Among the U.S.–based laboratories, certificates from the
Gemological Institute of America (GIA) are by far the most popular certs in
China for over .30-carat round diamonds, especially with cut grades of triple
EX or double EX, with none to faint fluorescence. GIA offers a Chinese language
tutorial on the 4Cs on its website, www.gia.edu, to educate consumers in
choosing diamonds. GIA certs are especially popular among internet-savvy
consumers. There are also a lot of third-party internet forums that discuss GIA
certificates, which fuel their popularity as well. In addition, the majority of
the website retailers in China primarily offer GIA goods, which further
reinforces its dominant position.
Seung-Hae Moon, managing director of GIA Asia Pacific
Education, told Rapaport Magazine that GIA is advertising in six leading
consumer magazines in China, and has distributed GIA certificate window
displays and 4Cs counter cards to many local retailers. GIA’s education
division also is offering a Graduate Gemologist (GG) residency course in
Shanghai. The second class just graduated in August, adding around 20 new
Graduate Gemologists in China, where GG diplomas are still very scarce.
LABS ALSO EDUCATE
Laboratory reports from International Gemological Institute
(IGI) are the second most popular among the U.S.–based certificates. IGI also
emphasizes consumer education and professional education, offering training to
retail salespersons and diploma courses in diamond grading.
Because both GIA and IGI certificates are issued overseas,
Chinese retailers often offer the diamonds with a local certificate in Chinese
issued by domestic labs as a secondary certificate of quality. Occasionally,
there are diamonds with certificates from EGL USA and other European
Gemological Laboratory labs, and certificates from American Gem Society (AGS)
Laboratories. However, the availability and presence of diamond certs from
these labs are not nearly as prevalent.
MARKET OVERVIEW
At the recent eighth annual conference of Zhejiang Province
gold and jewelry firms, Shi Hongyue, vice chairman of the Gems & Jewelry
Trade Association of China (GAC), addressed the overall market situation and
industry challenges in China. He explained that the jadeite market has declined
sharply. High-end jadeite has risen to very high prices but few consumers are
buying, while low-end jadeite is difficult to sell, even though the price has
been reduced.
In addition, according to Xinhua News, the Shanghai Diamond
Exchange (SDE) traded 42.88 million carats of diamonds in the first four months
of 2012, a 45.4 percent decline year on year. Total trading reached $1.255
billion, with a narrowed increase of 8.6 percent. The total import of polished
diamonds was $639 million in the first four months, with a narrowed increase of
5.6 percent.
The China jewelry market is facing two major challenges,
according to Shi. First, the diamond and jade section of the market has cooled
in the midst of continued global economic turmoil. Second, the industry is
overbuilt on many levels, from manufacturing to retail. Shi cited the excess
production capacity and presence of too many trading centers.
Of the more than 100 major jewelry centers, over one-third
of them do not have enough occupants and business, Shi noted. There are too
many jewelry retailers, who are heavily concentrated in the first-tier cities,
with a wide variety of business models, including regular shops, franchise
outlets, high-end clubs, sales counters in department stores and website-based
retailers. As a result, he said, the market is overstocked with inventory and
does not have enough liquidity, leading to fierce price wars.
COSTS ON THE RISE
But it’s not just the number of players, Shi said. Many
jewelry manufacturers are suffering from a sharp decline in orders and low
profits. In recent years, the price of tourmaline surged by five to ten times,
and jadeite more than ten times, which attracted a lot of speculative
investment. Business people and investors unfamiliar with the jewelry industry
rushed into the business, and many real estate projects were built around the
concept of creating jewelry industry and trading zones. Even veteran industry
members were eager to expand downstream and upstream. As a result, many manufacturers
expanded their production capacity, while retailers participated in
manufacturing, and manufacturers opened retail shops.
To combat the current oversupply and overexpansion problems,
Shi called on the industry to increase efficiency, develop human resources and
team building, and increase risk management and creativity.
“The China
jewelry industry has experienced ten years of rapid growth, and also the low
point in 2009,” he concluded. “The year of 2012 might be more difficult, but
the difficulties are meant to come and meant to go, and the survivors will
become even stronger. I believe jewelry is a beautiful industry and so is the
future.”
THE MARKETPLACE
Diamond retail sales and wholesale trading were quiet in
August because of weak overall demand and the summer vacation in Israeli and
Belgian trading centers.
There is continued demand for round .30-carat to 1.10-carat,
D-H, VS-SI, Gemological Institute of America (GIA)-certified diamonds in triple
EX and double EX cut grade, with none to faint fluorescence. But the demand is
much less than it was in 2011 and retailers and dealers are very cautious about
building up inventory.
Halfway through the year, retailers have lowered their
projections for 2012 sales. Buyers are expecting to visit the upcoming
September Hong Kong Show for more pricing guidelines and indications of market
trends.