RAPAPORT... The Diamond Federation of Hong Kong (DFHK), China is a nonprofit organization, founded January 1, 2000. It was formed by the merger of two established diamond trade associations, the Diamond Importers Association, founded in 1957, and the Hong Kong Diamond Bourse, established in 1985. The goals of the DFHK include protecting the integrity of the diamond business by standardizing business practices, promoting quality services and consumer rights and maintaining Hong Kong’s reputation as the diamond center of Asia. Currently, the DFHK has more than 400 members and branch memberships, including retailers, wholesalers and manufacturers. DFHK Chairman David Pong, who is also chairman of the Wing Hang Diamond Co., recently spoke with RDR about the state of the Chinese diamond market.
Rapaport Diamond Report: Please give an overall picture of diamond production and sales in China.David Pong: With consecutive years of vibrant economic prosperity, the Chinese society has experienced rapid income growth. A more upscale consumer structure has formed. Benefiting from such favorable circumstances, diamond sales are quickly soaring to meet an ever-increasing demand. At the same time, China’s diamond-cutting industry is also picking up its pace.
RDR: What is the current situation for diamond manufacturing in China?
DP: Manufacturing in China has improved a lot, because of the introduction of high-tech machinery that is used for micropavé and other techniques. Cheap labor is also abundant; for a good worker, the salary can range from $300 to $400 per month. Less-skilled workers earn less than $300. China has more than 20 to 30 years of experience in diamond production.
RDR: Where are China’s major cutting centers?
DP: There are two distinct cutting regions. One is Panyu, where several hundred manufacturers cut diamonds and produce jewelry, all for export. The other is Shenzhen, where the diamond manufacturing is mostly for local sales. Chinese retailers prefer to buy there.
RDR: Please talk about the Chinese consumer market and its attitude toward diamonds.DP: Desire for diamonds in China is high — in retail shops, 70 to 75 percent of business is diamonds. One of my wholesale customers has 330 shops in China and diamonds are his main sales. Diamond jewelry is sold not only in independent retail shops, but also in department stores. Right now, business is good because the economy is strong. The diamond engagement ring has been a trend for more than ten years. De Beers promoted it heavily in China. Generally, sales of diamond engagement rings are led by urban areas. The new generation, particularly consumers in Shanghai and Beijing, want diamond engagement rings and diamond jewelry. The three-stone diamond ring and diamond anniversary rings are growing in popularity because of the Forevermark instituted by De Beers. “China Made” has become a sort of brand to Chinese buyers and it’s been very good for the country’s cutting and manufacturing business.
RDR: Are diamonds reserved for the wealthy, or are they purchased by consumers at all income levels?
DP: The wealthy class buys bigger and better stones, but mainstream buyers also want diamonds, even as small as a 10-point size. The Chinese consumer wants better-make diamonds and diamond jewelry. In general, diamonds ranging from 20- and 30-pointers up to 1 carat are the biggest market. Best-selling qualities are J and above in color and VS2 and above in clarity. In Shanghai and other urban cities, higher qualities are in demand. Government-issued certificates are important to Chinese diamond buyers.
RDR: Are colored diamonds in demand in China?DP: Not at this time; there is not much knowledge about them. Treated color diamonds are not wanted by top retailers. There is something about a natural diamond and it has more appeal if it is not treated. When you give your wife or girlfriend a diamond, you want it to be genuine.
RDR: What are China’s major export markets for diamonds?
DP: The major markets for Chinese diamonds and diamond jewelry include the U.S., Asia, Europe and the Middle East. The U.S. market has always been the biggest for diamond jewelry exports. We’ve done business with customers there for 30 years. Business is slow now, but the amount of sales is still huge. When sales are not good, we turn to other markets. For example, at trade shows, such as the 2008 Hong Kong International Jewellery Show, the major goal is to attract new buyers from other areas. Vietnam is showing growth.
RDR:What is the current situation with the U.S. market?
DP: Diamond prices are increasing slowly; the better-quality stones are priced higher, but are more salable. Chinese manufacturers sold cheaper qualities to the U.S. before, but there hasn’t been much increase in overall sales. Now, many are asking for better qualities.
RDR: What are the biggest growth markets?
DP: There is still huge growth potential in China, followed by India.
RDR: Do you see a demand for large, lesser-quality diamonds?
DP: There is a big demand in the Middle East, where they like bigger stones but don’t care as much about quality. The Indian market is good for big stones in the J to K color range. Russia is not as big a marketplace, but demand is growing fast and its percentage of sales is increasing.
Article from the Rapaport Magazine - May 2008. To subscribe click here.