China's tax refund upgrades: A recipe for greater economic vitality

Editor's note: Matteo Giovannini, a special commentator on current affairs for CGTN, is a finance professional at the Industrial and Commercial Bank of China, a non-resident associate fellow at the Center for China and Globalization, and a member of the Global Young Leaders Dialogue. The article reflects the author's views and not necessarily those of CGTN.

On April 27, Chinese authorities introduced a sweeping set of measures to optimize the departure tax refund process for overseas travelers. This policy innovation represents much more than a procedural update; it signals China's deliberate move to enhance the convenience of shopping for foreign visitors, stimulate inbound consumption and further advance its high-level opening up.

By lowering barriers and streamlining the shopping experience, China is positioning itself as a more attractive destination for international tourists while reinforcing its broader economic strategies in an increasingly interconnected global economy.

The new measures substantially improve the user experience for foreign travelers shopping in China. Among the most notable updates are lowering the minimum purchase threshold required for tax refund eligibility, expanding refund channels to include mobile payment systems such as Alipay and WeChat Pay and rolling out real-time tax refund services at designated stores and major airports.

Previously, the higher minimum threshold for claiming refunds and the reliance on physical paperwork at departure points created friction for travelers, often discouraging them from making additional purchases. By reducing the minimum amount needed and offering instant refunds at the point of sale or through familiar digital platforms, China has significantly lowered the psychological and logistical barriers that might have inhibited spending. These user-friendly innovations align with China's broader digital ecosystem, where seamless mobile transactions are deeply ingrained into daily life.

Moreover, the introduction of self-service refund kiosks at airports, along with multilingual support, ensures that even first-time visitors can navigate the process with ease. Such enhancements not only improve the perception of China as a tourist-friendly destination but also position shopping as an integral and enjoyable part of the travel experience.

Beyond the immediate improvements to the consumer experience, the new tax refund measures' deeper logic lies in their potential to stimulate inbound consumption, a crucial component of China's economic growth strategy.

In 2024, China's inbound tourism saw a robust recovery, with foreign travelers contributing significantly to service trade revenues. However, compared to other major economies, inbound tourism's contribution to China's GDP remains relatively modest. Recognizing this untapped potential, Chinese policymakers are clearly seeking to invigorate domestic consumption by leveraging the purchasing power of international visitors.

The upgraded tax refund policy directly incentivizes tourists to spend more on retail goods, cultural products and high-end services. It also promotes the sales of Chinese brands and region-specific goods, such as tea, silk and traditional medicine, thus serving as a platform to showcase China's cultural and industrial achievements to a global audience.

Furthermore, shopping tourism has a ripple effect across multiple sectors, including hospitality, transportation and entertainment. By boosting retail sales through easier tax refunds, China creates a multiplier effect that reverberates through the broader economy, driving growth in related industries and reinforcing the domestic consumption cycle.

Perhaps the most significant implications of the new measures are their role in promoting China's high-level opening up and supporting the smooth operation of its dual-circulation economic model.

High-level opening up is not simply about reducing tariffs or facilitating foreign investment; it is about building an environment that fosters two-way flows of goods, services, capital and people between China and the world. The optimized tax refund policy embodies this philosophy by making China more accessible, welcoming and convenient for international visitors, while encouraging cross-border economic interactions.

Moreover, the policy supports China's dual circulation strategy, which seeks to balance domestic economic vitality with robust international engagement. By encouraging foreign travelers to participate more actively in the domestic economy through consumption, China strengthens internal demand while simultaneously enhancing its external connectivity.

In this context, optimizing the tax refund system is more than just an administrative reform; it is a strategic adjustment that enables the domestic and international economic cycles to reinforce each other. It reflects China's deepening commitment to integrating its domestic market with the global economy in a mutually beneficial and sustainable way.

In an era when tourist decisions are heavily influenced by convenience and overall experience, the ease of obtaining tax refunds can tip the scales in favor of one destination over another. China's proactive approach thus ensures it captures a larger share of global tourist spending while projecting an image of a modern, efficient and open economy.

By making it easier for foreign travelers to shop and receive tax refunds, China strengthens its domestic consumption engine, deepens its integration with global economic flows and reinforces its competitive position globally. In doing so, it demonstrates that even small policy innovations, when thoughtfully designed and strategically implemented, can profoundly impact economic dynamism and international engagement.

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