RAPAPORT… The retail season during the extended May Day holiday weekend proved to be prosperous and profitable for business. The three-day holiday, from April 30 to May 2, is a popular time for weddings, traveling and shopping. According to China Gold newspaper, $23 million worth of jewelry was sold during the three days in the Caibai Jewelry Store of Beijing, a 64 percent increase year on year. In Shanghai, total jewelry sales reached $30.7 million in the same period. Laofengxiang and Laomiao, the two big jewelry chains, sold $12.5 million and $9.1 million, respectively, during the weekend, for increases of 83 percent and 76 percent, respectively. Gold jewelry was the top seller during the weekend, but jadeite and diamonds sold very well too. Other cities, like Guangzhou, Tianjin and Hangzhou, also reported good sales. Retailers in China launched special promotions for Mother’s Day on May 8, and reported satisfactory revenue.
Double Pressure
Many trade members in China are dealing with the double pressure of rising prices and product shortages at the same time. Jewelry factories in Shenzhen that use a lot of melee under .10 carats, dealers who buy stock for resale or retailers who sell a lot of certified diamonds — all of them are facing the same problem. That problem is replacing sold stock when the prices to purchase that stock are rising so quickly. Since it has been impossible to predict how high prices will go, many traders are wondering whether they should buy more than they can use now just in case the price continues to rise.
For wholesalers, the good news is that the diversity of sellable items has substantially improved and they are now selling many goods that were not popular at all in the past. Currently, China is buying a much wider range of goods from D, IF to M, SI in various sizes. Some dealers even say that they have sold off all their old inventory that had been stored in their safes for two years. On the other hand, fine cut goods, especially Double EX or Triple EX goods with Gemological Institute of America (GIA) certificates, sell very quickly when priced right, but it is difficult to get new replacement goods to fill future orders. Even if buyers offer cash terms, there are not enough well-cut goods available.
As the second-largest diamond-consuming country, but still at the end of the diamond supply chain, Chinese diamond traders feel vulnerable to the constant price increases. Although initially they try to resist the increases, they feel they really have little power in influencing or controlling diamond pricing. As the diversity of goods in demand grows, Chinese traders are increasingly interested in sourcing internationally from various trading centers, as well as buying from the U.S.
Smugglers Face Prosecution
According to Shenzhen Customs officials, the 28 suspects arrested in the widely publicized crackdown of a diamond smuggling ring in 2010 have been handed over to court for criminal prosecution. The 28 people were detained in a raid in Shenzhen by more than 150 police officers. The investigation into diamond smuggling from Hong Kong to Mainland China reportedly began in 2009, when a person from Hong Kong named Weng reported a robbery of diamonds worth approximately $500,000 in Shenzhen. The police investigators found that Weng did not hold a full-time job, but was frequently shuttling between the adjacent cities of Hong Kong and Shenzhen. Following that lead, police uncovered a large diamond smuggling ring that sourced diamonds in Hong Kong and hired “water men” like Weng to smuggle them into Shenzhen and distribute them to jewelry factories and dealers. The investigation also revealed that the smugglers commonly rented residential apartments in the Luohu district of Shenzhen to use as distribution points, very often selling the smuggled diamonds door to door. It has been a year since the arrests and the case is now ready for criminal prosecution.
It has been reported that the total value of the smuggled diamonds reached $31.92 million, representing evaded tax of $6.72 million. The crackdown on the ring was widely seen by diamond industry trade members as a clear message from the Chinese government that smuggling would not be tolerated and that diamonds would be traded only through legal channels. Traders say the crackdown has had a positive effect on legitimate diamond business.
The Marketplace
- Wholesale trading holds steady following good retail sales on May Day weekend. Trading partners in India are on vacation and many retail buyers still have stock remaining from the holiday.
- Overall demand remains strong and prices continue to rise. Shortages exist and prices increased further for rounds
- in .30 carats to 1.10 carats, D-H, VS-SI, GIA-certified diamonds in Triple EX
- and Double EX cut grade, with none
- to faint fluorescence. Triple VG goods also are selling well. The diversity of goods is expanding.
- Demand has improved for parcel goods consisting of round, .30-carat to .70-carat, G-I, SI stones.
