Hainan, the tropical resort destination known as China’s Hawaii, is on track to become the biggest duty-free market in the world in the next two years, according to a report jointly released by KPMG China and Moodie Davitt. The report illustrates how China’s policy of building a world-class shopping haven has converted overseas shopping to domestic consumption, strengthening the plan of building Hainan into a free trade port on par with Dubai and Singapore. The report said Hainan’s offshore duty-free sector has been “the rising star” of global duty-free and travel retail since its inception in 2011. The growth was further boosted by the introduction of an enhanced shopping policy in July 2020, which raised the annual shopping limit from CNY30,000 to CNY100,000 per person, bringing the offshore duty-free business to approximately USD5 billion by the end of 2020. 

China Duty-Free Group – Hainan’s dominant duty-free player – climbed to the top of the ranking by the end of the first half of 2020, ahead of Lotte Duty Free. In 2019, the Chinese player only ranked No 4 in the world behind Dufry, Lotte Duty Free and The Shilla Duty Free, according to a report released by Moodie Davitt.

The duty-free market in Hainan has a price advantage, especially when traveling abroad is still impossible amid the global epidemic. Official data showed that in the past May Day holidays, the province welcomed 2.95 million travelers, a growth of 121% from the same period last year, and travel revenue reached CNY4.1 billion, or more than three times the revenue of the previous year. In 2019, over 83 million tourists, most of them from the Chinese mainland, visited the island, driving some USD15 billion in tourism revenue. Even in Covid-ravaged 2020, the ‘Eastern Hawaii’ attracted 64.6 million visitors, down just 22.2% from 2019. Despite the reduction in arrivals, sales at Hainan’s offshore duty-free shops rose 127% year-on-year in 2020 to around CNY32.74 billion. The province aims to increase sales to at least USD15.5 billion by 2022 and USD46.5 billion by the end of 2025 in line with Hainan province’s 14^th Five Year Plan.

The blueprint to build Hainan into a globally influential high-level free trade port by the middle of the century was first released in June 2020. To achieve the goal, Hainan will boost its local industries, including tourism and consumption, as well as ease market access for foreign companies, analysts said. From premium watches and exquisite jewelry, to high-end cosmetics, luxury cars and yachts, leading international luxury brands vied for attention during the just-concluded China International Consumer Products Expo (CICPE). The fact that Chinese consumers cannot travel abroad to buy duty-free luxury goods due to travel restrictions caused by the Covid-19 pandemic has offered opportunities to luxury brands to offer their products to Chinese consumers in Hainan. 

Several executives of high-end brands interviewed by the Global Times on the sidelines of the Expo said that the Chinese market turned out to be the only market that achieved a year-on-year increase even during virus-plagued 2020. Swiss luxury watchmaker Hublot, part of French group LVMH, told the Global Times that “the Chinese mainland market is important for Hublot. Our global growth mainly comes from China, which is a miracle.” In 2010, the Chinese mainland market accounted for less than 1% of its global sales, but this rose to 15% in 2020. Having established eight specialty stores in the Chinese mainland, “we look forward to expanding to 10-11 boutiques as soon as possible this year, while further accelerating the deployment of online e-commerce channels to provide consumers with a more complete shopping experience,” the company said. Yves Morath, Commercial Counselor of the Embassy of Switzerland in China and head of Swiss Business Hub China, told the Global Times that the Chinese luxury goods market is a very dynamic one and leads the demand for Swiss watches. China became the biggest export destination for Swiss watches last year for the first time, while watch exports to other markets dropped, the Global Times reports. 

Chinese netizens have called for the ouster of Sweden’s fashion retailer H&M from the Chinese market after they found the company prohibited sourcing products from Xinjiang, citing so called forced labor concerns in the cotton-producing region amid the latest wave of Western sanctions on China. The boycott is now spreading to other Western companies, which are boycotting supplies from Xinjiang. They include Nike, Adidas, and other members of the Better Cotton Initiative (BCI), a Switzerland-based non-profit organization that promotes sustainable cotton production. More than 30 Chinese celebrities announced they would end their endorsement contracts with the brands listed on the BCI website. The BCI has 2,100 members worldwide, of which nearly 500 are from China, including five retailers and brands, and 485 suppliers and manufacturers. Consumers said they would stop buying Nike and will support local brands such as Li Ning and Anta, while others told Adidas to leave China. Anta Sports Products said it is withdrawing from BCI and will continue to use cotton from Xinjiang. 

China produces about 22% of the world’s cotton. Xinjiang manufactured 5.2 million metric tons of cotton during the 2020-21 season, about 87% of China’s total production. More than 50% of farmers in Xinjiang grow cotton, and over 70% of these farmers are members of ethnic minority groups including Uyghur, Kazak and Hui.  China still needs to import about 2 million tons of cotton every year from countries including Brazil and India. As of the end of 2019, Xinjiang had 808 cotton processing enterprises, accounting for 84% of the country’s total, according to the China National Textile and Apparel Council.

