Strengthening The Trading Platform
By Julius Zheng
In 2010, China surpassed Japan to become the second-largest diamond consuming market after the U.S. As the market grows and gets more internationalized, there is more interaction with the other important trading and producing centers.Shanghai and Hong Kong Sign AgreementThe Shanghai Diamond Exchange (SDE) and the Diamond Federation of Hong Kong (DFHK) recently signed an agreement to share resources in an effort to develop China’s diamond industry by maximizing trading activity and facilitating the exchange of member services. In addition, the DFHK and SDE will develop and implement a joint business promotion plan and facilitate the organization of an international jewelry exhibition. The two partners also will develop a strategic plan to promote general trade of more than $800 million between them during 2011 and to increase it in subsequent years.Hong Kong has become the most important diamond trading center in the Far East, and as a free port, it has a critical role in gathering diamonds from diamond-producing countries worldwide and distributing them to the consuming markets in Asia. Many renowned diamond companies have offices in both Hong Kong and Shanghai.The total diamond trading volume between Hong Kong and Mainland China rose by 374 percent from 2002 to 2010. In 2010, the total volume of polished diamonds exported from Hong Kong to the SDE was $5.57 billion, 43 percent of the SDE’s total imports. In addition to its second-place ranking as a diamond consumer market, China has become the world’s second-largest diamond-processing center, contributing 30 percent to 40 percent of the total diamond industry output. Up to 50 percent of the workers in China are managed by Hong Kong invested companies.According to SDE, the bourse traded $753 million carats of diamonds in the first three months of 2011, rising 32.8 percent year on year. Over its ten years of operation, the SDE has traded more than $8 billion of diamonds, with an average annual increase close to 40 percent. In 2010, the SDE traded over $2.89 billion of diamonds, a 90.7 percent increase from 2009. In the upcoming ten years, the bourse aims to build a stronger diamond trading platform serving Asia and the world.Eye on Basel Unlike the three Hong Kong shows, BaselWorld is not yet a typical show for the Chinese to attend, nor is it as convenient. However, with an increased awareness of the necessity for international sourcing in light of current global shortages, more Chinese buyers are attending such international shows as those in Basel and Las Vegas. Among the 1,892 exhibitors in BaselWorld this year, 522 were from Asia, the second-biggest presence after Europe, which had 1,206 exhibitors.The Chinese presence is still relatively weak in terms of buyers and exhibitors, but they are paying more attention to the Basel show and also drawing more attention. Such renowned Chinese exhibitors as TTF Studio, Y&M and Fine Pearl Jewelry displayed their products at the show.Japan QuakeThe earthquake, tsunami and nuclear power plant accident in Japan have drawn immediate, wide and consistent concern in China, as the two countries are separated by just a narrow sea and have many connections, in both people and economy. China sent over a rescue team, and donated large shipments of fuel, equipment and other relief goods immediately after the disaster. The Grade 7 nuclear accident at the Fukushima No. 1 nuclear power plant generated considerable discussion in China about the possibility of nuclear pollution reaching China by air and sea. As with many other natural disasters, the fear caused by the accident is almost worse than the accident itself, and the government has been forced into conducting public relations, literally every day, to assure their citizens that the accident does not pose any danger to the Chinese public. The diamond market in China, with its strong and increasing demand, has been relatively unaffected by the disaster. Since Japan is not a major diamond-exporting country to China, the domestic supply of diamonds has not been affected. It is not yet clear whether the disaster will cause long-term and serious damage to Japan — and by extension, to the world economy — because the countries’ economies are so interconnected. Most diamond trade members are optimistic that China’s economy can maintain its momentum. The pearl market is of greater concern because China exports a large volume of freshwater pearls to Japan and it is feared that the demand for imports might decline as Japan deals with the huge task of rebuilding.The Marketplace- The wholesale market was busy with preparations for the upcoming May Day holiday retail season. The price increases at the wholesale level have resulted in significant price increases at retail, but the hikes have not adversely affected sales volume.
- Overall demand remains very strong and prices are rising. Shortages remain for rounds in .30 carats to 1.10 carats, D-H, VS-SI, Gemological Institute of America (GIA)-certified diamonds in Triple EX and Double EX cut grade, with none to faint fluorescence. Triple VG goods also are selling well.
- Gold jewelry, gold bars and other gold products have become very popular as a hedge against inflation in China.
Article from the Rapaport Magazine - May 2011. To subscribe click here.
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