Rapaport Magazine

Understanding Colored Gems

China Market Report

By Julius Zheng
Compared with diamonds, which commonly come with certificates, the colored gemstone market is much less standardized in China. Jade and pearls have been the favorite colored gemstones in the Chinese tradition for centuries. In the Chinese culture, people have an almost superstitious belief in the spiritual nature of jade. The gemstone is treasured as having ritual power to provide luck and protection, and many traditions and ideals have built up around this belief. If a jade bangle suddenly breaks, for example, the Chinese believe that it may have broken to protect its master from tragedy.

Value of Jade

In the Gemological Institute of America (GIA) nomenclature, jade includes nephrite and jadeite, but the Chinese also include other materials in the jade family, such as serpentine, because they are suitable for carving. Throughout history, jade has been widely used for jewelry, carvings, seals and ritual objects.

The price of high-quality jade has increased greatly in recent years, due to increasing consumption and also speculation. Jadeite sales always face big disclosure issues due to the huge price differences between jade qualities. Untreated jadeite, which is called A Jade in China, can be sold at extremely high prices if it is designated “imperial green” and has good transparency; a pleasant lavender or honey-yellow color can also be very expensive. If the jadeite is bleached but not dyed, it is known in the trade as B Jade. If the jadeite is both bleached and dyed, it is then called C Jade. The value of B Jade and C Jade are only a fraction of A Jade, but not every trade member discloses treatments. In response to consumer concerns, some well-established retailers have maintained a policy of selling only A Jade, often with certificates.

Nephrite commands its highest value when it is white and resembles suet, or mutton fat. Small pebbles of suet-like nephrite material have become very rare in recent years, compared to larger nephrite materials, often called mountain material, that are somewhat dry looking. The smaller pebbles often have a natural brownish skin, and modern carvers try to retain some of this surface skin in carving. At the same time, trade members have developed a treatment technique to mimic the brownish skin and make the stones appear more valuable.

Disclosure Issues

In recent years, the emerald has become increasingly popular in China, and with it, issues have arisen regarding treatment disclosure and education. Since the emerald is often subject to oil treatment, unaware consumers can become upset when their emerald does not look as good after it has been worn a few months.

Another issue with gemstones is that retailers sometimes misrepresent the colored stones or their origin, which commonly happens with pearls. For instance, retailers might call garnets “red precious stones” because of their color. As a matter of fact, red precious stone is the Chinese name for ruby, another red gemstone, but one with a much higher value than garnets.

By all means, gem treatment is not always a bad thing as long as it is properly disclosed, but self-discipline, education and certification will undoubtedly become more important as the market becomes more accepting of colored gemstones.

For colored diamonds, different shades of yellow with GIA certificates are the most popular and affordable choice, but there are occasional demands for fancy pink, blue and other fancy colors. The popularity of fancy color diamonds is increasing, along with the increasing sales of bigger diamonds.

Luxury Market

According to a recent report of the World Luxury Association (WLA), the luxury consumption of China — not including private airplanes, yachts and luxury cars — reached $10.7 billion in the 13-month period that ended in March 2011, accounting for 27 percent of global luxury consumption. Jewelry markets reached $2.76 billion, and the watch and clock market $1.94 billion. China is the second-largest luxury consuming market and WLA predicted it will overtake Japan, the largest luxury market, by 2012.

Surprisingly, Chinese visitors spent nearly $50 billion on luxury items in European countries in 2010, more than four times domestic luxury consumption. Making luxury purchases in Europe is more popular because of the price advantage over prices in China and that practice has made the Chinese the biggest overseas consumers of luxury items. While loose diamonds enjoy a favorable tax policy of 0 percent import tariff and 4 percent value-added tax (VAT) in China, jewelry pieces carry a tax of almost 50 percent, representing combined tariff and VAT. The taxes on other luxury items in China are also very high, making it worthwhile to shop overseas. There has been widespread discussion recently of whether China should reduce the taxes on luxury items to encourage Chinese shoppers to spend more within the country instead of shopping overseas.

The Marketplace

• According to statistics from the Shanghai Diamond Exchange (SDE), the total import, export and intermember transactions on the SDE from January through June of 2011 reached $1.847 billion, an increase of 48.2 percent year on year.

• Retail sales have cooled in July and wholesale trading followed, but demand is still relatively steady, although high prices have somewhat dampened sales.

Article from the Rapaport Magazine - August 2011. To subscribe click here.

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