Chinese Jewelers Drop as Gold Tax Breaks End

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Shares of listed Chinese jewelry brands declined after the government eliminated a policy that permitted retailers to offset value-added tax (VAT) on gold.

Chow Tai Fook Jewellery Group was trading approximately 8.7% lower at HKD13.90 (approximately USD1.79) as of late afternoon in Hong Kong. Laopu Gold dropped roughly 8.2% to HKD628.50 (around USD80.87), Chow Sang Sang fell about 6.5% to HKD13.03, and Lao Feng Xiang declined approximately 3.4% to CNY46.58 (near USD6.55).

Starting November 1, Chinese gold retailers will no longer be able to apply VAT offsets on gold purchased from the Shanghai Gold Exchange and the Shanghai Futures Exchange, according to an official statement issued on October 29. This change will remain in effect until the end of 2027.

“The new policy makes non-investment gold eligible for a 6% VAT deduction, meaning the actual VAT rate is 7%,” explained Song Jiangzhen, director of the market research center at the Guangdong South Gold Market Research Institute. “Previously, the entire 13% VAT could be deducted.”

Additionally, the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration jointly announced on October 17 that tax incentives for diamonds would be canceled. Consequently, starting November 1, diamond imports will be subject to a 13% VAT.

Though the effects of these policy changes have not yet fully materialized, their impact on the supply chain is expected to be significant. “The business-to-business sector, including material suppliers, wholesalers, and jewelry retailers, will be most affected,” predicted Song.

Despite these policy shifts, gold and diamond prices at stores belonging to major Chinese jewelry chains remained unchanged this month.

In the fiscal year ending September 30, Chow Tai Fook increased retail prices for gold products by 44%, followed by additional hikes of 12% to 18% late last month. Meanwhile, Laopu Gold has raised its prices three times over the past year, most recently on October 26.

A staff member at a Laopu Gold store in southern China mentioned that while many customers visited to browse jewelry and inquire about prices, most did not proceed with purchases.

According to Song, investment-grade gold, such as gold bars or exchange-standard gold, should still benefit from tax exemptions. Consumers can purchase gold bars directly from banks and have them custom-crafted if desired.