Group 1 - Hainan Free Trade Port has opened its first year post-closure with nearly 100 key projects across all 18 cities and counties, attracting both local and out-of-province enterprises [1] - The expected investment in the commercial aerospace sector in Wenchang, Hainan, is projected to be between 1 billion to 1.5 billion yuan over the next 2-3 years [6] - The total investment for cooperative projects identified by the Hainan Development and Reform Commission is expected to exceed 45 billion yuan [8] Group 2 - The meat processing industry in Hainan is experiencing increased orders, with companies benefiting from new policies that allow for tax exemptions on goods that have increased in value by 30% [9][11] - Hainan has attracted over 20 enterprises that utilize the tax exemption policy for production and processing since the port's closure [13] - The number of foreign trade registered enterprises in Hainan has increased by 4,396 since the port's closure, with a total of over 30,000 new registrations in 2025, marking a year-on-year growth of over 40% [15] Group 3 - Hainan's duty-free shopping has seen significant growth, with sales reaching 1.21 billion yuan in the first seven days of the new year, an increase of 88% year-on-year [16] - The number of inbound tourists to Hainan has surged, with Sanya and Haikou seeing increases of 28% and 15% respectively in the first week of the new year [14]

Group 1: Hainan Free Trade Port Overview - Hainan's geographical proximity to Thailand attracts Southeast Asian investors, particularly from Thailand, to invest in the region [1] - The implementation of the closure policy in Hainan is seen as a significant and effective government initiative, embraced by various sectors [1] Group 2: Boao Lecheng International Medical Tourism Pilot Zone - Boao Lecheng is one of the 13 key parks in Hainan Free Trade Port, featuring 4 public hospitals and 35 private hospitals [2] - The zone has expedited the approval process for innovative international drugs and medical devices, reducing the approval time from 6 months to 3-5 working days, thus making essential medications more accessible and affordable for patients [2] Group 3: Lingshui Li'an International Education Innovation Pilot Zone - The zone hosts 6 renowned universities, including the University of Glasgow and Beijing Language University, sharing resources and facilities [3] - The favorable visa conversion mechanism allows international students to seek employment in Hainan post-graduation, enhancing the attractiveness of the educational environment [3] Group 4: Tourism and Duty-Free Shopping - Hainan offers visa-free entry for tourists from 85 countries, with convenient transportation options available [6] - The duty-free policy, effective from November 1, expands the categories of duty-free goods from 45 to 47, including new technology products, positioning Hainan as a premier international shopping destination [6] Group 5: Product Processing and Cultural Industries - The collaboration between Thai enterprises and local government in the coffee industry exemplifies successful foreign investment, enhancing local agricultural development while preserving cultural heritage [7] - The Lingshui Haifeng International Film and Television Base attracts Thai film crews due to favorable tax rates, promoting the region as a filming destination [7] - Companies like Haikou Yiyou Network Technology are benefiting from the closure policy, improving cross-border operational efficiency through better infrastructure and simplified foreign exchange management [7] Group 6: Economic Impact and Future Outlook - The closure policy is expected to enhance market openness, attract foreign investment, and promote economic prosperity in Hainan, positioning it as a key gateway for foreign investors into mainland China [9] - The overall development strategy aims to support high-quality growth and exemplify a higher level of openness to the outside world [9]

