In Depth: Shanghai Duty-Free Tender Exposes Angry Rift Inside China’s Travel-Retail Giant

[para. 1] On a Tuesday morning in Shanghai, significant tension surfaced within the state-dominated Chinese duty-free sector as a public confrontation unfolded between representatives of Sunrise Duty Free Shanghai Co. Ltd. and their majority shareholder, China Tourism Group Duty Free Corp. (CTG Duty Free), at the city’s airport group headquarters. The Sunrise representatives attempted to submit a bid for Shanghai Pudong and Hongqiao airports’ lucrative duty-free concession contracts. However, CTG Duty Free, which owns a controlling stake in Sunrise, had both opposed this move and tried (unsuccessfully) to physically block the bid’s submission. While Sunrise eventually managed to turn in their documents, CTG Duty Free simultaneously filed a withdrawal letter, intensifying internal disputes and highlighting the politically fraught alliances behind China’s duty-free industry [para. 1][para. 2][para. 3][para. 4].

[para. 5] The underlying causes of this clash trace back several months to escalating power struggles between the long-standing, partially foreign-owned Sunrise, and CTG Duty Free, representing entrenched state ownership. Sunrise was founded in 1999 as a wholly foreign-owned company, and only became majority-owned by CTG Duty Free in 2018 following a regulatory shift requiring state ownership for duty-free licenses. Uni-Champion (representing the original foreign founders) and Citic Group retained 33.32% combined, while the Shanghai Airport Group holds 15.68%. The partnership was promoted as strategic but had always been uneasy [para. 5][para. 6][para. 7].

[para. 8] The confrontation was triggered on December 6, when Sunrise’s board, dominated by CTG-appointed directors, voted against entering the new airport tender. Wang Yanguang, chairman of Sunrise and deputy GM of CTG, refused to sign bid authorization. Despite this, Zhang Fengyi (Sunrise’s GM) pressed ahead to submit the bid. Eventually, Shanghai Airport Group allowed Sunrise’s submission, alongside CTG Duty Free itself, Sinopharm’s Zhejiang unit, Wangfujing Group, and global player Avolta AG [para. 8].

[para. 9] Sources report CTG Duty Free now views Sunrise’s foreign backing as a liability, due to the increasing strategic importance of the sector. Tensions worsened when CTG Duty Free abruptly suspended Sunrise’s online sales — which comprise 70% of Sunrise’s revenue — with no explanation, causing inventory pileup. Despite inquiries, CTG Duty Free did not comment [para. 9][para. 10].

[para. 11] CTG Duty Free has been the dominant force in China’s duty-free industry, controlling key locations like Beijing Capital Airport and Hainan’s flagship stores. However, as China seeks to recalibrate its economy and unwind pandemic restrictions, CTG’s fortress appears vulnerable [para. 11].

[para. 12] In late October, state authorities indicated a possible opening for greater foreign participation, releasing policies encouraging foreign-invested firms to apply for licenses and source more domestic goods. Sunrise has been invited to official meetings on license qualifications, while, notably, foreign-owned Avolta is also allowed to bid for Shanghai’s contracts, exposing inconsistencies in policy application [para. 12][para. 13][para. 14][para. 15][para. 16].

[para. 17] Sunrise’s woes predate the dispute, rooted in changes to regulatory frameworks that previously allowed it to prosper via a Free Trade Zone pilot known as “bonded-duty-free integration.” This let Sunrise efficiently import goods for tax-free airport or taxed online sales, outcompeting domestic players. In 2023, Sunrise earned 17.8 billion yuan ($2.52 billion) in revenue [para. 17][para. 18][para. 20]. However, new customs rules now block these advantages, halting key online sales and leaving over 2 billion yuan in unsold inventory. Most online operations have ceased, forcing Sunrise to rely solely on capped cross-border e-commerce [para. 19][para. 20][para. 21][para. 22].

[para. 23] Sunrise’s leadership warns the business model is unsustainable if online operations do not resume, due to the high fixed costs of airport rents and need for omnichannel integration. In 2024, Sunrise’s revenues dipped to 16 billion yuan, but net profits soared 99% to 513 million yuan — a margin at risk if their online shutdown continues [para. 23].

This summary captures the sequential escalation of conflicts, the shifting regulatory environment, the deepening divide between state and private/foreign interests, and the profound challenges facing Sunrise within China’s evolving duty-free landscape.