Gold Rally and New Tax Regime Hit China's Jewellery Retailers

A sustained rise in gold prices combined with a recently introduced tax regime has sharply reduced consumer appetite for jewellery in China, squeezing sales and prompting hundreds of store closures. Retailers report fewer walk-in customers, longer decision cycles for purchases and a shift toward lower-margin items as buyers delay discretionary spending or opt for smaller, cheaper pieces.

Industry insiders say the tax changes have increased the effective cost of transactions and complicated pricing strategies, undermining promotional efforts during traditionally busy periods. Elevated bullion prices — which raise the base cost of inventory — have further compressed margins for merchants who cannot pass the full increase to price-sensitive consumers. The twin pressures of higher input costs and steeper tax burdens have forced some chains to shutter underperforming outlets and reassess expansion plans.

The slowdown is most acute in urban centres dependent on domestic shoppers and reduced tourist footfall. Jewellery has historically been a popular store-of-value and gift category, but with consumers reprioritising spending, demand for large or high-purity pieces has waned. Retailers are responding by trimming inventory, expanding financing options, promoting lower-weight designs and emphasizing linked services such as repairs and customised work to stabilise sales.

Market observers note the sector’s uneven resilience: outlets with strong brand recognition, diversified product ranges or integrated omnichannel platforms are better placed to absorb shocks, while smaller independents and mid-tier chains face heightened risk. Analysts expect a period of consolidation if current price and tax conditions persist, with potential for more closures and M&A activity as healthier players seek scale advantages.

Policy developments and gold price trends will determine the near-term outlook. A rollback or adjustment to taxation could relieve some pressure, while a sustained drop in bullion prices might revive larger purchases. For now, many retailers are prioritising cost control, targeted promotions and digital channels to reach cautious consumers and mitigate the impact of the downturn.