In November of this year, with the major adjustment of the gold value-added tax policy of the Chinese Communist Party, the Shuibei market in Shenzhen, known as the “China Gold Trading Center,” and its national retail network are facing unprecedented panic and stagnation.
Recently, wholesalers of gold and jewelry at Shuibei in Shenzhen, as well as a wholesaler with over 30 years of experience, the owner of a precious metal factory, and a gold shop owner from Shenyang, were interviewed by Dajiyuan to reveal the shockwaves of this industry earthquake – profits being squeezed and market reshuffling accelerating.
The recent joint announcement by the Ministry of Finance and the State Administration of Taxation of the Chinese Communist Party on the “Notice on Gold-Related Tax Policies” has tightened the value-added tax and regulatory mechanisms in the gold circulation field significantly. It includes strict enforcement of value-added tax (VAT): Over-the-counter or informal gold transactions (especially in the recycling and wholesale sectors) are required to strictly pay a 13% value-added tax. Previously, many transactions could be avoided or take advantage of the vague policy area for “tax-free processing,” but now this area has been significantly reduced, and all transactions must be invoiced.
For small and medium-sized enterprises without the qualification of “Shanghai Gold Exchange first-tier members,” their deduction rights for input tax on gold raw materials are limited, leading to a sharp increase in their procurement costs and a significant weakening of market competitiveness.
The Chinese Communist government’s adjustment of gold-related tax policies has triggered chain reactions in the jewelry industry. Shuibei, as China’s largest gold and jewelry wholesale distribution center, was the first to feel the “chill.”
The Shuibei market feels deserted. Mr. Peng, a gold wholesaler, bluntly said that this policy impact has made it difficult for people to do business, the market is very quiet, and “companies that can’t even last a month will die.” The reason is simple: cash flow is cut off. Businesses still need to pay salaries, interest, electricity bills, rent every day, but with a sudden drop in sales and stagnant transactions, the pressure has increased suddenly.
Merchants are closing their doors to watch, and the once lively trading hall is now sparsely populated. Retail counters with thin profits are starting to transfer ownership, and some owners are even slashing prices to escape.
“Now all over-the-counter transactions outside the exchanges must pay value-added tax,” Mr. Peng explained. “Before we bought material cheaper than the exchange, now we have to pay 13 points of tax to issue legal invoices, which is simply not feasible.”
Furthermore, due to varying tax enforcement standards in different regions, some areas allow “tax-free processing,” while most places strictly enforce taxation. “This will lead to the closure of the recycling route, and small businesses simply cannot survive,” Mr. Peng added.
He further pointed out that this round of taxation reform has the most direct impact on the recycling end: in the past, a large amount relied on off-exchange recycling and the circulation of goods without input invoices, but now they must face the reality of “recycling without input and sales must issue a 13% invoice.” For example, if a recycler’s annual revenue is 5 million, being required to issue invoices at 13% will swallow up its meager profit, causing many recyclers to choose to pause or exit.
The inconsistent tax execution approach in various regions has also intensified the confusion: some areas have a lenient attitude towards “tax-free processing,” while others impose strict taxation, leading to inconsistent standards nationwide. While waiting for a unified approach, the market is seeing a universal reaction of “suspension for observation.”
Behind the tax reform, Mr. Peng believes it reflects the financial reality. “Local finances are tight, and value-added tax makes a significant contribution to local finances. Now, with across-the-board measures, everyone in Shuibei is afraid.”
Amid setbacks in traditional channels, e-commerce platforms are acting swiftly. He revealed that in response to the sales pressure of “Double Eleven,” e-commerce platforms have “given the green light” by inviting qualified first-tier members to open online stores and even achieve “instant approval” for entry. “What used to take three days to approve is now approved immediately. The platform is anxious to drive performance.”
Mr. Tian, a jeweler at Shuibei, said, “It’s a very awkward situation now.” The “awkwardness” refers to the sudden tax adjustments and tightened regulations.
According to the current policy, gold trading is divided into two categories: “consumer gold” and “investment gold.” The former mainly includes jewelry, which requires a 5% consumption tax; the latter is investment gold bars, subject to a 13% value-added tax invoice. This adjustment means that gold purchased through informal channels without a legal invoice will face obstacles in the recycling process in the future.
“Buying and selling are all troublesome now, issuing invoices means additional taxes, not issuing invoices brings risks,” Mr. Tian said. “Many peers don’t know what to do.” In his view, regulatory authorities are using this opportunity to promote the billification and legalization of gold circulation. “In the future, it’s best to have a receipt when buying gold, otherwise, without a source for recycling, supervision will become stricter and stricter.”
He estimated that the gold recycling industry may only have about two years of survival space. “In the future, you may only be able to buy and sell gold through banks, and the industry will be brought back into regular channels.”
