RAPAPORT... For the 2008 JCK Las Vegas show, the China Hong Kong Pavilion, organized by the Hong Kong Jewelry Manufacturers’ Association (HKJMA), expanded to two locations on Level One of the Sands Expo Convention Center to accommodate 213 exhibitors from Hong Kong and four from Mainland China. Shanghai Lao Feng Xiang, a Chinese jeweler since 1848, featured its award-winning series of “China Red” jewelry, inspired by the traditional Chinese spindle. “Our main purpose in being here is to communicate and learn,” Shi Lihua, the company’s general manager, told RDR, adding that “the show organizer moved us to Level One from Level Three this year, and we are having much better foot traffic.”
Far From Home
Despite the large number of Chinese exhibitors, however, visitors from Mainland China were scarce at the show. JCK Las Vegas is a big show but a remote destination for most Mainland Chinese because the flight there can take 15 hours or more. Complicating matters further is the fact that the U.S. Embassy in Beijing and the U.S. Consulates General in major Chinese cities are very strict in granting visas. It is more likely that an increasing number of Chinese buyers would go to the three major Hong Kong shows in March, June and September, which are much more convenient for them. In addition, since the majority of diamonds sold in China are smaller than 1 carat, it is more practical to go to Hong Kong shows to source goods.
It is very common for Hong Kong-based companies to strategically place their headquarters and sales offices in the free port city of Hong Kong but locate their factories in Mainland China, especially in Shenzhen and Panyu, to take full advantage of the inexpensive but highly motivated local labor. In recent years, more successful Chinese companies also have established branch offices in Hong Kong. With the manufacturing and trading centers of Shenzhen and Panyu so close to Hong Kong by land, and five airliners offering 62 daily flights on average between Hong Kong and Shanghai, Hong Kong and Mainland China are relying more and more on each other in the diamond and jewelry business.
In reaction to the reduced sales at JCK, many international exhibitors were hoping for improved activity at the June 19 through 22 Hong Kong Jewellery & Watch Fair, Asia’s biggest midyear jewelry show with approximately 1,250 exhibitors from more than 30 countries and regions. In discussions with RDR, several exhibitors said that many Mainland China buyers did come on the first day of the show, although the foot traffic slowed down in the next three days.
Meanwhile, Vasant Mehta, the vice chairman of India’s Gems and Jewellery Export Promotion Council (GJEPC), has been actively promoting the 25th edition of the India International Jewellery Show (IIJS) to be held in Bombay this August to trade members in Shenzhen and Panyu. Mehta told RDR that he hopes to see more Chinese buyers visiting the show this year.
Market StableThe wholesale market was relatively quiet in June but stable in general, since the busy retail season of the Labor Day holiday in May was over, and the preparation for the National Day Golden Week holiday in October had not begun yet.
The first bad news for May was that the general level of accumulated consumer price index (CPI) increased 8.1 percent for the period January through May. Then came the devastating 8.0-magnitude earthquake that struck Sichuan Province and neighboring regions on May 12, killing more than 69,000 people and injuring 374,000, with 17,000 people still listed as missing in the weeks after the disaster. The rainstorms and floods in June affected 20 provinces and 38 million people.
Nevertheless, the market is healthy in general. According to the National Bureau of Statistics, China’s total retail sales of consumer goods reached $124.3 billion in May, a year-on-year increase of 21.6 percent, with jewelry sales rising by 29.4 percent. In 2007, jewelry sales reached almost $26 billion, making that category the third-largest consumer hot spot after real estate and automobiles.
Tiffany & Co. announced its plan to open its eighth store in China in July. The new 2,000-square-foot store will be located near the hotel and yacht club in the coastal town of Qingdao. Hong Kong–based Luk Fook Holdings Ltd is also expanding rapidly in Mainland China. Law Tim Fuk, the company’s chief financial officer (CFO), believes that the jewelry market in Mainland China will maintain double-digit growth rates for the next ten years, while the more mature Hong Kong market will grow only in the single digits. The jeweler currently operates 383 stores globally, of which 346 are in Mainland China and 29 in Hong Kong. The company hopes to increase the number of its branded stores by 20 percent annually in Mainland China over the next few years and generate 50 percent of its operating profit there.
The Marketplace
• Demand is strong for round, G+, VS, ½-carat fine-make diamonds with Gemological Institute of America (GIA) certificates, especially triple EX goods, resulting in price increases.
• Round, G+, VS, 0.60- to 0.69-carat fine-make diamonds with GIA certificates are popular and hard to find.
• Sales are stable for larger stones in 1 carat+/VS+/H+, GIA-certified and fine make.
Article from the Rapaport Magazine - July 2008. To subscribe click here.