The shop, stocked with some of the world's best-known brands, has had a soft opening since September.

If the World Tourism Organization is to be believed, then China will be the world's No. 1 tourist attraction with an estimated 137 million overseas visitors by 2020. The owners of the duty-free shops saw some truth in it to plan well ahead of the impending boom.

The 4,000-square-meter store will offer 100,000 world famous brands and domestically made up market goods, such as cashmere and silk. Cigarettes, however, will not be on the shelf - a move deemed to protect duty-free shops at ports.

Only foreigners, overseas Chinese and people from Taiwan Province with passports and international departure tickets can buy products there.

"Prices of the duty-free merchandise are about 30 to 50 percent lower than those in normal stores, and 5 percent lower than that at Hongqiao Airport's duty-free shop," said Teng Rui, general manager of Shanghai Downtown Duty Free Shop Co. Ltd.

"Since our soft opening on September 17, we have received about 3,300 overseas visitors, 70 percent of whom are Japanese," said Teng. "Ave-rage daily sales this month increased 50 percent from last month."

The new downtown duty-free shop is expected to attract 200,000 customers next year.

"China, and Shanghai in particular, is poised to become a top destination for travelers. Duty-free business, therefore, has a future here," said Raymond de Malherbe, managing director of Ferragamo Hong Kong Limited. "We have an outlet at the Pudong International Airport's duty-free shop, and have enjoyed satisfactory sales. Business here should be good."

According to Shanghai Tourism Commission, more than 1.8 million tourists visited the city last year. On average, tourists stay for four days and spend US$118 on shopping.

The new shop is jointly owned by China Duty Free Group, Jin Jiang Group, Pudong Real Estate Group and Shanghai Yaxin Construction Co., with total investment of 15 million yuan (US$1.81 million).

"Selling domestically made goods is a way of stimulating exports, and they account for 25 percent of our merchandise," said Teng.

China opened its first downtown duty-free store in Beijing in 1990. In 1999, four coastal cities - Shanghai, Dalian, Qingdao and Xiamen - were chosen to test downtown duty-free shops as tourism grew.

But not every duty-free shop sees a successful run.

In October 1999, Oriental King Power, World Duty Free and Sunrise Duty Free won the bid to operate a duty-free shop at Pudong Airport.

"It was not successful," said Zhang Hanlin, director of the University of Foreign Trade's WTO Study Center. "Pudong's duty-free shop can't match Hongqiao in terms of passenger flow, purchasing power and revenue. World Duty Free withdrew after huge losses, while Oriental King Power is running in the red."

(eastday.com November 19, 2001)