With the global economic situation remaining uncertain, and
China’s domestic growth rate slowing, the country’s consumers are becoming more
conservative. In 2011, the Chinese government implemented a number of
restrictive measures in an effort to curb surging real estate prices caused by
speculation. The speculators were buying up properties they had no plans to
occupy, leaving those who wanted to buy a home to live in unable to afford the
prices in big cities.
The measures had an immediate impact. According to data from
China’s National Bureau of Statistics, 49 of the country’s 70 medium and
large-sized cities actually registered a decline in the price of newly
constructed residential real estate in November 2011 compared with the previous
month, and 16 remained at the same price level. The five cities where prices
did rise posted very small increases of less than .2 percent.
While the decline in real estate prices was good news for
those shopping for a residence, it had a dampening effect on a chain of related
manufacturing sectors, and will affect consumers psychologically on the volume
of self-rewarding purchasing they do. Other factors with a negative influence
on China’s consumers include the poor performance of the stock market recently
and lowered confidence in the manufacturing sector.
Seasonal Sales
For many diamond wholesale firms, one difference from
previous years is that the concentrated purchases traditionally made in the
weeks leading up to Christmas, the Western New Year and the Chinese New Year
didn’t happen in 2011. Retailers were only buying what they absolutely needed
and were reluctant to stock up because of reduced retail demand and the
uncertainty over prices caused by the diamond price hike in the first half of
2011 and the price drop in the second half.
In 2011, retailers launched their year-end holiday
promotions earlier than ever. In the city of Wuhan in Hubei Province, many
jewelry retailers even started their promotions at Thanksgiving, much earlier
than in previous years. The promotions got more intensive in December, when the
stores offered a lot of discounts and coupons.
In past years, retailers who have both brick-and-mortar
stores and online sales platforms tended to sell their older product lines on
their websites, but this year they offered new products in both places. In the
city of Xuzhou in Jiangsu Province, Christmas promotions also started a week
earlier than in previous years.
Wedding Survey
A recent survey in Shanghai about wedding costs, conducted
by Jiefang daily newspaper and QQ.com, one of China’s most popular web portals,
found that only 4.3 percent of consumers favored no-frills wedding packages in
which the couple does not acquire an apartment nor a car nor host a wedding
reception. Another 13.2 percent wanted a wedding package in line with their
financial situations and what they could afford and 22.5 percent preferred a
basic wedding — without a formal reception but including perhaps an apartment
and/or vehicle.
Still, 58.5 percent of respondents were hoping for a
complete wedding package that included an apartment, a car, wedding rings, a
formal wedding banquet and a honeymoon trip. A wedding with all of these
components would cost on average slightly more than $300,000. While wedding
rings are truly the backbone of the diamond and jewelry market in China, ring
budgets tend to be a small percentage of the overall wedding cost simply
because real estate and wedding banquets are so expensive. In the survey, 33.8
percent of potential buyers in Shanghai have a budget for rings of $1,500 to
$3,000, 24.6 percent were willing to spend $1,250 to $1,500 and 15.9 percent,
$950 to $1,250.
Jailed Indians Released
As the Western New Year and Chinese New Year approached,
there was heightened interest in being home for family celebrations. That was
especially important for the 22 Indian merchants who had been detained in China
on diamond smuggling charges since a January 2010 raid by Shenzhen customs
officials. Representatives of the Indian government and Indian organizations
had been in discussions with China seeking their release since 2010. Gujarat
Chief Minister Narendra Modi even visited China and raised the issue with top
Chinese leadership in November 2011. Initially, the Chinese court ruled that 13
of the 22 traders could be immediately released. The remaining nine, who faced
more serious charges, were sentenced to longer jail terms. By the end of
December, only 12 had been released. “I am thankful to the Chinese government
for expediting the trials,” Modi said.
The Marketplace
- The polished diamond supply is plentiful and prices are
stable, with wholesalers holding firm on the prices of certified goods.
- Wholesale trading improved slightly toward the end of 2011
in advance of the holidays, but cautious retailers refrained from large
inventory ordering and the dealers who supply the retailers also were reluctant
to stock up in large quantity.
- Diamond retail sales were flat at the beginning of December.
Wedding demand was for .30-carat to 1.10-carat round in D-H, VS1-SI2 with
Gemological Institute of America (GIA) certificates.
Article from the Rapaport Magazine - January 2012. To subscribe click here.