Leaping Tiger

RAPAPORT…

The new Year of the Tiger began on February 14. In the Chinese culture, the tiger is regarded as the king of all wild animals, feared and admired for centuries for its beauty, elegance and mystery. In the Chinese zodiac, the tiger is a symbol of courage, power, passion and vigor.

In the just-ended Year of the Ox, China’s economy held solid in the midst of the world financial crisis. According to the country’s National Bureau of Statistics, the gross domestic product (GDP) for 2009 reached $4.91 trillion, up by 8.7 percent at comparable prices, making China the second-largest economy after the U.S. and thus an important motor of the global economy. Ma Jiantang, the bureau’s commissioner, noted that because of China’s huge population of 1.3 billion, its per capita GDP still falls behind the world’s 100th place.

Lunar New Year Sales

The Golden Week New Year holiday that ran from February 13 to February 19 had wholesalers busy filling orders before the holiday and retailers enjoying satisfactory sales during it. The Chinese New Year is traditionally observed with family gatherings and it is also a great time for weddings. That was especially true this year, when the first day of the Chinese New Year fell on Valentine’s Day. Initial reports reveal $49.9 billion in overall retail in the weeklong holiday, for a 17.2 percent increase over 2009, and a 19.1 percent increase in gold and silver jewelry.

In an interview with RDR, Ken K.C. Fong, president of the Jewellery Gallery Co., Ltd., who has been operating high-end jewelry stores for 12 years in Shanghai, said “The 1-carat diamond has had a substantial sales increase since the third quarter of 2009 and its total sales have almost doubled from 2009. Diamonds 3 carats and larger also have seen a surprising increase in sales. Consumers are paying more and more attention to color and clarity. Recently, consumers began to emphasize cut grade, something new in traditional retail. All these trends are indications that the level of consumption is rising. I have great expectations for the Year of the Tiger.”

Second Place

According to the Diamond Administration of China (DAC), China’s trade in polished diamond imports and exports rose 16.4 percent to $1.52 billion in 2009. Despite the world financial crisis, imports on the Shanghai Diamond Exchange (SDE) continued to rise, increasing by 30.7 percent to a new record of $699 million. With those totals, China made a leap over Japan to become the second-largest diamond consumer market. Still, China has a big gap with the U.S., with its net diamond imports of $2.5 billion from January through November 2009.

DAC attributed the increased imports to China’s economic growth and the expansion of its domestic jewelry market, particularly in bridal goods. According to Sun Wensheng, president of the Gems & Jewelry Trade Association of China (GAC), the jewelry industry in China reached total sales of $32.26 billion in 2009, reflecting 10 percent growth year on year. Sun also predicted that China’s jewelry industry has stepped into a new growth period and predicted that total sales will reach almost $60 billion in 2020.

Lin Qiang, president of the SDE, told RDR that he is very optimistic about a further increase in the exchange’s trade volume in the Year of the Tiger, noting that China’s diamond tax policy of 0 percent import tax, as well as the 4 percent value-added tax (VAT) implemented in 2006, has paved the way to market stabilization.

Lin, suggesting that the recent smuggling crackdown and arrests will contribute to a cleaner, fairer and healthier market in China, encouraged SDE members to participate in more active trade and services in Shanghai, Shenzhen and other areas. SDE currently has 248 members and has traded more than $5.6 billion in goods since its establishment in October 2000.

Preparing for the World Expo

In preparation for the World Expo 2010 opening on May 1, in Shanghai, DAC organized an exhibition and auction with the World Expo theme from February 5 to 7. More than 70 million visits are expected at the expo. In preparation, 12 Chinese jewelry companies who are licensed to sell World Expo–themed jewelry took part in the exhibition and auction, displaying diamond, gold, platinum and jadeite products.

“The Star of the World Expo,” a Gemological Institute of America (GIA)–certified, 8.36-carat, round D, IF, Triple EX diamond, was reportedly sold at the auction for $1.85 million. A sale of such value is a new phenomenon in China.

The Marketplace

• The wholesale market was busy preparing for the Chinese New Year sales season in advance of February 14.
• Demand is greatest for 0.30- to 1.10-carat round stones in D-J, VVS-SI, GIA-certified and preferably EX cut. Diamonds of 1-carat round in G-H, SI1 have become more popular. While traditional retailers are more lenient on cut grade than web-based retailers, consumers are more aware of cuts.
• Demand is also good for round and some fancy shapes in 1 carat in I-K color, SI or I clarity, to be set as jewelry pieces and sold as promotional items. There is some demand for fancy shapes of the same color and clarity, too.
• Tiger-themed talisman jewelry, gold bars and figurines of various sizes are popular.