The businessman, named by The Herald as 28-year-old Weidong Li, was fined $20 (£16) and in total 314 flags were seized.
Last month Zimbabwean officials warned that anyone who "abused" the flag risked prosecution.
Anti-government protesters have been using flags and the hashtag #ThisFlag.
The protest movement, initiated by a pastor Evan Mawarire, called on Zimbabweans to re-own their flag and to force politicians to answer questions on their lack of accountability and corrupt ways without fear.
On passing the sentence against Mr Weidong, presiding judge Tendai Mahwe said he was showing leniency, saying the accused had saved the court time by pleading guilty.
"You bought the flags in China and you were selling them for profit," Mr Mahwe was quoted by the Herald as saying.
"The moral blameworthiness is low and I will take into consideration that you will lose your flags," he added.
The Chinese national was arrested after officials found the flags on display for sale at his shop in Harare, the capital.
He becomes the first person to be found guilty of breaching the Flag of Zimbabwe Act, which bans any trade involving the national flag without official permission.
A judge in Zimbabwe has fined a Chinese national for selling the national flag without authorisation, the state-run Herald newspaper reports.