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KOLKATA - Diamonds may be a woman's best friend, but the burgeoning demand for gems and jewelry in China and India's expertise in handcrafted jewelry may well signal a new era of friendly business relations in this sector between the two Asian giants.
According to research done by India's Gems and Jewelry Export Promotion Council (GJEPC), the Chinese gems and jewelry market is growing at the rate of 8-10% annually, while diamond consumption is estimated to grow at 15%. China's gold consumption value will total almost US$18 billion with an annual export value of more than $15 billion by 2010, making China the third-largest national gold market after India and the US. China, which was virtually nonexistent in the field of man-made gems and cubic zirconium (CZ) processing a decade ago, is now one of the major CZ producers alongside India, Korea, Taiwan and Thailand. Their growth in the sector has been phenomenal in spite of very meager domestic consumption.
With these facts and figures in mind, the GJEPC sent an 11-member delegation to China in September to explore the possibilities of doing business in the jewelry industry. A study of the markets and possible business prospects between the two countries generated several revelations. The underlying intent of the Indian side was to determine whether China is a potential market for Indian gems and jewelry or a potential threat, and to promote two-way trade between India and China. By projecting China as a potential market rather than a threat, the council would draw itself closer to the new benchmark it has set in reaching $16 billion in jewelry exports to China by 2007.
The delegation visited key towns and provinces in China where an advanced level of business is done in the jewelry sector. These included Panyu, a Pearl River Delta town (officially a district of Guangzhou) known as the "jewelry city" of China; Wuzhou; Shanghai; and Hong Kong.
The council made three main observations in its report:
First, China is definitely emerging as India's arch-rival in the jewelry sector, and India has to wake up and compete if it intends to maintain its dominant position in the world's cut and polished diamond market.
Second, China will become the world's leading jewelry consumer and processor by 2010, spurred by its growing power tariff cuts and the liberalization of the market. China's jewelry market has been growing at more than 8% annually since the 1980s and it has become one of the few countries whose domestic consumption exceeds $10 billion annually.
Third, a year-by-year analysis shows that in 2001, China's domestic market for jewelry posted a record high of $9.64 billion while the country exported $2.53 billion in jewelry. In 2002, gold consumption reached roughly 250 tons, making China the fourth-largest global consumer of gold jewelry. In platinum consumption, China has overtaken Japan as the market leader. Already, more than 52% of the platinum jewelry in the world is made in China. China also occupies 1.8% of the world's diamond market share. Annual sales of pearls and precious stones amount to $24 billion. With an average growth of more than 6%, China's jewelry market is predicted to surpass $21.7 billion in 2010, accounting for 10% of the world's market.
However, in the diamond-processing sector, China still has a long way to go; India processes 120 million carats of diamonds a year, compared to China's 2.4 million carats, which translated into diamond sales of just $740 million. China also has only about 10,000 diamond-cutting and processing units, compared to India's 800,000 to 1 million. China has about 25,000 people working in the industry, compared to India's well over a million. However, China has the advantage of disciplined labor, coupled with an impressive quality of workmanship. Aware of China's potential, De Beers, the South African conglomerate, has been busily developing the Chinese market since 1997.
China is gradually expanding and gaining its share of the diamond-processing pie that India enjoyed, with increasing numbers of diamond processors from Israel, Belgium and even India, setting up bases in China. Wealth creation in China is leading to more domestic consumers, while India has to rely almost solely on exports. De Beers' move into China has been seen as a way for the world's largest raw diamond supplier to reduce its dependence on India. The quality of Chinese workmanship is steadily improving, and policies such as single-window official clearance are highly attractive to foreign businessmen. It is not surprising that a number of international brands have opened up retail outlets in major cities such as Beijing, Shanghai and Guangzhou.
Most prominent have been jewelers from Hong Kong and Taiwan who have reoriented their businesses toward the Chinese mainland. Four Hong Kong jewelers, namely Chow Tai Fook, Tse Sui Luen (TSL) Jewelry, Chow San San and Luk Fook Holdings, rank among the top 10 diamond jewelry brands in China, according to the trade magazine Gold Jewelry.
The Indian side also explored some other aspects of the Chinese industry, such as that Indian manufacturers might consider manufacturing in China to capitalize on the country's advantages. Many Indian diamond companies have a presence in China already, and the jewelry industrial park at Panyu offers a ready pool of skilled labor. In addition, the Shanghai Diamond Exchange could become a potentially useful way for Indian diamond exporters to supply cut and polished diamonds to their customers.
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Asia Times Online
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