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China Halts E-Commerce Refunds Without Product Returns

E commerce

Business Honor
25 April, 2025

China has ordered e-commerce platforms to end automatic refunds without returns by July to protect merchants from financial losses.

In a major regulatory action, Chinese regulators have instructed leading e-commerce platforms to suspend the policy of automatic refunds to customers without demanding product returns — a policy that has raised controversy and financial alarm among online merchants.

The order, to be effected by July, follows talks with platforms such as PDD Holdings (operator of Temu), JD.com, and others. As per sources close to the development, the government seeks to ease financial burden on merchants, most of whom have been incurring the costs of refund claims without recovering returned items.

Originally aimed to provide convenience to customers and resolve low resolution of conflicts, the "refund without return" culture gained popularity after PDD launched its app in 2021. Other platforms followed suit afterwards since they wanted to remain in line with market trend, and a new market trend was established. Yet while this buyer-friendly feature has been beneficial for customers, it has been bad news for sellers of products from apparel to gadgets, the majority have reported losses due to refund abuse and fraud.

The step follows rising government alarm about "involution-style" rivalry — a buzz phrase for excessive, unsustainable rivalry among competitors damaging to industry well-being. Other government regulators such as the National Development and Reform Commission have escalated scrutiny of the phenomenon, requiring more sustainable business models for e-commerce.

A July 2024 protest outside Temu's office in southern China demonstrated the increasing discontent among the merchants, finally pushing the authorities, such as the market regulator and commerce ministry, to call for a policy revamp.

This policy shift is a careful balancing act between protecting consumer rights and maintaining merchant viability in China's massive e-commerce market. It is a sign of a broader regulatory push to rethink the platforms' roles and ensure fair play in an increasingly competitive online market.