The Korean government will announce as many as four local retailers that will be allowed to open new duty-free shops in Seoul next week in a bid to meet the growing demand from Chinese tourists, government sources said Thursday.

Duty-free stores, mostly run by retail giants, such as Lotte Group, posted a combined 9.2 trillion won ($8 billion) in sales last year, with an average 15.1-percent growth over the past decade.

As the government has put policy priority on boosting the sector, competition heated up among retail giants here to enter the lucrative market amid sluggish domestic spending.

Last year, the government adopted a policy to hold an open competition for duty-free licenses every five years as a way to reduce monopolies in the market and improve the climate for newcomers.

HDC Shilla Duty Free, Hanwha Galleria and SM Duty Free won new licenses to open outlets in Seoul, while Lotte Duty Free and SK Networks lost their bids to renew their licenses to Doosan and Shinsegae.

Last month, however, the government changed its stance and extended the operational licenses of local duty-free stores to 10 years from the current five. Also, the licenses will be automatically renewed to help the companies run their businesses in a more sustainable way.

According to the sources, the Korea Customs Service (KCS) will announce its plan to issue two to four additional licenses next week despite concerns that there are too many duty-free shops in Seoul to make a profit.

The KCS move reflects a boom sparked by mega-hit drama "Descendants of the Sun," which has added fuel to the so-called Korea Wave in China, attracting travelers from the neighboring country.

The number of foreign tourists in Seoul rose by 15.7 million on-year in 2014, and the number will increase further this year. (Yonhap)