The Dragon and the Elephant

RAPAPORT… China and India are emerging economies with huge populations and great potential. China has 1.35 billion people and India has 1.17 billion, and their combined population — approximately one-third of the global population — provides low-cost labor for its domestic manufacturing operations in a variety of industries. Even though the majority of their populations are not yet wealthy, the emerging middle class of both countries is widely considered a formidable new consumer force.

Cooperation, friction and competition have accompanied the growth of China, dubbed the Dragon, and India, characterized as the Elephant. The fact is that the diamond industry and market in China would be very different without the supplies the country gets from India and the India market also would be different without China.

A decade ago, when the Chinese market was in its infancy, a 0.10-carat diamond was considered “big” and Indian suppliers were offering parcel goods. Today, China has strong demand for certified goods from 0.3 carats to 1 carat, especially with EX cut, and the upgraded Indian manufacturing sector is able to fill the orders. Indian traders were among the pioneers in the Chinese market and among the early members of the Shanghai Diamond Exchange (SDE) — they are still the leading foreign presence in the bourse.

Indian traders also serve or directly operate in Hong Kong, the gateway to Mainland China and another prominent diamond importing destination. With approximately 2 million people employed in the gem and jewelry industry in India, and 11 out of 12 diamonds that are processed globally passing through India, the diamonds selling to China from other trading centers can very likely be traced to India also. Both of the countries are important driving forces in the diamond and jewelry industry and both of them rely on each other, even while they compete against each other.

In the depressed days of the global financial crisis, many Indian suppliers shifted their focus to China. Meanwhile, the China market, with its increasing domestic demand, took advantage of the opportunity to purchase diamonds at low cost, and became the second-largest diamond market in the world after the U.S.
Legit Suppliers

After the smuggling ring was busted in Shenzhen in January of 2010, in which many Indian traders were arrested, there was a brief period when Indian suppliers left China. But the market share they left behind was immediately taken over by legitimate suppliers, including old and new Indian companies. And now, more suppliers are arriving.

India is by far the biggest diamond polishing country and China has become the second largest. When the two neighboring countries decide to push further, they will be unavoidably competing for polishing jobs and rough diamonds. Arguments and frictions will be seen and heard but, as always, mutual understanding and cooperation will hold the key to both countries’ growth.

GJEPC Promoting IIJS

A recent international road show in Shenzhen promoted the 27th edition of the India International Jewellery Show (IIJS), to be held in Mumbai August 19 to 23. At the event, Rajiv Jain, vice chairman of GJEPC, encouraged more Chinese buyers to visit IIJS. Indra Mani Pandey, the Indian Consul General in Guangzhou, emphasized that India has become the second-largest gem exporter to China, right after Belgium, accounting for 18 percent of China’s gem imports. To boost the Chinese market’s potential — along with India’s share of it — the Gem and Jewellery Export Promotion Council (GJEPC) has organized buyer-seller meets in Shanghai, Shenzhen and Beijing in the past three years.

Indian Retailer Commits to China

As further proof of China’s current market growth and recognition of its potential, international jewelers are all showing great interest in the country. Gitanjali, India’s largest retailer, is planning to open some 50 retail locations by the end of this fiscal year across China, doubling the number of its sales points. It already operates two diamond and jewelry factories there, with around 4,000 employees.

“Labor in China is far more disciplined and consistent when it comes to cutting diamonds and precious stones. We plan to make an investment of about $3.5 million in China as there is a huge domestic demand there, especially for platinum jewelry,’’ said Gitanjali Chairman Mehul Choksi. He noted that demand for gold jewelry studded with diamonds has grown at 15 percent to 25 percent for the past three years in China, and that demand had picked up pace to 25 percent to 30 percent since the start of 2010. Choksi said demands of Chinese consumers need to be met “in the same manner as Indians. Earlier, platinum was the hero. Now, the size of the diamond market in China is nearly double that of India.’’

The Marketplace

• The retail and wholesale markets were somewhat quiet in July, which is typical for the time of the year. Most trade members feel that July sales have not been as good as June. Overall, the market mood is stable.
• Demand is good for 0.30-carat to 1.10-carat, D-J, VVS-SI, Gemological Institute of America (GIA)-certified and preferably EX stones.
• There is occasional demand for DIF diamonds in 1 carat and 1.50 carats with GIA certificates and for diamonds over 3 carats.
• Demand is good for World Expo–themed jewelry, decorations and gold and silver bars. The Belgium Pavilion and its diamond exhibition remain a popular destination at World Expo 2010 in Shanghai.