What is Hainan’s seal-off, why it’s good for duty-free sales, and what’s next?

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By Kevin Rozario

Published on January 22, 2026

Duty-free sales have surged in Hainan since an island-wide ‘seal-off’ was introduced on 18 December. According to data released by the General Administration of Customs and reported by state media, between 1 December 2025 and 10 January 2026, revenue hit RMB38.9 billion/$5.6 billion, with sales volumes rising by 49.6% year-on year.

Customs reported that transactions of “regulated off-island duty-free purchases” rose 32.4% to 585,000, suggesting that spend per head had risen over the five weeks. On average, the island saw about 24,000 duty-free shoppers collectively spending RMB160 million/$23 million per day. The customs administration said this is higher than before the island-wide special customs rule was in place.

Seal-off plans had been in the making for several years as a way to establish a free trade port system to boost trade and investment. The move has created a fully independent customs territory – similar in concept to Hong Kong or Macau – separated from the rest of mainland China for customs purposes. It is a prominent symbol of China elevating its international trade status.

New policy lowers the cost base

While the term ‘seal‑off’ sounds restrictive, the commercial implications for duty‑free are overwhelmingly positive. The policy changes the operating model due to zero tariffs on most imported goods, no import VAT, and no consumption tax on most, but not all, goods. This dramatically lowers the cost base for retailers and brands, leading to more competitive pricing and higher volumes.

At Singapore-base China Trading Desk (CTD), a digital marketing and advertising agency specialising in the PRC consumer, CEO Subramania Bhatt told TRBusiness: “The 18 December seal-off is best read as a structural upgrade to Hainan’s duty-free environment: it formalises the island as a customs supervision special zone, and it explicitly expands the zero-tariff goods regime while keeping controls at the mainland boundary. This includes the 30% value-added pathway for qualifying goods moving to the mainland.”

Bhatt added: “This aligns with the immediate post-implementation sales surge, supporting higher conversion and bigger baskets – with the caveat that the surge period also overlaps with holiday travel and strong promotional activity.”

In that sense, the revenue hike is due to a combination of the policy change plus retail activation, not the seal-off alone.

Hainan duty-free sales in Q1 and Q2

Nevertheless, the five-week stats look promising, at least for current quarter sales. For Q1 2026, Bhatt said: “Expect continued strength, but likely a peak then normalisation. Launch momentum and holiday travel support demand, and the holiday calendar matters: Lunar New Year falls in mid-February, which typically concentrates travel into a defined peak period. We’ve already seen how concentrated holiday weeks can be: Haikou Customs cited offshore duty-free sales of RMB712 million/$102 million from 1-3 January up 128.9% YoY.”

In the second quarter, the effects of the seal-off should be clearer as a new baseline will begin to emerge. Q2 2026. “I’d expect a moderation after the holiday peak, then event-driven (sales) lifts later in the quarter. The bigger story is whether the new customs regime translates into sustained advantages – particularly assortment breadth and replenishment efficiency – rather than just short-term promo-driven spikes. Expanded zero-tariff scope and more efficient facilitation support the possibility of a higher run-rate, but Q2 is where you’ll see if it really holds up once promotional intensity and holiday travel normalise.”

From CTD’s latest outbound sentiment signals, travellers are research-heavy and price-verifying, with high levels of pre-trip research, and near-universal price comparison against online. Social platforms are also materially raising shopping propensity, with in-person service still vital in closing a sale. That combination, says Bhatt, “favours destinations and operators that can deliver proof + convenience + confidence” – exactly the model Hainan is trying to implement with the seal-off.