Mainland Chinese shoppers, whose spending on jewelry and
watches is second only to their spending on cosmetics, were much scarcer in
Hong Kong during the Chinese New Year holiday, when they typically stay on the
Mainland to participate in the biggest family gatherings of the year.
March saw a rise in retail activity. “We had one of the
busiest months yet,” said Sally Ryder of Ryder Diamonds, which specializes in
engagement rings. She said stones of around 2 carats are selling well, and
dealers are offering substantial discounts. “Prices are becoming a lot more
flexible,” she added.
The number of Mainland Chinese visitors to Hong Kong totaled
more than 28 million in 2011, or 67 percent of all visitors to the territory,
up 23.9 percent from 2010. Those numbers are closely watched by the jewelry
industry because Mainland Chinese are estimated to comprise up to 50 percent of
jewelry buyers in Hong Kong and close to 30 percent in Singapore.
TOURISM INITIATIVES
The Hong Kong Tourism Commission announced plans to
encourage even more Mainland traffic in 2012 by allowing increased numbers of
frequent travelers from Mainland China to use Hong Kong’s self-service kiosk
border control system at certain border crossings. The program, introduced back
in 2004, allows frequent visitors to insert a smart identity card into card
readers at specific locations to open a first set of gates and then use a
fingerprint reader to open a second set of gates. By bypassing the traditional
immigration counters, the kiosk system greatly reduces border crossing delays
and speeds entrance to Hong Kong.
The tourism commission also announced its intention to help
Hong Kong travel agents expand their outbound tour operations from the
Mainland. The commission provided no details on how the government plans to
help, but said that it hoped to be able to inform tourism operators about
progress on this initiative in the near future.
The main purpose of Mainland visitors in visiting Hong Kong
is to shop. The big advantage traditionally has been Hong Kong’s tax-free
status. But the recent appreciation of China’s renminbi currency against the
U.S. dollar — to which the Hong Kong dollar is pegged — means that Hong Kong
prices are even more attractive to Mainland Chinese buyers than usual.
KEEPING AN EYE ON GROWTH
The Chinese government revised its projected gross domestic
product (GDP) for 2012 downward to 7.5 percent from 8 percent — a goal that had
been in place since 2005. While any downturn in China will have a negative
impact on the Hong Kong trade, 7.5 percent is still considered solid growth,
especially compared to the performance of other global economies.
The lower growth projection is seen as a sign of the
Mainland’s firm resolve to reduce the country’s reliance on exports and
encourage homegrown consumption in an effort to promote sustainable growth. At
a press conference on March 14, outgoing Chinese Premier Wen Jiabao said the
revised growth was part of the government’s economic restructuring plan, and
that 7.5 percent could not be considered as low. He added that the Chinese
economy is slowing due to the impact of the European debt crisis and lower
demand from overseas, according to a report by Xinhua, Mainland China’s
official news agency.
THE GLOBAL IMPACT
Hong Kong customers are considered very well informed about
jewelry and diamonds. They are aware of the importance of cut, and are
impressed by craftsmanship, particularly by the skill required for such cuts as
hearts and arrows in round brilliants, which have been selling particularly
well in recent months.
Consumers continue to be a little concerned about the global
economy, including that of Mainland China, and this is reflected in their
shopping habits. Some customers are reluctant to spend as much as they once did
and they are more cautious in their selections. With reduced budgets, they are
looking for smaller-size stones of less than 1.5 carats or 2 carats. But they
are not compromising on the quality.
“Two-carat stones, fancy shape is the number one market
demand,” said Mori Boaz of Avi Paz Fancy, manufacturers of straight-edged fancy
diamonds.
Elsewhere in Asia, India’s imposition of a 2 percent import
duty on polished diamonds in January is not expected to have much direct impact
on trade in Hong Kong. However, the tax could lead to increased activity in
Hong Kong and Dubai if Indian traders try to circumvent the tax by dealing from
other centers.
Meanwhile, the currency crisis in Europe is having no effect
on retailers and wholesalers in Hong Kong, at least so far, possibly because
the European market is well established and not seen as prone to major
fluctuations. Signs of a revival in the U.S. economy are already being felt in
Hong Kong. Wholesalers say they have a ready market in the U.S. for any
inventory unsold here.
The Marketplace
- Diamond retailers reported an extremely busy March. Some
attribute increased demand to couples planning to marry during the new Year of
the Dragon, considered the luckiest year in the 12-year Chinese zodiac cycle.
- Retail buyers are reporting increased flexibility in
pricing, with prices down by as much as 10 percent compared with four months
ago.
- Buyers are making purchases to fill inventory rather than
to speculate, which sellers hope means a return to stability.
- Engagement rings of around 2 carats are selling strongly,
and demand is good for stones of 1.5 carats and below.
- Stones above 2 carats are slightly down, those above 3
carats even more so.
Article from the Rapaport Magazine - April 2012. To subscribe click here.