Chongqing - Under the bright lights of Chow Tai Fook’s sparkling showroom at Chongqing’s Shin Kong Li Plus (SKLP) mall, sales staff meticulously line up rows of gleaming gold bangles on November 7.

"Today's price is 1,268 yuan per gram," one clerk said. "Younger customers now prefer designs with symbolic meanings - pieces shaped like ancient coins or those co-branded with the Palace Museum collections are very popular."

Chow Tai Fook's store in Chongqing's Shin Kong Li Plus (SKLP) mall. (Photo/Zheng Ran)

Despite global gold prices soaring above $4,000 per ounce in October, the store is offering an 8% discount on selected jewelry. Inside the store, a young family browsed for a gold charm for their child, while another shopper examined a gold-and-jade pendant. "From small children to elderly customers, people can all find something they like here," the clerk added, noting that sales remain stable despite high prices.

A salesperson displays a gourd-shaped gold pendant, symbolizing good fortune and prosperity. (Photo/Zheng Ran)

The interviews came as gold prices reached historic highs. On November 11, spot gold rose to $4142.08 per ounce, surpassing the $4,000 mark.

China, one of the world's largest gold consumers, is now witnessing how global price surges and domestic policy shifts are affecting its jewelry market.

High-end gold jewelry pieces are typically sold at fixed, all-inclusive prices rather than by weight. (Photo/Zheng Ran)

New tax policy increases production costs

On November 1, China's Ministry of Finance and the State Administration of Taxation implemented a new tax policy titled "Notice on Tax Policies Related to Gold." The regulation distinguishes between investment-grade gold (such as bullion traded on official exchanges) and non-investment gold (including jewelry and ornaments), applying differentiated tax treatments based on the nature of the transaction.

Guo Yiming, investment director at Shaanxi Jufeng Investment Information Co., explained that under the new rules, the deductible input VAT rate for jewelry producers dropped from 13% to 6%, significantly raising the cost of raw materials. "To maintain reasonable profit margins, enterprises have had to adjust their retail prices upward," Guo said.

Several brands quickly raised their price per gram. On November 7, Chow Tai Fook listed its gold ornaments at 1,268 yuan per gram, up 70 yuan from 1,198 yuan on November 2.

Song Xiangqing, vice president of the China Commerce Economy Association, said the policy may lead to a clearer division between investment and consumption gold. He noted that investment gold, with lower tax costs, remains closer to international prices, while jewelry, facing higher upstream taxes, could see reduced demand. "Some consumers may switch from buying ornaments to purchasing gold bars," Song said.

Jewelry stores shut doors, but e-commerce rises

Chow Tai Fook's latest business report shows how the changing market is reshaping the retail landscape. As of September 30, 2025, the company operated 6,041 retail outlets - 603 fewer than at the end of March. In mainland China, the network shrank by 611 stores to 5,663. More than 70% of its stores are franchises, and the company stated that it will continue to close underperforming outlets and selectively open high-performing new ones.

Other major jewelers are facing similar pressures. Chow Tai Seng reported that its franchise business revenue dropped by 56.34% year-on-year in the first three quarters of 2025, with 560 fewer stores compared to the previous year.

Other major jewelry brands, including Chow Tai Seng and Zhou Liu Fu, have stores on the same floor as Chow Tai Fook at SKLP. (Photo/Zheng Ran)

Jiang Han, a senior researcher at Pangu Think Tank, stated that China's gold jewelry sector is undergoing a profound transformation. "Gold jewelry is a high-value, low-frequency, experience-driven product that traditionally relies on foot traffic and the trust built in physical stores," Jiang said. "But in major cities, customer flow has dropped sharply. The idea that location equals sales no longer holds true, and store productivity is under pressure."

Jiang described the current phase as a shift from expansion to quality improvement. Brands, he said, are facing short-term financial and human resource challenges, including staff restructuring and franchise realignment, but are also seeking to rebuild their business models around product quality, service, and digital transformation.

Jiang explained that franchise closures, which make up the majority of store reductions, are part of a strategic move. "The relationship between major jewelry brands and franchisees is a typical principal-agent model. The fact that closures mainly involve franchise stores suggests that brands are optimizing channel structures to improve efficiency," he said.

As offline performance weakens, jewelry retailers are turning to online sales. Chow Tai Fook's e-commerce retail value in mainland China rose 28.1% year-on-year in the third quarter, contributing 6.7% of total retail value and 15.5% of sales volume. Similarly, Chow Tai Seng's online business grew 17.68% year-on-year to 1.9 billion yuan in the first three quarters.

Jiang said this trend reflects a shift in trust from high-end gold consumption, from physical stores to official online flagship shops. "Consumers now feel more confident buying standardized products and co-branded items online," he said.

Chow Tai Fook's Palace Museum collection. (Photo/Zheng Ran)

The move toward digital channels also helps brands cut costs. "E-commerce allows companies to reduce dependence on high-rent locations and use data-driven marketing to improve inventory turnover and repeat purchases," Jiang said. However, he cautioned that services like try-on, resale, and after-sales care still require in-person contact. "That's why most major brands are adopting an online-to-offline model that integrates digital interaction with in-store experience."