Jewelry on show at a yacht show in Shanghai. The Chinese city is pondering tax refund policies to encourage consumption and boost tourism and commerce.[China Daily]

Shanghai, China's financial hub, is looking into the possibility of launching a duty-free program in its Pudong New Area district, sources said on Tuesday.

"Research has been carried out concerning the tax rebate plan this year, but there is no detailed plan so far," said an official surnamed Ding from the Commerce Commission of Pudong New Area. Ding, who refused to disclose her full name, said that the program has not yet been proposed to either the municipal or central governments.

Calls to the relevant departments at the Commerce Commission of Pudong New Area went unanswered.

According to a report in the Shanghai-based Laodong Daily, Shanghai Commercial Economic Research Center has been commissioned to conduct a feasibility study for the program, which is intended to promote tourism and spending on luxury goods.

However, Qi Xiaozhai, the center's director, said it was not involved in the research.

"I know some departments of the municipal government are carrying out research, but our center isn't doing the work. Personally, I think this is a very good idea to help Shanghai become a more international city," said Qi.

Shanghai has been considering the program for around three years, with Pudong seen as the ideal location, according to Qi, who said the program was listed in the city's 12th Five-Year Plan (2011-2015) for business development.

However, the municipal government has not yet raised the proposal with the Ministry of Commerce. "The central government will have the final say," added Qi.

Offering duty-free products has become a standard way of increasing revenue from shopping in tourist markets, according to He Jianmin, a professor specializing in tourism management studies at Shanghai University of Finance and Economics.

"Free access to the famous West Lake has boosted the tourism revenue of Hangzhou, the capital of Zhejiang province, and duty-free products would also help to promote Shanghai's economy," He said.

"Shopping accounts for as much as 72 percent of Hong Kong's tourism revenue," He added.

On April 20, Hainan province in southern China began to operate a system offering duty-free products in designated stores to visitors as part of the central government's efforts to construct an international leisure and shopping area.

However, Qi believes that the Shanghai program will have a greater effect in fueling local tourism, given the city's economic scale and national influence.

Shanghai attracted 8.51 million international tourists and 113 million domestic visitors in 2010. Visitor numbers are expected to rise further after a Disneyland theme park opens in the city, sometime around 2016.

More than 57 million Chinese traveled abroad in 2010, spending around $40 billion overall. Meanwhile, 2.1 billion domestic travelers nationwide spent about 1.4 trillion yuan ($215.6 billion), according to He.

China will replace Japan as the world's second-largest luxury goods market this year, second only to the United States, according to a recent report from the management consultancy Bain & Company.

It says sales of luxury goods in China will grow by 25 percent year-on-year this year, to $17 billion. Meanwhile, sales of luxury goods in Japan are likely to decline by as much as 5 percent, partly because of the March 11 earthquake, according to the report.