The consumer blowback in China started with a boycott of H&M. Consumers can no longer check out H&M products on some online platforms. On Taobao.com and JD.com, searches for “H&M” return no results. The mobile phone app stores of Xiaomi, Huawei and Vivo have removed H&M’s app, while Baidu map and Dianping.com blocked search results for their stores. Huang Xuan and Song Qian, two Chinese Brand Ambassador of H&M with millions of followers on Weibo, have cut cooperation with the company.

H&M said in March 2020 that it is deeply concerned by reports of forced labor and discrimination of ethnic and religious minorities in Xinjiang, and it strictly prohibits any type of forced labor in the supply chain, regardless of the country or region. The company said if it discovers and verifies a case of forced labor at a supplier it works with, it will take immediate action and, as an ultimate consequence, terminate the business relationship. Although the statement has been on its official website for more than a year, it has triggered a fresh round of attention as the EU recently imposed sanctions over Xinjiang affairs. Some internet users said “such suicidal behavior” deeply offends the feelings of the Chinese people, and the company could not earn money in the Chinese market. Netizens also left remarks on the official Weibo account of H&M to show their outrage, including comments such as “I heard that you are boycotting Chinese cotton, then I will boycott your products.” The Communist Youth League of China (CYLC) slammed H&M’s comment in a post on its Weibo account, saying “spreading rumors to boycott Xinjiang cotton while also wanting to make money in China? It is wishful thinking!” In another post, the CYLC used the remarks made by Chinese senior diplomat Yang Jiechi at last week’s Alaska meeting with U.S. officials, in which he said that “the Chinese people won’t accept this,” referring to the U.S. condescending attitude towards China. Xinjiang cotton “won’t accept this,” the CYLC said in the post, urging H&M to take off its colored glasses and immediately stop spreading false information about Xinjiang. 

“H&M would rather believe the lies spread by a few people than hear the voices of billions of Chinese people, and would not go to Xinjiang to take a look. What is the intention of such manipulation?,” the official People’s Daily newspaper wrote. Although the Chinese market is large, any malicious slander is not welcome here; national interests are above all else, and such behavior is doomed to be wishful thinking, the newspaper added. “The so-called forced labor in Xinjiang is nonexistent and entirely imaginary. The spotless white Xinjiang cotton brooks no slander,” Ministry of Commerce Spokesman Gao Feng said. “We hope these companies will respect the law of the market, rectify their erroneous actions and avoid politicizing business issues,” Gao added.

H&M China said in an announcement that the group has always upheld the principles of openness and transparency in the management of the global supply chain, and does not take any political position, the Global Times reports. H&M had 520 stores and USD1.4 billion in sales in China in 2019. China is its third-largest market after Germany and the United States.

This overview is based on reporting by the China Daily, Shanghai Daily, Global Times and The Guardian.

A meeting between senior officials of the U.S. and China in Anchorage, Alaska, did not lead to an improvement in relations between the two countries. Yang Jiechi, Director of the Office of the Foreign Affairs Commission of the Chinese Communist Party, and Wang Yi, State Councilor and Minister of Foreign Affairs, met U.S. Secretary of State Antony Blinken and National Security Advisor Jake Sullivan. The meeting started with the two countries’ officials publicly rebuking each other. Blinken said that China threatened the rules-based international order and endangered global stability. Yang Jiechi riposted that “the United States uses its military force and financial hegemony to carry out long-arm jurisdiction and to suppress other countries”. “It abuses so-called notions of national security to obstruct normal trade exchanges and incite some countries to attack China,” he added in a 15-minute speech, forcing the U.S. party to wait for translation. He also accused the U.S. to be a bad host as the U.S. should not be talking to China in a condescending manner. What is typically a few minutes of opening remarks open to the press in such high-level meetings lasted for more than an hour, and the two delegations tussled about when media would be ushered out of the room. The U.S. accused China of “violating protocol”.

Chinese Foreign Minister Wang Yi said China-U.S. relations have encountered unprecedented difficulties as China’s legitimate rights and interests have been unreasonably suppressed. “The old habit of U.S. hegemonic behavior of willfully interfering in China’s internal affairs must be changed,” Wang said. But after the initial spat, Chinese officials said they had “direct, frank and constructive discussions”. “We hope the United States is not going to underestimate China’s determination to defend its territory, to safeguard its people, and maintain its righteous interest. China and the U.S. should move toward each other while respecting each other’s core interests. On this common ground, China is willing to adopt an open attitude to the United States,” said Chinese Foreign Minister Wang Yi. Blinken called the talks “a very candid conversation on an expansive agenda”. As they differed on many issues, China and the U.S. agreed to set up a working group on climate change. 

