The Year of the Dragon started early in 2012 on January 23. As the only mystical animal among the 12 Chinese zodiac creatures, it is the mightiest and holds special significance. Looking very different from Western dragons, the Chinese dragon is made up of various parts of such animals as a tiger, fish, snake and eagle, and is not regarded as a threatening evil being, but rather as a symbol of power, superiority and rule. The dragon has been the symbol of emperors for centuries and also represents the striving spirit of the Chinese nation, with the Chinese people proudly calling themselves the descendants of the dragon.
In Chinese astrology, people born under the sign of the dragon are special. They are powerful, energetic and wise, and many of them become leaders. In light of all those good signs, many young couples plan to get married or give birth to dragon year babies in 2012.
Hoping For a Good Year
For most diamond trade members, 2011 was a dramatic year, and the majority of them predicted that the first part of 2012 would be very challenging. The World Bank has projected the next two years will be difficult and has lowered the expected global growth rate of 2012 to 2.5 percent, and that of 2013 to 3.1 percent. In 2010, China achieved 10.4 percent growth, which slowed to 9.5 percent in the third quarter of 2011. The World Bank estimates that the growth rate of China will be 8.4 percent in 2012, higher than the average growth rate of developing countries.
Global economic uncertainties are affecting the overall volume of diamond demand in China, as well as the dollar value of the average purchase, suggesting that consumers have become more conservative in their buying. Sales during the year-end season were satisfactory, primarily due to increased promotions, and there was hope for good sales during the Golden Week that starts the Year of the Dragon.
DAC Visits Bourses
A delegation of high-level officials from the Diamond Administration of China (DAC) and related agencies, including the Customs House and commodity inspection and taxation, visited the diamond bourses of India, Belgium and Israel at the end of 2011.
Delegation leader Zhang Bin, assistant to the DAC chairman, said the delegation decided to visit Israel because it had heard of the “outstanding performance” of the Israeli diamond industry. He noted that the purpose of the visit, beyond seeing Israel, was to learn how the local diamond industry functions, including the roles of the various players in the industry — the bourse, manufacturers, the Diamond Controller, the Israel Diamond Institute (IDI) and the banks. DAC officials, who are working to develop the new diamond center in Shanghai, also were interested in learning about the management systems behind the Israeli diamond institutions.
Ji Guang Yu, deputy director in charge of liaison for DAC, told Rapaport Magazine the delegation wanted to learn from the management and trading experience of the foreign diamond trade centers and their knowledge based on many decades of operation.
The foreign trade centers are very interested in the Chinese market, according to Ji, which boasts the fastest growth rate around the world. He also noted that the foreign bourses in India, Belgium and Israel would be eager to work with stakeholders in China to enlarge their own trade with the Chinese market.
The DAC, having successfully organized the Shanghai Diamond Festival in September 2011, intends to enlarge the event in 2012, according to Ji. The festival, which is held in conjunction with the Shanghai Shopping Festival and which extends through the National Day holiday week in early October, is designed to educate the public about diamonds, expose them to a variety of diamonds and stimulate domestic diamond demand.
SDE Trade Volume Up
According to the Shanghai Diamond Exchange (SDE), turnover on the exchange reached $4.707 billion in 2011, up 63.1 percent year on year. The trade volume included import, export and intermember transactions. As the only official Chinese portal for diamonds imported for domestic consumption, SDE measured that category at $2.04 billion, an increase of 55.6 percent from 2010, despite the falloff that occurred toward the end of 2011. At the close of the year, the SDE had 326 members, having added 45 members in 2011, of whom 201 — 62 percent — are foreign based.
The Marketplace
- Diamond wholesalers received last-minute orders from retailers in the beginning of 2012 for the Chinese New Year Golden Week starting January 22.
- Retailers were actively building up their gold jewelry inventories in expectation of increased gold sales during the holiday season but they were still cautious about how much they bought.
- Diamond wholesale trade slowed in mid-January because holiday orders had been fulfilled and many trade members left early for vacation. Very little wholesale activity was expected from January 22 to the end of the month. In addition, foreign suppliers sent some inventory back to their home diamond centers to avoid getting stuck with goods, resulting in a slight shortage of 1-carat to 3-carat goods in China.
Article from the Rapaport Magazine - February 2012. To subscribe click here.