Summary of Conference Call Notes Industry Overview - The conference call discusses the duty-free market in Hainan, China, highlighting the growth in customer traffic and sales performance in 2025 compared to previous years [1][2]. Key Points and Arguments Customer Traffic and Sales Performance - Hainan's overall customer traffic increased by approximately 2-3% year-on-year, with Sanya showing over 7% growth and a peak of 15% from November 1 to 4 [2] - Sales in Hainan turned positive starting September 2025, primarily due to a low base from the previous year and strong performance during the National Day holiday [2] - Average transaction value increased by over 30%, driven by sales of electronic products and premium goods, although conversion rates remain negative [1][2] Product Category Performance - Electronic products' share in the duty-free category rose to about 10%, aided by the launch of Huawei phones in the duty-free market and relaxed purchase restrictions [1][3] - Premium goods benefited from economic recovery and promotional activities, while the share of cosmetics declined, though year-on-year growth rates did not significantly drop [4] Impact of New Policies - The new policies in Hainan, which include the addition of pet supplies and musical instruments, have had a limited impact on the duty-free market [5] - The policy allowing island residents to shop multiple times has made purchasing more convenient, but its effects will take time to manifest [5] Border Closure Policy - The border closure policy has not had a substantial impact on Hainan's offshore duty-free business, with existing policies remaining unchanged [6] - Mainstream duty-free product categories are still on the negative list, meaning they do not enjoy zero tariffs, and taxable goods still incur normal customs duties, consumption taxes, and value-added taxes [6] Company-Specific Insights - Nichi's sales have continued to decline, with half-year reports showing a drop from over 8 billion to over 6 billion, primarily due to a contraction in taxable business rather than poor performance in duty-free sales [7] - Nichi is expected to explore new business models, such as online reservations, to address current challenges and seek new growth opportunities [7] Future of Duty-Free Shops - City duty-free shops have seen improved sales since the implementation of new policies on November 1, allowing for pick-up upon return to the country [9] - New product categories, including mobile phones and drones, have been introduced, and the online reservation platform offers an unrestricted shopping experience [9] - The potential for home delivery could significantly expand the reach of these shops, especially in smaller airports [9] Comparison with Korean Duty-Free Model - Chinese city duty-free shops share similarities with the Korean model but have advantages in shopping convenience and product selection [10] - If market conditions allow for home delivery, it could further enhance convenience and mitigate the impact of airport pick-up limitations [10] Company Growth Potential - Zhongmian Company has a clean shareholding structure with limited foreign investment, indicating low downside risk [11] - The company aims for a long-term revenue growth target of 10% annually, with potential revenue reaching 80-100 billion RMB in five years if growth is maintained [11] - The company has significant room for improvement, particularly in its two main duty-free stores in Hainan, which could enhance its operational performance [12] Other Important Insights - The overall market remains heavily influenced by the recovery of high-end consumer spending [5] - The current environment presents opportunities for companies to optimize operations and improve brand and product offerings [12]

Core Viewpoint - The company believes that the closure policy will positively impact its business in Hainan Province, facilitating market expansion and diversification [1] Company Summary - The company operates in the tourism service sector in Hainan Province [1] - The closure policy is expected to enhance local business operations [1]

Group 1 - The company is actively monitoring the opportunities that the "closure" policy may bring and is conducting a comprehensive assessment of its impact on operations, logistics, and taxation [2] - The company will strictly adhere to legal regulations and relevant disclosure obligations if there are any related plans [2]

Group 1 - The 2025 China International Service Trade Fair has commenced in Beijing, showcasing Hainan's free trade port policies, latest projects, and development achievements to promote international economic and trade cooperation [1][2] - The Hainan pavilion features a central display that highlights the achievements of the Hainan free trade port and its closure policies, attracting significant interest from visitors, many of whom are considering investment or relocation to Hainan [1][2] - The slogan for this year's Hainan pavilion is "New Blue Ocean for Free Trade, Setting Sail at the Right Time," emphasizing the rapid growth of Hainan's service trade, which reached a total import and export value of 56.74 billion yuan in 2024 [2] Group 2 - A promotional event for Hainan's free trade port policies and modern service industry was held in Beijing, attracting over 50 key business associations and enterprise leaders, providing insights into investment opportunities [3] - Officials from various Hainan provincial departments detailed the free trade port policies and investment opportunities, while leaders from key economic zones showcased the potential and advantages of modern service industries [2][3] - The event has encouraged participants to accelerate their exploration and investment plans in Hainan, recognizing the significant opportunities presented by the development of the free trade port [3]

Core Viewpoint - Hainan Province is fully prepared for the implementation of its closure policy, with all necessary regulations and infrastructure in place [1] Group 1: Policy Readiness - The import tax product catalog, restricted and prohibited lists, and policies for processing and value-added domestic sales with tax exemptions have all been established [1] - Supporting documents related to the closure policy have been finalized [1] Group 2: Infrastructure Completion - Hardware facilities for the closure have passed national acceptance tests [1] - Information systems such as the international trade "single window" and customs smart supervision platform have been successfully built [1] Group 3: Pressure Testing - Ongoing pressure testing exercises are being conducted to enhance the capability to manage the closure effectively [1] - The pressure tests are characterized by a comprehensive approach, covering all processes, elements, and large sample sizes in a practical manner [1]

