Foreign tourists landing in China now have one more reason to spend. With the roll-out of a new “refund-upon-purchase” tax rebate scheme, shopping has never been more convenient for overseas visitors.

Launched nationwide on 8 April, the new policy marks a major shift from the traditional model, where foreign travellers could only reclaim value added tax at departure points. Under the revamped system, tourists can now enjoy tax refunds instantly at participating stores, following a simple credit card pre-authorisation. Customs clearance upon departure finalises the process, releasing the funds and wrapping up the transaction. This model allows tourists to reinvest the refund into additional spending during their stay.

The initiative was first piloted in five major regions, including the municipalities of Beijing and Shanghai; but its wider implementation signals something more significant: China’s determined pivot towards fuelling domestic consumption as a key economic growth engine.

A consumer-focused shift

The tax rebate policy is just one part of China’s broader strategic recalibration. Long reliant on exports and investment to drive GDP, the country is now fully embracing consumption as a growth pillar. Central to this transformation is the “dual-circulation” strategy – a framework that puts domestic markets at the core, supported by international trade as a complementary force.

China’s policymakers have responded to global uncertainties, from trade tensions to slowing external demand, with a suite of measures designed to bolster spending at home. The Central Economic Work Conference in December 2024 set the tone, urging vigorous efforts to boost consumption, improve investment efficiency, and expand domestic demand on all fronts.

This call to action was quickly followed by a comprehensive policy plan unveiled in March. A joint release by the Communist Party of China Central Committee and the State Council, the plan laid out an ambitious vision to enhance purchasing power, reduce financial burdens, and create a more appealing environment for consumers.

The eight-section plan is wide-ranging, targeting both immediate and structural barriers to consumption. It seeks to raise incomes by promoting reasonable wage growth, improving employment security, and reforming minimum wage mechanisms. On the investment side, new channels for property income are being explored – including rental and equity models that allow rural homeowners to monetise their assets.

The approach is not just financial. Policymakers are weaving consumption growth into wider social reforms, from child care and elderly care to more paid leave. A proposed child care subsidy system, for example, aims to support rural, freelance and daily-wage workers, integrating them into childbirth insurance programmes. Fiscal support for basic pensions and health care for rural and non-working urban residents is also set to increase.

Recognising the realities of an ageing population, the plan highlights the importance of unlocking the consumption potential of older adults. It encourages the development of industries such as anti-ageing health care and senior tourism, catering to a demographic increasingly eager to explore travel and leisure opportunities.

Efforts to cut down excessive working hours and offer more annual leave highlight another key principle: quality of life. By enhancing wellbeing, China hopes to unlock consumer confidence and unleash latent spending potential.

This consumption blueprint also accounts for sectoral and regional nuances. Traditional big-ticket items like housing and automobiles remain a focus, but emerging sectors – such as AI-driven products, smart wearables, 3D printing, robotics, and brain-computer interfaces – are expected to create high-growth consumption avenues.

Rising consumption

These policies are already bearing fruit. Retail sales of consumer goods rose by 5.9 percent year on year in March, a notable acceleration from the 4 percent recorded during January and February. In the first quarter of 2025, China’s retail sales expanded 4.6 percent year on year, which was 1.1 percentage points faster than in 2024, according to the National Bureau of Statistics.

“Overall, consumer spending in the first quarter of this year continued to improve on the back of policy support,” said Sheng Laiyun, deputy head of the bureau. He highlighted initiatives such as the nationwide trade-in programme for consumer goods as a catalyst for growth.

Services consumption is expanding even faster than that of goods, with service-related retail sales increasing by 5 percent year on year in the first quarter. Per-capita service spending also rose by 5.4 percent, accounting for 43.4 percent of total per-capita consumer expenditure – an indicator of China’s steady shift towards a services-driven economy.

Kuang Xianming, vice president of the China Institute for Reform and Development, predicted that services will make up over half of all consumption by 2030. “This expanding market is highly attractive to foreign companies,” he told Xinhua News Agency.

This growing appetite was on full display at the fifth China International Consumer Products Expo, concluded on 18 April in Hainan Province. As China’s sole state-level event dedicated to consumer goods, the expo saw a record turnout of 1,767 companies and 4,209 consumer brands from 71 countries and regions. 65 Fortune Global 500 firms were present, making the expo a strong demonstration of market confidence.

The numbers speak volumes: 52 cooperation agreements totalling nearly 92 billion yuan ($12.6 billion), and more than 60,000 professional buyers – a 10 percent increase on the previous year.

Domestic demand as an anchor

Amid mounting global economic headwinds, particularly as the US raises tariffs on Chinese imports, China’s push to stimulate domestic demand has become vital to safeguarding economic stability. Chinese Premier Li Qiang underscored this when inspecting an exhibition promoting domestic sales of foreign trade firms on 15 April in Beijing. He called for greater efforts to boost consumption.

The growing strength of the domestic market has enabled China to respond more effectively to rising external pressures. As trade tensions with the US escalate, targeted actions are being taken to help export-oriented enterprises to pivot towards the home market. One such initiative, led by the Ministry of Commerce, promotes the consumption of export goods within China. Through this scheme, high-quality export products are being made available in supermarkets, physical stores, and online platforms nationwide, while also being incorporated into the country’s consumer goods trade-in programme.

As Kuang noted, “Expanding domestic consumption is not only key to high-quality development, but also a strategic move amid global economic uncertainties.” With a robust and expanding internal market, China has gained vital economic resilience – positioning itself to weather global turbulence while continuing on the path towards national rejuvenation.