Shenzhen Shui Bei Gold Platform Payment Abnormality Serves as a Wake-Up Call! Experts Call for: Strengthening Investor Education and Implementing Penetrative Supervision Are Urgently Needed

Strengthening investor education and implementing comprehensive regulation of the gold market are urgent priorities.

Shenzhen Shuibei, the most well-known and most complete gold jewelry cluster in the country, is home to numerous jewelry businesses that control half of China’s gold market. Recently, a platform called Shenzhen Jieworui Jewelry Co., Ltd. (hereinafter referred to as “Jieworui”) encountered payment difficulties, which then triggered a “chain reaction.”

In fact, similar incidents are not the first of their kind. The sharp fluctuations in international gold prices have further intensified related risks. Industry insiders believe that illegal gold trading activities are a form of illegal financial activity. The frequent occurrence of such events mainly stems from loopholes in the enforcement of relevant laws and regulations. Strengthening investor education and implementing thorough regulation of the gold market are therefore urgent.

Ordinary Investors Should Avoid Falling into “Gold Investment Traps”

Recently, reporters visited Shuibei market repeatedly and interviewed several victims involved in the Jieworui incident. Among them were some gold merchants from Shuibei, as well as housewives, “moms,” and even young people who had just started working for a few years. They mainly came into contact with the Jieworui platform through social media platforms.

A “mom” told reporters that she had seen gold prices rising steadily over the past few years and decided to try investing in gold. However, as a “novice” with no investment experience, she was influenced by social media to learn about Jieworui, which has a physical store in Shenzhen Shuibei, and gradually engaged through a mini-program. Compared to banks and other institutions that require certain thresholds and charge fees, and often face stock shortages, she found Jieworui appealing. However, she admitted she had not visited the store in Shuibei in person.

Reporters also found many related gold investment marketing posts on social media, using headlines like “high returns” and “gold preservation,” which can easily mislead ordinary investors. This reflects the new regulatory challenges faced by the gold investment market in the social media era. In response, Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, told reporters that for ordinary investors—especially housewives, the elderly, and other groups with weaker risk awareness—targeted publicity, case warnings, and basic knowledge of gold investment should be promoted to enhance risk prevention awareness. It is also important to clearly distinguish between “investing in gold” and “consuming gold” to avoid falling into “gold investment traps.”

Similarities in Trading Models

“Jieworui often promotes no manual fee and high buyback prices, attracting many ‘moms’ and other ordinary investors. You really shouldn’t be greedy for small benefits,” said Chen, a manager who has been operating a gold jewelry business in Shuibei for many years and had business dealings with Jieworui. She explained that Jieworui was not very noticeable in the Shuibei market initially, and many merchants had never heard of it. In contrast, Jieworui invests heavily in online promotion and has cultivated many “online fans.” Moreover, from a trading model perspective, some of these platforms share similar operational patterns.

Wang Yucheng, Director of Beijing Jinsu Law Firm, told reporters that the business types of these gold platforms often involve not only physical gold recycling but also various forms such as pre-order pricing. For example, in pre-order pricing, customers pay a deposit and agree with the platform on a future buy or sell price. When the contract matures, the platform determines whether to fulfill the contract based on the market price versus the agreed price, or to forfeit the deposit. The specific operation modes, user scale, and fund amounts involved in such businesses could pose criminal risks. Depending on the circumstances, these platforms may be suspected of illegal business operations, gambling, or even fundraising fraud or illegal public deposit absorption.

Yu Lingqu, Executive Director of the Financial Development and State-Owned Enterprise Research Institute of the China (Shenzhen) Comprehensive Development Research Institute, told Securities Times that “initially, illegal gold trading activities developed without regulation and were even considered ‘innovative’ by the industry. It was only after a collapse that remedial measures were taken, often at a high cost.”

After the Jieworui incident broke out, several trading platforms in Shuibei also reported rumors of run-offs. Regarding the situation of Jieworui’s funds clearance, payment arrangements, and specific payout ratios, there are still disputes in the market. The Shenzhen Luohu District task force has also issued continuous updates on the situation.

In fact, the Shenzhen Gold and Jewelry Industry Association issued a warning letter last October, pointing out that judicial authorities had investigated three gold jewelry companies in Shuibei. “It was found that these companies, under the guise of operating gold, were actually conducting ‘non-physical gold betting’ activities through online platforms. Their actions have already involved the crime of opening a casino,” the warning letter stated. These cases exposed that some enterprises, in pursuit of illegal profits, used the pretext of physical gold trading to induce customers into high-leverage “buy long, buy short” betting transactions. Their business operations had completely deviated from the normal scope of the gold jewelry industry, severely disrupting market order and tarnishing the industry’s reputation.

Comprehensive Regulation Is Urgently Needed

“Illegal gold trading activities are a form of illegal financial activity. The root cause of the frequent occurrence of such incidents lies in loopholes in the enforcement of relevant laws and regulations, making risks difficult to detect during the latent phase,” Yu Lingqu suggested. He recommended leveraging the supervisory role of industry associations such as the Gold and Jewelry Industry Association and supporting banks and financial regulators to use their information systems to identify risks in a timely manner.

Bai Wenxi proposed that, in response to the Jieworui incident and similar platform collapses in recent years, regulation should be strengthened across five dimensions: access thresholds, fund supervision, business standards, risk prevention, and accountability. A “full-process, all-encompassing” regulatory system should be established to curb the emergence of illegal gold trading platforms from the source. Comprehensive regulation is urgent. For example, strict entry and qualification management should be enforced to prevent “unlicensed operations”; fund management and escrow should be standardized to prevent “misappropriation of funds”; “betting-style” trading should be prohibited; information disclosure and risk warnings should be strengthened; and risk early warning and emergency response mechanisms should be established.

“Recently, community inspections have been conducted to check whether merchants are operating on-site and whether pre-order pricing is being carried out, as well as recording daily sales and foot traffic,” Chen said. “We hope that the incident can be resolved quickly so that Shuibei market can continue to develop healthily and stably.”