In 2015, the market for variable refrigerant flow (VRF) air conditioning systems in China totaled 3.7 billion U.S. dollars, representing 13% of the total packaged air conditioning market, and the VRF market share has grown rapidly. This report provides context for assessing China’s minimum energy performance standard (MEPS) for VRF systems by analyzing the costs and benefits of efficiency improvements via various technological advancements. Currently, the best available VRF systems in Japan currently achieve Japanese annual performance factor (APF) 6.5–6.6 (China APF of roughly 5.0-5.5, based on our preliminary estimates). In general, the best available VRF systems available in major economies surpass the highest efficiency levels recognized by labeling programs by at least 20%. In addition, there are multiple VRF systems manufactured in China that have system EER ratings of 4.00 and higher. Some Chinese manufacturers also reported a China APF range of 4.60-5.00 for the VRF systems with an integrated part load value (IPLV) range of 6.05-6.60. In this analysis, we model four representative VRF systems—with cooling capacities of 14 kilo-watts (kW), 18 kW, 40 kW , and 85 kW—based on the Chinese market’s most common configurations and using China-specific component data and product specifications from manufacturer literature and industry experts. For each VRF system type, we evaluate 144 different design combinations of efficient technologies and estimate the least-cost combinations able to reach target efficiency levels, relying heavily on recent literature and input from industry experts in the Chinese market. We analyze consumer impacts by calculating net lifetime savings and payback period for each level of efficiency improvement. The results show that China has great opportunity to improve its VRF system efficiency using cost-effective technologies. With stringent MEPS levels, sufficient incentives, and robust regulatory programs such as labeling and procurement programs, high-efficiency VRF systems can be developed and deployed in China.