Trade volume on the Shanghai Diamond Exchange (SDE), including import, export and intermember transactions, reached $1.217 billion in the first half of 2010, up 76 percent year on year. Data released recently by the Diamond Administration of China (DAC) also reported that the import volume of diamonds reached $577 million, increasing by 92 percent year on year.
The numbers reinforce China’s position as the second-largest diamond-consuming market after the U.S. The world’s third-largest diamond market, Japan, imported $0.334 billion during the same period. The value of transactions among SDE members remained flat at $60.87 million.
During the first half of the year, 25 new members joined SDE, bringing the total to 267. SDE moved to the new China Diamond Exchange Center building late in 2009 and in October will celebrate its tenth anniversary.
In addition to an increase in domestic demand, DAC attributed some of the domestic sales increase to the more legitimate and regulated market environment that was created after a January 2010 smuggling raid closed up many of the illegal business channels in operation previously. The raid also increased interest in membership in SDE, the only authorized channel for importing diamonds into China legally under the favorable tax policy.
Gold Is First Choice
“China Gold Jewelry Fashion Trends,” a recent study conducted by China Gold Association (CGA), provides a qualitative analysis of the current gold jewelry market in China and an overview of the anticipated market trends for 2010. The survey, conducted in eight major Mainland cities during November 2009, covered shopping behaviors, tastes and preferences of local consumers, as well as their purchasing power.
The results show that gold jewelry was the first choice of 42.8 percent of the respondents, while 28.7 percent prefer platinum. Diamonds came in at third. In addition, 56.1 percent of the respondents said they buy one to three gold jewelry pieces each year. Gold jewelry is viewed primarily as an “adornment,” with 28.3 percent of the respondents describing it as an appealing ornament and 19.4 percent viewing it as “an investment.”
In regard to jewelry themes, an impressive 89.1 percent of respondents said that flora or plant life was their favorite theme in gold jewelry design. Colored gemstones were considered by 21.3 percent as the best material to be set in gold jewelry, followed by diamonds, with 20.8 percent, and jadeite, with 20.2 percent. More survey respondents preferred “simple designs” to “elegant styles.”
The research also indicated renewed optimism for the precious metal’s prospects in jewelry fabrication for the rest of 2010. Sixty percent of those taking the survey said they plan to purchase gold jewelry in 2010, with an average price tag ranging from $290 to $425. The study also forecast that China’s gold jewelry market will remain robust in 2010, with elevated purchasing power.
Selling the South African Diamond Cachet
In recent years, many retailers have been telling Chinese consumers over the counter, through advertisements and on the internet that South African diamonds are the best diamonds in the world, without ever fully disclosing their 4Cs information. Although South Africa is one of the important importers to China — together with India, Belgium, Israel and Hong Kong — only a small number of local diamond companies deal in diamonds mined and cut in South Africa with genuine certificates of origin.
The majority of the diamonds sold in the Chinese market do not come from South Africa — either from mining or by processing. In many cases, with rough diamonds moving through various polishing centers, origin of the stone is almost impossible to determine. Although the government has prohibited using such terms as “South African Diamond” or “Burmese Sapphire” as proper product names since 2007, some trade members still tend to boast that all their merchandise comes from South Africa. There continues to be widespread confusion among consumers about which country produces the best diamonds.
Increasingly, honest trade members are speaking out on the internet, educating consumers that the quality of a diamond is not necessarily determined by its place of origin.
Themed Jewelry
In preparation for the World Expo 2010 that opened May 1 in Shanghai, DAC organized an exhibition and auction with the World Expo theme in February. The exhibition included diamond jewelry and jade products and, for the first time in the history of the World Expo, introduced diamonds as special licensed products. A total of ten diamond companies and more than 500 different diamond jewelry designs specially licensed by the World Expo 2010 have been introduced to the market since then.
The Marketplace
• The retail and wholesale markets were quiet in August.
• Demand is good for 0.30-carat to 1.10-carat, D-J, VVS-SI, Gemological Institute of America (GIA)–certified and preferably EX stones.
• Demand is good for 1-carat stones in K-L with no certificate.
• The gradually rising Chinese currency (RMB), with its increasing purchasing power, continues to benefit diamond importing. At the same time, diamond dealers, especially those in the Shanghai Diamond Exchange (SDE), are worried about the stock they bought months ago, because the import price was based on the U.S. dollar, exchanged into the Chinese currency. If the RMB continues to rise, it will compress the projected profit margin.
Article from the Rapaport Magazine - September 2010. To subscribe click here.