CITIC SEC: Hainan Customs Closure Time Confirmed. It is recommended to pay attention to tourism industry companies that will benefit in the long term under the customs closure policy.

CITIC SEC released a research report stating that the State Council Information Office held a press conference on the construction of the Hainan Free Trade Port, announcing the official start of the island-wide closure on December 18, 2025. The bank believes that the biggest significance of the closure lies in the trade aspect, as it will help accelerate the construction of an international tourism consumption center in Hainan. Entities in the island's tourism industry chain (such as scenic spots, hotels, tourism retailers, and travel service providers) are expected to benefit in the long term. For duty-free operators, the bank believes that the continuation of the off-island duty-free policy will maintain their competitive advantage, as the policy will be further relaxed for goods entering the "second line". The bank suggests focusing on companies in the tourism industry chain that will benefit in the long term under the Hainan closure policy. CITIC SEC's main points are as follows: - The closure time has been determined, further advancing the construction of the Hainan Free Trade Port. - The island-wide closure operation is a landmark project in the construction of the Hainan Free Trade Port. The closure is aimed at establishing Hainan Island as a customs-supervised special area, implementing a policy system characterized by "opening up the first line, controlling the second line, and ensuring freedom within the island." - The conference announced the current closure policy measures, known as the "Four Guidelines," which include more favorable zero-tariff policies on goods, relaxed trade management measures, convenient passage measures, and efficient and precise supervision models. The specific date for the closure has been set for December 18, 2025. - Continuing to optimize tourism supply, accelerating the construction of an international tourism consumption center. - The conference mentioned that Hainan has made significant progress in promoting the construction of an international tourism consumption center, which has resulted in increased tourism flows and a variety of tourist experiences for visitors. - Emphasizing the status of off-island duty-free, expediting the pilot of duty-free for island residents, and promoting research on simplifying the tax system. - The conference underscored that after the island-wide closure, tax system reforms will focus on various aspects, such as enterprise income tax, personal income tax, expanding the range of zero-tariff goods, and further optimizing the duty-free shopping policy. The conference also mentioned the potential pilot of duty-free consumption for island residents and the ongoing research on sales tax reform. In conclusion, the policy post-closure still values the duty-free status, with an emphasis on creating a strong duty-free brand and offering high-quality duty-free products to consumers. Additionally, there is a focus on simplifying the tax system. The bank believes that despite the increasing competition in the retail market in the long term, entities with superior property layout, supply chain resources, and high-quality operational capabilities will maintain their advantageous position. Risk factors include underwhelming growth in tourist flows and consumption post-closure, intensified competition in Hainan post-closure, significant exchange rate fluctuations, and governance flaws in companies.