Sorry that I didn't specify it, I didn't mean that people should open a merchant account to make fraudulent transactions. In fact, this is illegal in China and financial authorities nowadays are heavily cracking down on these behaviors. So it is unlikely that people who do that can move a long way before being caught.

However, if you get the right network of people and some special channel, there's still chances to legally profit. Let's say you happen to know someone who owns a company in China and who needs some Chinese dollar, you change with them. so the conversion loss can be cut to 0.1%. How you increase the transactions amount legally? My answer is swiping the card for others and give them 0.4% cash back. As I said, the cash back of credit cards in China is usually around 0.2%. So it would be alluring for others to do that as long as you can persuade them that your card is legal. Again, knowing the right people is important. If you know someone whose job is to buy office supplies for his or her company, well, I know it's difficult, but it is still possible. Further more, as long as you are creative enough, you can explore a lot other uses, e.g., buying gold in Hong Kong(thus no sales tax) with this card and resell them immediately, not sure about the profitability.

As for the financial regulations in China, being Chinese and working in some Chinese banks for several years myself, I am pretty sure that there's nothing illegal if you use this loophole while staying away from the fraudulent transactions. And Anyway, it's the American company Discover that's underwriting the losses, so the financial agency in China do not really care.

Indeed, it is difficult, if not impossible, for someone to make a mint from it. Maybe the people to whom these loopholes are most useful are those Americans who's living in China, planning to use the card for personal consumption.