SHANGHAI, November 2, 2025 – The Chinese government announced a significant new tax policy on Sunday, eliminating the Value Added Tax (VAT) for all standard gold transactions on the Shanghai Gold Exchange (SGE) and the Shanghai Futures Exchange (SHFE).
The move, jointly announced by the Ministry of Finance and the State Taxation Administration, is widely interpreted as a decisive and strategic effort to bolster Shanghai's standing as a premier global bullion trading hub and to increase the international influence of the yuan-denominated "Shanghai Gold" benchmark.
The policy, which is effective immediately, removes a key barrier that had previously made trading on the Shanghai exchanges more costly for international participants compared to rivals in London and New York.
Bolstering the Shanghai Gold Benchmark
For years, China has been the world's largest producer and consumer of gold. However, its influence on global pricing has not matched its market share. The global gold price is still largely set by the London Bullion Market Association (LBMA) and the New York COMEX, both of which price in U.S. dollars.
By removing the VAT, Beijing aims to:
Increase Liquidity: The tax exemption will lower transaction costs, attracting more domestic and, crucially, international financial institutions, miners, and central banks to trade directly on the SGE.
Boost the Yuan: This move is a key part of China's long-term strategy to promote the internationalization of the renminbi (RMB). By encouraging more global trade to be settled using the yuan-priced Shanghai Gold benchmark, China can reduce its reliance on the U.S. dollar and increase its financial influence.
Enhance Price Discovery: Higher trading volumes will lead to better "price discovery," making the Shanghai Gold price a more accurate and credible reference point for the entire Asian market, which accounts for the majority of global physical gold demand.
Market Reaction and Global Implications
Analysts reacted quickly to the news, calling it a "game-changer" for the structure of the global gold market.
"This is not a minor adjustment; it's a structural reform," said a Hong Kong-based metals trader. "The VAT was a significant friction point for international banks. By removing it, Shanghai is signaling it is in direct competition with London. This will accelerate the shift of the gold market's center of gravity from West to East."
The policy is also expected to encourage more physical gold to be vaulted within the SGE's designated warehouses in Shanghai, further solidifying the city's role as a physical clearing center.
The announcement comes at a time of heightened global economic uncertainty and record-high gold prices, driven by persistent inflation fears and strong central bank buying. China's move to liberalize its market is poised to capture a larger share of this booming global trade.