RAPAPORT... Against the backdrop of a still-slumping global economy, China continues to rack up impressive growth in both production and consumption, built on its surging domestic economy. According to preliminary estimates released by China’s National Bureau of Statistics (NBS), the gross domestic product (GDP) during the first half of 2009 rose 7.1 percent to $2.1 trillion after a strong second quarter. In terms of growth by quarters, the GDP rose 6.1 percent in the first quarter of the year and 7.9 percent during the second quarter.
Offsetting the fact that from January to May, jewelry exports dropped to $1.94 billion, a decline of 17.06 percent year on year, domestic consumption of automobiles, furniture and jewelry continued to surge. In May 2009, sales of gold and silver jewelry registered a staggering growth rate of 28.7 percent, due to strong Labor Day holiday sales and steady domestic demand, especially for weddings.
Domestic consumer sales in the first half of 2009 rose 15 percent to $826 billion. Retail sales in cities rose 14 percent to $558 billion and retail sales outside cities rose 16 percent to $264 billion.
WFDB Asia Summit MeetingThe World Federation of Diamond Bourses (WFDB) convened its first-ever WFDB Asia Summit Meeting on June 29 in Hong Kong, aiming to strengthen the organization’s ties with its member diamond bourses in Bangkok, Hong Kong, Mumbai, Shanghai, Singapore and Tokyo. In his opening statement, Avi Paz, WFDB president, said that Asia soon will be one of the world’s leading and most diversified markets for diamonds and diamond jewelry. Paz noted that China has significantly lowered its taxes on diamonds and that, as a result, taxation issues are no longer a barrier for sustainable growth in the country.
In his market report, Lin Qiang, president of the Shanghai Diamond Exchange (SDE), pointed out that China’s diamond and jewelry business is the least affected by the global economic crisis. After a significant downturn in the fourth quarter of 2008, along with the rest of the world, China was one of the first to see its market rebound in the first quarter of 2009.
New Gem Association to Boost Sino-Thailand TradeThailand signed a memorandum of understanding with China to sell gems and jewelry and other items in a major export cooperation agreement. Jiesheng Fang, deputy secretary general of China’s Gems & Jewelry Trade Association, said a joint Thai-Chinese gem and jewelry trade association would soon be set up to promote cooperation. “Thailand is currently the world’s key production source of colored stones, while China is not,” said Fang. “More importantly, China’s consumption of gems and jewelry has experienced robust growth over the past three years, with annual sales now amounting to $20 billion, compared with $15 billion in the previous three years.”
Diamond Firms GrowingChina ranks second in the world in diamond cutting and has approximately 80 diamond-processing companies — mainly in Guangdong, Zhejiang and Shandong provinces — employing nearly 60,000 people. Based in Qingdao of Shandong province, Jinghua is the one of the biggest players in the diamond-processing sector in China. Zhu Xinwei, general manager of Qingdao Jinghua Diamond and Jewelry, said that the worldwide economic recession has not hurt Jinghua’s business, and that the company is planning to recruit 200 new employees for its eight factories in 2009, to supplement the present staff of 3,000.
A recent report by KPMG shows that by 2015, China’s market share of the global diamond-processing business could grow to 21.3 percent, while India may see its share fall from 57 percent to 49. Robust domestic demand for diamonds has also increased the optimism of diamond processors. China is now “the fourth-largest diamond consumer worldwide, and demand is growing,” said Wang Fang, an employee of the Gems & Jewelry Trade Association of China.
However, China’s labor costs are still higher. “The cost of processing 1 carat in China is $17, compared with $10 in India,” said Deng Weiguo, general manager of Aiffany Jewelry.
Estate Jewelry Not Popular Pawn shops, legalized in recent years, have become one of the primary sources for estate jewelry. In addition, consignment stores sell mostly estate watches and some estate jewelry. Sometimes, consumers can find a good deal on diamond jewelry at these locations but generally, Chinese people do not particularly like second-hand items unless they are old enough to be considered “antique.” Jade — both Nephrite and Jadeite — just might be an exception. It is a very prized gem material in the Chinese tradition. “Old” jade is more acceptable than other “old” gems and can even command higher prices than new.
The Marketplace- The month of July is a traditionally slower but stable season in China since there is no major holiday to boost sales. The demand for wedding diamonds is steady.
- Demand is stable for rounds in 0.15 to 0.69 carats, G+, VS and in 0.15 to 0.69 carats, I-J, VVS.
- Demand remains good for rounds in 0.30 to 1.10 carats, D-H, VS, Gemological Institute of America (GIA)-certified diamonds in triple EX, double EX and EX cut grade with none to faint fluorescence. I-J, VVS sells better outside the Shanghai market. SI1 goods have a smaller, but decent, market share. The asking prices for triple EX goods continue to increase.
Article from the Rapaport Magazine - August 2009. To subscribe click here.