Domestic duty free to help China tap into luxury market

And the first plan, it seems, is to open up more duty free shops across the country.

The China Duty Free Group has announced that it is in talks with local district government offices in both Beijing and Shanghai to open outlets in the cities in an effort to entice local shoppers to spend more locally.

Although the shops will officially only open to "foreign visitors," the China Daily newspaper has reported that Beijing officials are keen to let the locals in on the duty-free act as well - although exactly how this would work and who would qualify remains unclear.

The China Tourism Academy earlier this year claimed the country's outbound tourism expenditure would reach US$80 billion (64 billion euros) this year and that the country's tourists say shopping was their main expense when travelling.

Sanya shop already paying rich dividends

China has already made a move into the "domestic duty free" market to try to stem the tide of money heading offshore, opening up a 7,000-square-foot (650 sq m) shop in the resort city of Sanya, on the southern island of Hainan, to Chinese tourists after it had previously been open only to foreigners and those coming in from Hong Kong, Macau and Taiwan.

There's been a spending cap put on Chinese shoppers of 5,000 yuan (628 euros) at the store but the move still helped its operators Sanya Duty Free turn over 1.67 billion yuan (210 million euros) last year, according to media reports, fueled by the demand for top-end handbags from the likes of Louis Vuitton and Cartier watches.

China's growing lust for luxury has been well documented, with the Boston Consulting Group this week predicting Chinese consumers could be buying more of the goods than anybody else in the world by 2015.

That followed a report from the Bain consultancy group which estimated that Chinese consumers racked up a 270 billion yuan (34 billion euro) bill for luxury goods last year - while predicting that figure could rise 22 percent this year.

MS