China Expands Tax Refund Incentives to Attract Global Tourists Amid Economic Challenges

China has introduced enhanced tax refund policies to boost international tourism and spending amid economic challenges. Visitors can now claim refunds on purchases over 200 yuan, down from 500 yuan, with cash refund limits doubled to 20,000 yuan. More refund outlets will be added in high-traffic areas, simplifying processes and expanding duty-free product options. These measures complement eased visa rules, which have driven a 95.5% rise in foreign arrivals in 2024, as China seeks to strengthen its economy through tourism.

In a strategic move to bolster its economy and counteract the ongoing trade tensions with the United States, China has unveiled more generous tax refund policies for international visitors. These measures, announced by the Ministry of Commerce and five other government departments, aim to stimulate inbound tourism and consumer spending while enhancing the country's appeal as a global travel destination.

Under the updated policy, international visitors can now claim tax refunds on purchases exceeding 200 yuan (approximately $27), a significant reduction from the previous threshold of 500 yuan. In addition, the cash refund limit has been doubled from 10,000 yuan to 20,000 yuan, with no cap for refunds processed via bank transfers. These changes are part of a broader effort to streamline the refund process and make shopping in China more attractive for overseas tourists.

A Multi-Faceted Approach to Boost Tourism

The new tax refund policy builds on initiatives introduced last year to ease visa restrictions and encourage foreign travel to China. Vice-Minister of Commerce Sheng Qiuping emphasized the importance of departure tax refunds as a tool to lower shopping costs for international visitors and expand inbound consumption. He noted that these measures would also foster better economic, trade, and cultural exchanges between China and the rest of the world.

The government has identified several barriers that have previously hindered the effectiveness of its tax refund system, including limited locations for processing claims, a cumbersome application process, and insufficient shopping options for international travelers. To address these issues, authorities plan to establish more refund outlets in high-traffic areas such as airports, tourist hotspots, and bustling commercial districts. They will also simplify registration and filing procedures for retailers participating in the tax refund network.

Additionally, the range of products available in duty-free stores will be expanded, allowing both international and Chinese brands, as well as cultural and heritage retailers, to join the duty-free ecosystem. This shift aims to diversify shopping options and enhance the overall experience for tourists.

Tourism’s Role in Economic Recovery

Despite a notable rise in international tourism revenue last year, it still accounted for only 0.5% of China’s gross domestic product (GDP), a figure significantly lower than the 1% to 3% seen in many developed nations. Premier Li Qiang, in his recent government work report, highlighted the importance of improving duty-free policies as a key strategy to boost domestic consumption—an essential component of China’s economic recovery plan.

China recorded a robust 5.4% economic growth rate in the first quarter of this year, with retail sales of consumer goods rising by 4.6% year-on-year, according to the National Bureau of Statistics. However, lingering uncertainties from the trade conflict with the U.S. have cast a shadow over the country’s economic outlook, with some businesses already scaling back shipments and new orders.

A Promising Outlook for Tourism

China’s efforts to attract foreign visitors have already shown promising results. Visa waivers and other tourism-friendly policies have led to a remarkable 95.5% increase in foreign visitor arrivals in 2024 compared to the previous year. Official data reveals that 26.94 million overseas tourists, excluding those from Hong Kong, Macau, and Taiwan, visited mainland China last year. International tourism revenue reached $94.2 billion in 2024, a 77.8% increase from 2023, though still trailing the pre-pandemic peak of $131 billion in 2019.

Sales of tax-refundable goods have more than doubled, with a slightly higher increase in the total amount reclaimed, according to the State Administration of Taxation. These figures underscore the growing appeal of China as a shopping and travel destination.

A Step Toward Economic Resilience

By enhancing its tax refund policies and improving the overall shopping experience for international visitors, China is making a concerted effort to attract more foreign tourists and boost domestic consumption. These measures not only aim to invigorate the economy but also position China as a more welcoming and competitive destination on the global tourism map.

This article is based on a report originally published by the South China Morning Post.