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Informist, Monday, Dec. 15, 2025

 

MUMBAI – The recent value-added tax reforms in China accelerated consolidation in its gold jewellery industry, dampening consumption and, in all probability, will continue to hurt sales in the near future, Ray Jia, research head, China, the World Gold Council, said in a report Friday. However, by forcing out stores with weak financial and product strength, the industry is expected to emerge leaner and healthier. This shift should prompt jewellers to re-focus efforts on the "jewellery" aspect of gold jewellery, Jia said.

 

On Nov. 1, China's finance ministry and the state taxation administration announced adjustments to the value-added tax policy for the gold market, effective till Dec. 31, 2027. "Members who buy and sell gold directly on the Shanghai Gold Exchange (SGE) – the so-called "first-tier" supply – remain VAT free, however, members withdrawing gold are now subject to different policies depending on their purpose: investment or non-investment. Members withdrawing physical gold and re-selling with investment purposes are not impacted as they are still subject to the current VAT charge (at 13%) on the value-added part, while those with non-investment purposes now face higher costs when they re-distribute," Jia had said in a report in November.

 

Gold prices continued to rise in November due to expectations of a US Federal Reserve rate cut in December. The London Bullion Market Association gold price PM was 4.5% higher in November, and up 61% year-to-date. The Shanghai Benchmark Gold Price PM in Chinese Yuan rose 3%, and was up 54% year-to-date. The appreciating yuan against the dollar and weakening local demand limited gains in gold prices, Jia said.

 

Gold withdrawals from the Shanghai Gold Exchange fell 32% on month and 15% on year to 84 tonnes in November, the biggest fall in November since 2009. "This is likely due mainly to a significantly weakened gold jewellery sector: impacted by the recent VAT reform, rising gold jewellery costs have deterred consumers and subdued retailer restocking activity," Jia said. The bullion sales from Shanghai Gold Exchange, which were not impacted by the change in value-added tax, stayed healthy during November, although it was insufficient to offset fall in demand for gold jewellery.

 

Chinese gold exchange-traded funds attracted $2.2 billion, with holdings rising by 17 tonnes in November, and witnessed a third consecutive monthly inflow. The total assets under management of Chinese gold ETFs rose 10% on month to $29 billion, while holdings rose 7% to 244 tonnes. The buying strength of gold ETFs was driven by similar factors to those supporting bullion sales, the report said.

 

Gold futures trading volumes fell 29% on month to 461 tonnes per day on average in November, mainly due to lower gold prices volatility. "Despite the pullback, volumes remain well above the 2024 average of 302t/day. So far in 2025 gold futures volumes have averaged 463t/day, notably higher than the five-year average of 216t/day between 2020 and 2024," Jia said.

 

The People's Bank of China announced an addition of 0.9 tonnes to China's official gold holdings in November, pushing the total to 2,305 tonnes. "Y-t-d (year to date) China has reported 26t (tonnes) of official gold purchases, lifting gold's share in the country's total foreign exchange reserves from 5.5% in December 2024 to 8.3% in November this year – supported by the central bank's continued accumulation and the gold price surge," Jia said. 

 

In October, China had imported 36 tonnes of gold, down 57 tonnes on month and down 43 tonnes on year. Fewer working days weighed on imports due to the eight-day National Day holiday and mid-autumn festival. "In addition, the Shanghai-London gold price spread was negative for half of the month, further deterring importers. And the general weakness in the gold jewellery sector so far this year has kept imports low compared to previous years," Jia said.  End

 

US$1 = INR 90.76

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Reshma Ravi

Edited by Ashish Shirke

 

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