China

There is no doubt that India, the biggest diamond manufacturing country, and China, the second-largest diamond consumption market, have more and more interaction and influence with each other. It is also no surprise that many Indian diamond merchants, especially those who live in Shanghai and work in the Shanghai Diamond Exchange (SDE), can speak some Chinese, and use local communication tools like QQ and WeChat, which are popular in China.
   India-based companies have been coming to China since the establishment of the Chinese market and continue to maintain the strongest presence in the SDE. Many Indian manufacturers specialize in cutting triple EX, Gemological Institute of America (GIA)–certified round diamonds to cater to the Chinese market, while others produce melees for sale to the jewelry manufacturers in China, especially Shenzhen.
   On the other hand, Chinese jewelers and dealers are taking the initiative and sending an increasing number of buyers to Mumbai and Surat to source polished diamonds firsthand, either certified goods or parcel goods. Most go on short buying trips or visit the India International Jewellery Shows (IIJS), while others position themselves as long-term resident buyers.
   Chinese buyers work with local Indian buying agents, too, who are much more familiar with the market. The big Indian suppliers, such as Gitanjali, have not only gone into diamond wholesale and manufacturing in China, but also have set up their own retail chains.

Cooperation/Competition
   Both China and India have played important roles in the development of each other’s market. But cooperation, competition and even friction have always co-existed. The two countries account for one-third of the world population, providing valuable resources from low-cost labor to emerging consumers consisting of the newly rich and middle class.
   With a workforce of approximately two million in the gem and jewelry industry in India, and 11 out of 12 processed diamonds globally passing through India, the country’s position as the biggest diamond polishing country remains strong. China, as the second-largest diamond consumption market as well as the second-largest diamond polishing country, must necessarily access India’s diamond supply but at the same time wishes to develop its own diamond industry. Inevitably, the two countries will be competing for manufacturing business and such resources as rough diamonds. In the meantime, however, they have to rely on each other to a certain extent if both are to prosper.

Economic Growth Slows
   According to the data released by China’s National Bureau of Statistics (NBS), on July 15, the gross domestic product (GDP) of China in the first half of 2013 was $4 trillion, a year-on-year increase of 7.6 percent calculated at comparable prices. The growth in the first quarter was 7.7 percent, and 7.5 percent in the second quarter. According to Sheng Laiyun, NBS spokesman, the slower GDP growth was designed to create conditions for economic restructuring and rebalancing of the economy for sustainable growth in the future. Laiyun said China is capable of keeping its growth momentum steady for the rest of 2013, even though the overall domestic economic environment is expected to remain grim and complicated. Although expected, current GDP rates reflect a significant decline from growth in recent years, which occasionally reached double digits.

Reaction To Slowdown
   There has been heated discussion in a variety of sectors since the release of the GDP data. JPMorgan Chase downgraded China’s yearly growth forecast to 7.4 percent from 7.6 percent, citing weak manufacturing, investment and overseas demand. At the same time, Michael McDonough, senior economist at Bloomberg LP, predicted that the Chinese government is signaling unprecedented tolerance for slower growth in the second half of 2013, as the government is shifting from fast but low-quality economic growth into a mode of more sustainable growth.
   Yu Yongding, an economist at the Chinese Academy of Social Sciences (CASS), said, “It is not necessary to be too pessimistic; the bottom line in the government’s two previous five-year plans was 7 percent. We should prepare for a fairly long, difficult period as that is the cost of reform.”

Article from the Rapaport Magazine - August 2013. To subscribe click here.