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Chinese yuan. ©iStock

Earlier this week, China's chief administrative authority confirmed the refund, worth around 1.5trn yuan (£177.8bn) this year and available to all micro and small enterprises and self-employed households.

The Chinese government said it will start to refund payments made in the year-to-date next month, with plans to complete the majority of rebates by July.

Li Keqiang, premier of the state council, said: “Under the current circumstances, refunding excess input VAT credits to micro and small businesses and to manufacturing and other key industries is essential for ensuring stable growth at the moment.

“It is a direct boost to the cash flow of enterprises and will benefit them more quickly than tax cuts.”

The Chinese government has earmarked an additional 1.2trn yuan (£142bn) to set up three special funds, to help cities administering the refunds, and ensure employment and basic living needs.

The council also confirmed the government will subsidise more than 82% of the refunds of VAT already paid to local authorities, with the majority of supported focused towards the central and western regions.

Li said: “This is also a clear message to the market that we remain committed to encouraging, supporting and guiding the development of the non-public sector while unswervingly consolidating and developing the public sector.

“We treat state-owned, private and foreign-invested enterprises as equals in terms of tax refunds.”

The government said that it will implement reforms to how VAT is charged and collected in the nation.

The premier added that the government will also focus on supressing tax evasion and subsidy fraud, saying offences will be “punished without leniency”.

Earlier this month, ratings agency Fitch said that Chinese authorities are set to increase economic support this year, to help drive growth which slowed towards the end of 2021.