Various Segments of the Chinese Jewellery Market
Demand for diamond in China is increasing and the diamond industry is growing quite fast. Previously, diamond was used only for industrial use, and rarely for jewellery. After diamond was found in the three provinces of Liaoning, Shandong and Hunan, the diamond industry started developing in the 1980s. In those days, it was mainly used for export, with a total annual earning of US$ 60-80 million. Now, with increasing domestic demand, a substantial portion needs to be imported. At present, there are over 200,000 people engaged in the diamond industry. Diamond consumption in China is estimated at over US$ 2 billion, and is growing at the rate of 15% and more, especially engagement and wedding rings with 0.5 carat or 1 carat of diamond, which are very popular with young consumers.
According to some experts with the China Gemmological Association, diamond consumption in China will surpass Japan in 10 years’ time, with annual consumption reaching over US$ 10 billion. In diamonds, China occupies 1.8% of the world’s diamond market share. Shanghai accounts for one-fifth of China’s total diamond consumption. Shanghai is moving towards becoming one of the world’s top diamond jewellery markets, registering a 40% annual growth in the last four years. In the first 11 months of 2002 China imported diamonds and related products worth US$ 38.3 million through the Shanghai Diamond Exchange (SDE), the only legal trading channel in China (functioning since June 2002).
During this period, the SDE imported US$ 37.4 million worth of diamonds for ornament making, including finished diamonds making up 97.7% of the company’s total diamond imports. The other US$ 900,000 worth of diamond imports were for industrial use. The figure highlights the rapid growth in legal diamond imports and increasing non-industrial use of diamonds ever since the central government exempted the SDE from tariffs on diamond products in July 2002. In 2003, transactions volume at Shanghai Diamond Exchange was US$ 277 million.
Business turnover in diamond trading reported a 39% rise year-on-year to US$ 80.8 million during the first quarter of 2004 at the Shanghai Diamond Exchange. A continuing rise in diamond wholesale price in international markets shored up the trading in Shanghai, with the volume registered in March 2004 hitting a record high. In March 2004, trading of diamond totalled at 40.7 million dollars, up 91% year-on-year, with diamond imports rising 48% to 12.2 million dollars, and raw diamond trade soaring 270% to 3.71 million dollars. Trade in raw diamond accounted for 10.45% of the total trading volume during the first quarter of 2004, rising many times over the previous year.
However, the import volume lags far behind consumer demand for diamond products in China. Diamond smuggling is still a widespread problem. The large percentage of imported diamonds used for ornament making indicates China’s demand for diamonds remains brisk. Since 1993, China’s diamond retailing business has made rapid progress. China’s economic growth in the 1990s and a large population base of 1.3 billion has attracted the world’s attention, and a number of international brands have wasted no time opening up retail outlets in major cities like Beijing, Shanghai and Guangzhou.
Most prominent have been businesses from Hong Kong and Taiwan, with all famous gems and jewellery businesses in Hong Kong having shifted their strategic nerve-centre towards the Chinese mainland. For instance, four Hong Kong jewellers, namely Chow Tai Fook, Tse Sui Luen (TSL) Jewellery, Chow San San and Luk Fook Holdings, rank among the top 10 diamond jewellery brands in China, according to an industry magazine Gold Jewellery. Sales volume has also grown in tandem. In 2001, sales volume of diamond jewellery was 14.6 billion RMB (about US$1.8 billion), and its annual growth at 30.36% was the highest within the whole gems and jewellery sector.
In 2002, sales volume increased a further 20.55% to 17.6 billion RMB (about US$2.1 billion). Year = Sales volume of diamond (RMB billion) 1990 = 1.4 RMB billion 1993 = 2.0 RMB billion 1996 = 4.444 RMB billion 1999 = 8.831 RMB billion 2000 = 11.2 RMB billion 2001 = 14.6 RMB billion 2002 = 17.6 RMB billion Article source: Articles source: Gems & Jewellery Industry in China, Embassy of India, Beijing