AI images fuel surge in fraud, heavy losses reported by Chinese businesses

BEIJING: A rising wave of refund fraud driven by AI-generated fake images is causing significant financial damage to businesses across China’s booming online shopping industry, according to local reports.

Under standard policies on major Chinese e-commerce platforms, consumers are entitled to refunds if they provide evidence that an item arrived damaged, spoiled, or below standard. But scammers are now exploiting this system by using AI editing tools to make perfectly normal items appear broken or defective.

One fruit and vegetable seller from Jiaxing City said he had received multiple suspicious refund requests in recent months. At first, he trusted customers’ claims, but he grew wary as the number of complaints surged.

“The pictures they sent looked tampered with. Some were clearly digitally edited,” he said. Despite his concerns, the platforms processed the refunds because sellers could not provide counter-evidence.

Online marketplaces have begun integrating AI detection systems to identify manipulated images and warn users. However, experts caution that these tools remain imperfect and can be circumvented by skilled fraudsters.

In response to the growing misuse of AI, China has announced new regulations that will take effect in September 2025, requiring clear watermarks and labels on AI-generated images and videos. But analysts warn that these safeguards are still easy to evade, leaving businesses vulnerable.

With the rapid advancement of AI tools and the growing sophistication of online scammers, retailers fear losses will continue to mount unless stricter verification mechanisms are introduced.