Investment Rating - The report maintains an "Outperform" rating for the social services industry, indicating an expected performance that exceeds the broader market index by more than 10% [10]. Core Insights - The report highlights the upcoming full closure of Hainan Free Trade Port on December 18, 2025, which is anticipated to create investment opportunities, particularly in the duty-free sector [1]. - Key policy measures include an increase in the proportion of zero-tariff goods from 21% to 74%, more relaxed trade management, and efficient regulatory frameworks to support the implementation of these policies [6]. - The report suggests continued focus on bottoming stocks such as China Duty Free Group and Wangfujing, with expectations of sustained activity in the Hainan sector leading up to the closure [6]. Summary by Sections Industry Overview - The report discusses the significant developments in Hainan's free trade policies, which are expected to enhance the attractiveness of the duty-free market [1][6]. Policy Measures - The report outlines specific measures such as zero-tariff policies, relaxed import restrictions, and improved customs procedures to facilitate trade [6]. Investment Recommendations - The report recommends monitoring specific stocks in the duty-free sector, indicating potential for growth as the market prepares for the upcoming policy changes [6].

Core Viewpoint - The construction of Hainan Free Trade Port is progressing with significant policy measures aimed at enhancing trade, investment, and tourism, with a focus on international cooperation and high-standard economic rules. Group 1: Policy and Regulatory Framework - Hainan Free Trade Port's policy system is initially established, allowing visa-free entry for personnel from 85 countries [2] - The official start of Hainan Free Trade Port's customs closure operation is set for December 18, 2025 [3] - Current customs closure policies are summarized as "four more," including more favorable zero-tariff policies, relaxed trade management measures, more convenient passage measures, and efficient regulatory models [4] Group 2: Economic Performance and Investment - Over the past five years, Hainan has seen an average annual growth of 14.6% in actual foreign investment, totaling 102.5 billion yuan [5] - The number of newly established foreign enterprises has increased by an average of 43.7% annually, with 8,098 new foreign enterprises established [5] - Trade in goods and services has grown by 31.3% and 32.3% respectively [5] Group 3: International Cooperation and Market Integration - Hainan aims to build two bases for international trade: a headquarters for Chinese companies going global and a base for foreign companies entering China [6] - The customs closure will enhance the convenience of travel between Hainan and the mainland, with no additional documents required for mainland travelers [7] Group 4: Taxation and Trade Management - After customs closure, the coverage of zero-tariff goods will significantly increase, expanding to 6,600 items under a negative list management system [8] - The policy will allow for the free movement of zero-tariff goods among various entities within the island, eliminating the need for additional import taxes [8] Group 5: Tourism Development - Hainan is positioned as a premier destination for international tourism, with a projected increase of 8% in total visitors, reaching 97.2 million in 2024 [13] - The province is actively working to create a safe and enjoyable tourism environment, launching a "reassured consumption in Hainan" service system [14] Group 6: Future Development Goals - Hainan plans to leverage its advantages in domestic and international dual circulation to enhance cooperation with Arab countries in various sectors [11] - The province aims to develop its marine economy, with a focus on deep-sea technology and creating a "Sea Hainan" [17]

Core Viewpoint - Hainan's provincial government has completed preparations for the implementation of its closure policy, including the establishment of relevant regulations and infrastructure [1] Group 1: Policy Readiness - The import tax product catalog, restricted and prohibited lists, and policies for processing and value-added domestic sales without tariffs have all been formulated [1] - Supporting documents related to the closure policy are ready [1] Group 2: Infrastructure Completion - Hardware facilities for the closure have passed national acceptance [1] - Information systems such as the international trade "single window" and customs smart supervision platform have been established [1] Group 3: Stress Testing - Ongoing pressure testing is being conducted with a focus on "full process, full elements, full coverage, large samples, and practical scenarios" [1] - The capability to manage and control the process has significantly improved [1]