The Inner Mongolia Higher People's Court announced on its microblog that it had overturned the conviction of Huugjilt, who was 18 when he was sentenced to death and executed for the 1996 crime. Huugjilt used only one name, as is common among ethnic Mongolians.
The deputy head of the court, Zhao Jianping, offered his "sincere apologies" to Huugjilt's parents, China's official Xinhua News Agency reported. The parents received 30,000 yuan (USD 5,000) as an expression of the court's sympathy and were told they could claim an unspecified amount of compensation.
State media reported in 2005 that a convicted serial rapist and killer confessed to the murder after receiving a death sentence for other crimes, but was never tried for this killing and has still not been executed. Huugjilt's retrial was held only last month.
Huugjilt had come to the attention of the police after reporting that he had found the woman's body in a public toilet in Hohhot after hearing a cry for help.
Huugjilt's trial and execution came amid one of China's periodic "strike hard" campaigns, during which police and courts were put under extra pressure to break cases and punish criminals.
China's high court has since taken charge of reviewing all death sentences and has pledged to carry out executions for only the most heinous crimes.