels – may fade as products become easier to access at affordable prices in China.

To compete in this new environment, duty-free retailers will have to compete not just on price, but on exclusivity, service and overall experience, said Humphrey Ho, CEO of investment firm Helios & Partners. The industry’s success, he added, would depend on its ability to “justify the purchase as a unique memory of the trip”.

Some markets are already leaning into this strategy. According to Ho, countries like Qatar, Saudi Arabia and the United Arab Emirates are seeing strong growth in duty-free revenues from Chinese travellers by offering elevated airport experiences – including branded luxury cafes in Doha.