THE Chinese government said yesterday it has allowed Hainan to set up a company to conduct duty-free business on the island, which aims at making it a tourist hub.

The company "will help encourage proper competition, prevent a monopoly and facilitate the healthy development of the duty-free market in Hainan Province," the Ministry of Finance said in a statement.

The state-owned company will be the fifth major licensed duty-free operator in China, said the ministry. It will sell duty-free goods and set up duty-free stores in the province, the statement said.

China launched a pilot program in April to allow tourists and locals in Hainan to enjoy duty exemptions and tax refunds on certain imported products worth under 5,000 yuan (US$765) before flying to other airports in the country.

The move was to lure more mainlanders to the tropical island and build it into a world-class tourist spot.

After deducting customs duties, value-added and consumer taxes, products sold in the trial duty-free stores in Hainan will be 10 to 35 percent less costly than those sold in other stores.