Prior to the meeting, the U.S. government imposed additional sanctions on 24 mainland Chinese and Hong Kong officials deemed responsible for imperiling Hong Kong democracy, including the 14 Vice Chairpersons of the National People’s Congress (NPC). Meanwhile, the European Union also imposed sanctions to which China immediately replied with its own. In another move, the U.S. Federal Communications Commission (FCC) announced that it has launched proceedings to revoke authorization for two Chinese telecom firms – China Unicom Americas and Pacific Networks – to provide telecom services in the U.S., saying the actions were to protect the U.S. telecom infrastructure from “potential security threats.” U.S. Secretary of Commerce Gina Raimondo said that the U.S. Commerce Department has served subpoenas on multiple Chinese companies that provide information and communications technology and services in the U.S., adding the move was intended to conduct a review and prepare for actions to protect “U.S. national security.”

Chinese Ambassador to the U.S. Cui Tiankai said that the U.S. was full of illusions if it thought China would compromise. Meanwhile, the Biden Administration is still formulating its policy concerning tariffs imposed on Chinese goods by the Trump administration. No progress on the trade dispute was reported. Bilateral trade grew by 8.8% year-on-year in 2020 and jumped 81.3% in the first two months of 2021 in stark contrast to the free fall in diplomatic relations.

Analysts said the Biden administration likely would be in no hurry to sit down with Beijing again any time soon, according to the South China Morning Post. 

This overview is based on reporting by the China Daily, Shanghai Daily, Global Times, South China Morning Post and The Guardian.

China’s foreign trade increased significantly in January and February, thanks to strong external demand, a recovering domestic economy and a low base last year due to strict Covid-19 control measures. China’s total goods imports and exports expanded 32.2% year-on-year to CNY5.44 trillion in the first two months of 2021, sustaining the growth momentum recorded in previous months. Exports jumped 50.1% while imports rose 14.5% in yuan terms, according to the General Administration of Customs. In February alone, China’s foreign trade totaled CNY2.42 trillion, climbing 57% from a year ago, the GAC said. “Due to the impact of the coronavirus, overall trade in yuan terms in January-February last year fell 9.7%, and the low base was one of the reasons for the larger increase this year,” Customs said. “But even when compared with normal years, such as the comparable periods in 2018 and 2019, growth in China’s overall trade was around 20%.” Chinese authorities combine trade data for the first two months to compensate for fluctuations due to the Lunar New Year holiday, which falls at different times each year in January or February.

Exports in dollar terms skyrocketed 154.9% in February compared with a year earlier, while imports gained 17.3%, the most since October 2018. In the January-February period, exports jumped 60.6% from a year earlier to USD468.9 billion. The surge in exports was driven by a rebound in foreign demand, Customs said, citing improvements in manufacturing industries in the European Union and the United States, and increased imports of Chinese products thanks to fiscal stimulus measures. Many firms in export-oriented provinces stayed open during the Lunar New Year period this year, and orders that usually only get delivered after the New Year had been delivered normally. In January-February, imports increased 22.2% from a year earlier to USD365.6 billion, above the 15% forecast, partly due to stockpiling of semiconductors and energy products. China posted a trade surplus of USD103.25 billion for the first two months, compared with a USD7.1 billion deficit in the same period last year.

The Association of Southeast Asian Nations (ASEAN) remained China’s largest trading partner during the January-February period, with the combined trade volume rising 32.9% year-on-year. Other major trading partners such as the European Union, the United States and Japan saw trade volumes with China surge 39.8%, 69.6% and 27.4%, respectively. China’s foreign trade with countries along the Belt and Road amounted to CNY1.62 trillion in the first two months, up 23.9% year-on-year, the Shanghai Daily reports. 

Trade between China and the U.S. rose by an impressive 69.6% to CNY716.37 billion in the first two months of 2021, data from China’s National Bureau of Statistics (NBS) showed. Both exports and imports saw major increases. Exports to the U.S. totaled CNY525.39 billion, an increase of 75.1%, while imports from the U.S. stood at CNY190.98 billion, an increase of 56.1%. “I don’t think the new administration is increasing its pressure on the bilateral relationship. To the contrary, we can expect more normalized and more traditional diplomacy,” AmCham China Chairman Greg Gilligan said in response to a question from the Global Times about concerns of a worsening bilateral relationship. The fact that the Biden administration has not removed some of the measures or restrictions put in place by the previous Trump administration doesn’t mean it will be getting tougher, said Gilligan, adding that he will “remain optimistic, and has reasons to do so.” A rising proportion of AmCham member companies said they are optimistic that the relationship will improve in 2021, and 98% stressed that positive bilateral relations are important for their business growth in China.

