Shanghai is expected to become the first Chinese mainland city to introduce duty-free shopping in the near future.
The municipal finance bureau said at a regular meeting this week that it has started preparation work on selecting suitable tax refund agencies and designated shops.
The local finance authority is holding a consultation process on a possible implementation period, which people might be eligible to use the stores, the likely tax refunds to be offered, and which items might be applicable, before seeking the central government approval to launch the system.
Duty-free shopping is already available in some stores in the island province of Hainan. Foreign tourists and residents of Hong Kong, Macao and Taiwan who have been on the Chinese mainland for no longer than 183 days are eligible for an 11 percent rebate on any purchase of 800 yuan ($129) and above. Industry insiders think the minimum amount might be 500 yuan in Shanghai.
New guidelines on reform and development of the tourism industry released by the State Council in August highlighted how overseas tourists had said in surveys that duty-free shopping would increase the appeal of China as a shopping destination.
The central government has said it is keen to promote the policy to cities and provinces across the country that meet the requirements, and it hopes to come out with detailed regulations by the end of this year.
Disneyland in Shanghai is expected to receive its first visitors in the second half of 2015, and experts say a tax-free policy at sites in the city would add to its appeal for tourists.
Ding Haozhou, chief executive officer of the Shanghai-based Zonfa Commercial Management Group and a leading retail industry expert, said along with the benefits already offered by the China (Shanghai) Pilot Free Trade Zone, duty-free shopping would prove a real boon.
"The introduction of such a policy reflects the government's attempt to raise high-end consumption in China, rather than seeing that kind of spending being made overseas, especially since the central government's crackdown on corruption and extravagance," he said.
According to Global Blue, one of the duty-free shopping providers, Chinese overseas shoppers have been the world's biggest spenders for the past six consecutive years, splashing out 815 euros ($1,012) per transaction on average. Last year alone, Chinese consumers accounted for 27 percent of all tax-refund claims made to Global Blue.
Statistics from the Shanghai municipal commerce commission show that the city currently attracts 130 million tourists a year, 7 million of whom are from overseas. Annual tourist spending in the city is estimated at 700 billion yuan, of which 40 billion yuan is spent on high-end products such as jewelry and leather goods.
The most likely products to receive tax-free status are cosmetics, clothing, shoes and wine, said Ding, not exactly the most popular items for overseas tourists, suggesting the move is more targeted at domestic consumers.
