Antwerp Bets on China

RAPAPORT… There could be no better showcase for the Antwerp diamond industry than the World Expo 2010 in Shanghai. No one felt more strongly about the expo’s potential than Mickey Weinstock, an Antwerp-based diamond dealer who sells mostly to China. He was committed to Antwerp’s participation from the very first moment he heard about the six-month-long event being planned in China. His opinion came to be shared by a number of Antwerp World Diamond Centre (AWDC) executives, who threw their full support behind the project.

That early commitment is one reason why the Belgian-EU Pavilion ended up with an impressive location at the expo and an extensive agenda of diamond-related events and activities, including Antwerp Diamond Week, that took place from June 7 to 10. The most important day of that week was undoubtedly the opening day, billed as Antwerp Diamond Day. In addition to the usual self-congratulatory speeches by representatives of both Antwerp and China, a group of 150 leading Chinese diamond dealers and retailers was invited to meet with the representatives of Antwerp-based companies to establish business links for future collaboration and trade between both nations. Approximately 25 percent of those invited did meet that day with Antwerp diamondindustry representatives.

For Lin Qiang, president of the Shanghai Diamond Exchange (SDE), one of the most important aspects of Antwerp Diamond Day was the signing of the “Diamonds Love Antwerp” agreement with China. An exclusive partnership between the SDE and the AWDC, the agreement officially launched a diamond quality label for China. Under the terms of the agreement, diamonds will be exported from the Antwerp diamond office directly to SDE, which will have the right to issue a “Diamonds Love Antwerp” quality trademark on the diamonds.

No Tolerance for Smuggling

Along with its recent sizable reduction in import duty on diamonds — from 17 percent to 4 percent — China implemented a zero tolerance policy against diamond smugglers. A massive raid on diamond smugglers at the Shenzhen border in January was the first indication of how seriously China planned to enforce that policy.

The opening by SDE of a direct official link to Antwerp recognizes the Belgian trading center as a fully transparent Kimberley Process–compliant diamond export point and sends a clear signal of the new direction China is planning for its diamond industry. “We want to establish legal channels for diamonds to come from Antwerp to China. The quick implementation of the agreement signed today with Antwerp will help us increase the share of legally imported diamonds,” Qiang said.

Jacky Jiang of Eurostar Shanghai Diamonds enthusiastically explained why Antwerp diamonds were important for China. “For decades, the Diamond Trading Company (DTC) carried out all the market surveys and supplied salespeople around the world with information that could help them fine-tune their marketing strategies. Unfortunately, DTC is no longer doing that and nobody else is either. There’s a real void in that area.

“Antwerp diamond people are used to visiting China frequently, sharing with us marketing advice and education. This has been very helpful over the past decade and a half, and it has enabled us to build a better diamond industry in our country. In particular, it’s helping the Chinese jewelry industry to pursue quality step by step. It has enabled our jewelers to become increasingly honest, fair and professional, which is the way to healthy marketing. When people know what they’re selling, they don’t cheat their customers,” Jiang said.

The tricky question, of course, is to try to understand why the relationship between Antwerp and China is so important. “China is a new market and we need therefore a marketing concept that will work for Chinese people,” continued Jiang.

“The concept that ‘Diamonds from Belgium are the best make’ comes in very handy. Indeed, we’re trying to establish some tradition for diamonds and for the diamond culture. So, with its more than 500 years of diamond history, Antwerp was the perfect partner. You must understand that at the moment we need Antwerp to build up the concept of ‘Diamonds Love Antwerp.’ Chinese love European brands. Belgium is at the heart of Europe, so Belgian diamonds is an easy concept to sell.”

Having said that, even if the AWDC does establish a royal gateway into China, similar to what was once done by the DTC, one thing will still be missing. The DTC had real first-hand information on what was selling around the world at any given moment, which is not really the case with the Belgian umbrella organizations. Those details are not available to them because they are not buying or selling diamonds around the world. So if China needs Antwerp at the moment, it’s likely, that at some point, Belgium might need to provide a more business-oriented structure for offering strategic advice.

Needing Each Other

For Randi Li of Silk Road Diamonds in China, at this stage, it’s almost impossible to bypass Antwerp as a business partner. “Antwerp is by far the biggest trading center,” he said. “The great potential between our two countries makes us share a common interest.” According to Li, there are three major reasons. “First is their expertise. The Chinese basically know how to polish sawable goods and not much about the other kinds of rough. Trading rough, on the other hand, is in the hands of a very small circle of people and most Chinese don’t understand yet how to properly buy rough. Second, there is the issue of money. Buying rough requires immediate cash plus investing in four months of polishing, whereas buying polished is far more flexible. You can borrow on receivables. Furthermore, retailers prefer to expand and invest in new shops rather than in rough, whose return on investment is not easy to calculate. The third consideration is channel. In China, we have no channel for selling rough to others. Normally, Chinese buy only a specific range of polished, SI1 up, G up. If you buy rough, you won’t be able to sell outside that range, so you end up with a liquidation problem.”

Li said it is possible for the Chinese diamond industry to design its own solutions to those issues. However, he estimated that it would take three to five years for them to do so.

At the end of the day, everything happening in Shanghai — the presence of Antwerp at the World Expo, Antwerp Diamond Week, Antwerp Diamond Day and the signing of a bilateral agreement between SDE and AWDC — is just a means for people in the two countries to get to know each other better. Those events also have provided an opportunity for Antwerp to reassess its core advantages.