Recent Changes
WGC says China's new VAT policy may depress local gold jewellery demand
This story was originally published at 20:24 IST on 18 November 2025
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MUMBAI – The recent changes to the value-added tax in China's gold market are likely to exert pressure on demand for gold jewellery in the country as the sector is hit with additional tax, Ray Jia, research head, China, at the World Gold Council, said in a report Tuesday. The change in VAT does not apply to gold bars sold by members of the Shanghai Gold Exchange, gold exchange-traded funds, or gold accumulation plans. Jia said there may be further room for growth in sales of gold bars as consumers may purchase them for making jewellery.
On Nov. 1, China's Ministry of Finance and the State Taxation Administration announced adjustments to the VAT policy for the gold market, effective immediately and to remain in force till Dec. 31, 2027.
Wholesale gold demand in China defied seasonal weakness in October as gold withdrawals from the Shanghai Gold Exchange totalled 124 tonnes, up 6 tonnes from the previous month and 17 tonnes from a year ago. "Investment demand improved further, especially in the first half of October when US-China trade tensions flared up, momentum in local equities cooled and the gold price surged, and this supported wholesale gold demand," Jia said in the report.
Prices of the yellow metal initially soared in October, setting successive records on various risks and strong ETF buying, before cooling later in the month as geopolitical concerns eased and profit-taking emerged. Chinese gold ETFs saw inflows of $4.5 billion in October. The total assets under management jumped 24% to $29 billion, supported by strong inflows and higher price of gold, Jia said.
Local investors' interest in gold ETFs faded as trade risks weakened later in October, weakening gold prices. However, investor interest in gold ETFs revived in early November, supported by local equity pullbacks, a rebounding gold price, and rising geopolitical tensions, Jia said.
The People's Bank of China reported its 12th consecutive month of gold purchase in October, adding 900 kg. China's official gold holdings are now at 2,304.5 tonnes, 24 tonnes higher than at the end of 2024. Gold's share in China's foreign exchange reserves has risen to 8% from 5.5%, Jia said.
Net gold imports by China rose 5 tonnes month-on-month and 36 tonnes year-on-year to 93 tonnes in September, Jia said, citing data from China customs. "This is consistent with the pattern we saw from September's wholesale demand--the month's gold withdrawals rebounded both m/m (month-on-month) and y/y (year-on-year)," Jia said. End
US$1 = INR 88.60
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Reported by Ashutosh Pati
Edited by Rajeev Pai
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