China is set to remove a decades-old tax incentive for gold buyers, a policy shift that could increase costs for consumers in one of the world’s largest bullion markets. Starting November 1, retailers will no longer be allowed to offset value-added tax when selling gold purchased from the Shanghai Gold Exchange, whether sold directly or after processing, according to new legislation issued by the Ministry of Finance.
As reported by Bloomberg, the rule applies to both investment-grade products — such as high-purity gold bars, ingots, and People’s Bank of China-approved coins — as well as non-investment uses, including jewelry and industrial applications. Analysts say the measure is intended to boost government revenue at a time when economic growth is sluggish and the property market is under pressure, but it will likely push the price of gold higher for domestic consumers.
Global gold markets have recently experienced a remarkable rally, fueled by retail investors and central bank buying, with prices surpassing $4,000 an ounce in early October. However, the market also saw its steepest correction in over a decade following a reversal of ETF inflows, seasonal buying patterns in India, and easing geopolitical tensions, including a trade truce between the US and China.
Despite the recent pullback, gold remains elevated, supported by persistent global uncertainties, anticipated US interest-rate cuts, and continued central bank demand. Industry experts suggest the metal could approach $5,000 an ounce within the next year, underlining its ongoing appeal as a safe-haven asset.
The removal of the tax offset signals a significant policy shift in China’s bullion sector, affecting both domestic investors and retailers who have long benefited from the VAT exemption. While government coffers stand to gain, the change may moderate consumer enthusiasm in China, where gold has historically been a popular store of value and cultural investment.
With the world watching, the policy adjustment highlights the balancing act Beijing faces between stimulating domestic consumption and shoring up public finances amid a period of economic uncertainty.