Mr. Long, a gold wholesaler at Shuibei with over thirty years of experience, quickly adjusted his strategy after the official policy was announced. “Currently, we are switching to a ‘barter’ model, which is an exchange system,” he said. “Customers can buy gold bars or old materials from banks. As long as they meet the purity of three nines of pure gold, they can exchange for jewelry at my place with an additional processing fee.”
He pointed out that the tax reform has led to increased risks in cash transactions and higher invoice costs, making the “hand money and hand goods” model the industry norm. “Previously, the banks would give materials to manufacturers to produce gold bars before selling, but now qualified member units with production capacity have to hand over the materials to the exchange first, and only after inspection by the bank can they sell to customers.”
This process change has brought about time costs and price fluctuations. “Bank payouts now take about a month. Prices have increased from an additional ¥10 to ¥15 to ¥18, and in the future, an increase of ¥20 to ¥30 will be normal,” Mr. Long said.
He advised consumers to pay attention to real-time gold prices on exchanges, such as the pricing on the “Rongtong Jin” mini-program, along with a price difference of ¥20 to ¥30 from the bank, which he still considers reasonable. However, he also admitted that small-weight gold bars are becoming increasingly difficult to purchase, with banks now starting at 50 grams or 100 grams, making smaller weights more expensive.
“Ultimately, it’s about who can survive now,” Mr. Long said.
In Shenyang, thousands of miles away, Mr. Zhang, a gold shop owner, described a more challenging situation. “After the policy came out, you see how many shops have closed now.”
Mr. Zhang stated that the labor cost is actually very low, “about ¥30,” but the real pressure comes from the frozen supply chain. “The upstream is not delivering anymore. We can only ship with old gold. Whatever we could sell of the old gold has been sold, and we can’t collect the rest.”
“The operation of the whole gold shop is very difficult now,” Mr. Zhang said helplessly. He believes that the impact of this tax reform has already extended to the retail side. As tax policies are not yet entirely clear, many businesses are in a wait-and-see mode. “Everyone is waiting, everyone is anxious. Now the market is in an inflated state, selling at ¥990 and buying back at eight to nine hundred, a difference of nearly a hundred yuan, which is simply not normal.”
In his view, the impact of this tax reform will likely not stabilize until 2027, “This is a long-term period of turmoil. The industry will either transform or exit.”
Mr. Huang, the owner of a precious metal factory in Shuibei, has seen a trend of industry stratification from the manufacturing side.
“This tax increase has almost no impact on first-tier member units,” Mr. Huang explained. Nationally, including banks, there are fewer than 300 first-tier member enterprises, enjoying a 13% input tax deduction. “They buy raw materials at 13 points and can fully deduct, effectively buying at market price; whereas us, second-tier members, pay 13 points but can only deduct 6 to 7 points, meaning we have to pay an additional 6 to 7 points ourselves.”
Therefore, the tax reform directly raises the costs for non-member enterprises, weakening the competitiveness of small and medium-sized businesses. Mr. Huang frankly stated, “I won’t sell gold bars in the future; it’s more cost-effective to buy them from the bank.”
He predicted that in the future, Shuibei may see a batch of “direct-operated stores owned by first-tier members,” selling gold bars slightly cheaper than banks. “Small-scale businesses will find it increasingly difficult to operate, and Shuibei is bound to undergo a reshuffle.”
Currently, there are signs of an accelerated turnover of counters in the Shuibei gold market. “Previously, a counter that was ¥1.2 million now sells for thirty thousand.” Mr. Huang said.
In his view, the deep purpose of this tax reform is to “completely separate investment gold bars from jewelry.” Banks and first-tier members will dominate the gold bar market, while Shuibei will continue to focus on jewelry processing.
“In the past, the transfer of first-tier membership qualification used to cost three to five million, now it’s at least 120 million.” He said, “Many people are asking who is willing to transfer, and it’s a frenzy in Shuibei.”
The negative effects of the Chinese Communist Party’s gold tax reform policy are starting to show: slowing transactions, squeezed profits, and stagnant recycling.
Industry insiders generally believe that this tax reform will ultimately lead to a trend of industry concentration. Mr. Huang analyzed that in the future, small brands on the market will gradually be phased out, while large enterprises with qualification and channels will dominate. “First-tier member companies may grow bigger and bigger, with price advantages and brand advantages.”
The views of Mr. Tian, Mr. Long, Mr. Peng, and others also confirm this trend. The tax reform has tightened invoice chain supervision, increased costs, and tightened recycling links, causing “informal businesses” to lose space.
However, the industry is also seeing new adjustment directions. Mr. Huang revealed that his factory has begun to transition to silver and platinum. “Competition in gold is too fierce. We are preparing to move towards platinum and silver bars, which have lower processing costs and more relaxed policies.” He predicted that silver, platinum jewelry, or bars may usher in a new wave of popularity in the future.