China’s actual use of foreign direct investment (FDI) surged 31.5% on a yearly basis to CNY176.76 billion in the first two months of this year, the Ministry of Commerce (MOFCOM) said. China’s services sector attracted CNY141.74 billion of FDI during the two-month period, jumping 48.7% on a yearly basis, accounting for 80.2% of the country’s total use of foreign investment. During the first two months of this year, FDI from Belt and Road countries, ASEAN and the EU grew by 26.2%, 28.1% and 31.5%, respectively, on a yearly basis.

Other economic indicators also showed a positive trend in the first two months: industrial output rose 35.1%, retail sales increased 33.8%, also faster than a forecast, while the catering industry report?ed a 68.9% increase in revenue, as the hardest-hit sec?tor continued to recover from the Covid-19 impact. “After removing the base effect, the growth of the main indicators is stable and macro indicators are in a reason?able range,” according to the National Bureau of Statistics (NBS).

This overview is based on reporting by the China Daily, Shanghai Daily and Global Times.

Chinese President Xi Jinping praised the cooperation between China and Central and East-European countries (CEECs), saying “17 plus 1 could make more than 18” at the China-CEEC Summit, held via video link last week. The Beijing List of Activities for the 2021 Cooperation between China and CEECs was agreed at the Summit. Xi said China-CEEC cooperation is based on mutual respect and has no political strings attached. “All countries involved, regardless of their size, are equal partners in a cooperation mechanism featuring extensive consultation, joint contributions and shared benefits,” he said. China and CEE countries share the conviction that openness brings opportunities and inclusiveness ensures diversity. This is the key to the sustained vibrancy of China-CEEC cooperation, Xi added. Cooperation between China and the 17 countries covers 20-plus sectors. According to the Beijing List of Activities, a China-CEEC National Coordinators’ Meetings will be held in 2021. 

The summit with the Central and East-European countries was the first major diplomatic event hosted by China this year, showing the importance China attaches to European diplomacy, according to Liu Zuokui, Director of the Department of Central and East-European Studies at the Institute of European Studies under the Chinese Academy of Social Sciences (CASS). The summit is not only a continuation of China’s year of diplomacy for Europe in 2020, but also a new beginning in its efforts to promote the China-European Union (EU) comprehensive strategic partnership in 2021, Liu said. In the last two years, China has put much effort into its diplomacy in Europe, and the country has worked to make Europe a more important partner, Liu added.

Chinese President Xi Jinping pledged further supply of Chinese Covid-19 vaccines to Central and East-European countries. So far, Serbia has received one million doses from a Chinese company, and there is ongoing cooperation between Hungary and Chinese vaccine companies. At least six of the 17 CEECs, including Serbia, Hungary, North Macedonia and Montenegro, have either purchased Chinese Covid-19 vaccines for their mass inoculation campaigns or expressed an open attitude to buying them. Hungary will hosts the second China-CEEC Expert Forum on the Regulation of Medical Products and Medical Devices. If China-developed vaccines can be promoted in the CEE countries, it is conducive to enhancing China’s international influence, which is also a very important part of publicizing our anti-epidemic achievements, Prof. Liu said.

President Xi also called on China and CEECs to widen cooperation in the digital economy, e-commerce and the health sector. China supports setting up a China-CEEC dialogue mechanism on e-commerce cooperation and a China-CEEC alliance in the public health industry. China will promote the establishment of a China-CEEC customs information center and a focal point for customs clearance coordination for countries along the China-Europe Land-Sea Express Line. China is willing to explore cooperation on a pilot basis under the “Smart Customs, Smart Borders and Smart Connectivity” Initiative. The Beijing List of Activities said that the participants support holding the 5^th China-CEEC Customs Inspection and Quarantine Cooperation Dialogue in China. China plans to import over USD170 billion of goods  and strive to double farm product imports from CEE countries over the next five years, and aim for a 50% rise in bilateral agricultural trade. China is also willing to expand merchandise imports from CEE countries. China proposes setting up a farm produce wholesale market in the CEE region and introducing an exchange program for young agricultural professionals.

According to the Beijing List of Activities, participants designated the year 2021 as the China-CEEC Cooperation’s Year of Green Development and Environmental Protection. They support holding the second China-CEEC Ministers’ Conference on Environmental Cooperation in China, as reported by the Global Times and the China Daily.

China’s trade with CEECs exceeded USD100 billion for the first time in 2020, with the average growth since 2012 reaching 8% each year. By the end of 2020, Chinese cumulative foreign direct investment (FDI) in CEEC sectors, including energy, infrastructure and logistics, totaled USD3.14 billion, while those countries’ cumulative investments in China reached USD1.72 billion, according to China’s Ministry of Commerce (MOFCOM). The number of China-Europe freight trains stood at 12,400 in 2020, with key destinations including Poland, Hungary and the Czech Republic. Last year, a record number of 12,400 freight train trips were made between China and Europe.