Will diamond be a Chinese girl’s best friend?
Demand for diamonds in China is becoming red hot.
De Beers managing director Gareth Penny expects Chinese diamond demand to match the US, the world’s largest consumer, in the next decade. “What we’re now seeing, with China growing as rapidly as it is, annual double-digit growth compounded over a period of five years,” he said.
Mainland China and Hong Kong are the world’s biggest buyers of gems from Antwerp, Europe’s diamond capital, with sales of $737 million in the first three months of this year, up 55 percent, reports the Antwerp World Diamond Center (AWDC).
One reason is that engagement rings are becoming popular with Chinese brides as a result of aggressive marketing by De Beers in the 1990s. Twenty years ago, few Chinese brides received diamond engagement rings, now about half of couples getting married in major cities are buying them.
While engagement rings are becoming more common, the market still has room to grow. China could account for 16 percent of global diamond demand by 2016, up from about 6 percent last year based on estimates from De Beers.
With higher demand, prices are expected only to go up. “Prices, especially for color diamonds, are going through the roof.” said Marijan Dundek, author of the book “Diamonds.” This upward price potential makes diamonds an attractive investment.
Les we forget, in a society infatuated with status symbols, diamond is another symbol of status in China.
Mike Bastin, a visiting professor of marketing at China Agriculture University in Beijing, said: “This diamond purchase trend is consistent with my research findings into Chinese consumer behavior over the years, findings that reveal unequivocally an inherently elitist younger urban Chinese consumer who revels in conspicuous consumption. Furthermore, recent research findings from a research study with the psychology department of Peking University uncovered conclusively that increasing affluence inevitably leads to increased self-importance and consequent self-reward. This would appear to explain why Chinese consumers increasingly buy diamonds for themselves.”
A sign of the strength in the Chinese market for superb diamonds, Hong Kong-based jeweler Chow Tai Fook paid a record $35.3 million for a 507-carat rough diamond, the 19th largest ever found, this past February. “This spectacular and high-quality diamond is very rare and exceptional,” said Cheng Yu-Tung, chairman of Chow Tai Fook Group and known as the “King of Diamonds”, which the company will handcraft into the finest round diamond of 120 carats. The finished stone would be more expensive than the rough diamond. Jewelers expect Chow Tai Fook to find a buyer in mainland China for the finished piece or pieces.
With strong Chinese demand, Chow Tai Fook plans to expand its outlets by 2,000 by 2020. Currently, the company has 1,000 retail outlets across the mainland and Hong Kong, Macao, Taiwan and Malaysia with annual sales of HK$30 billion ($3.9 billion).
While China is expected to be a heavy importer of diamonds, the country is also mining its own diamonds. China Daily reports that “last year a large diamond mine was found in Wafangdian district in Dalian, Liaoning province which is estimated to contain 210,000 carats of precious stones and diamonds of a higher quality than those found in South Africa, according to Chinese gemologists. It is the only large-scale diamond mine found in China over the past three decades, said Yu Wenli, director of the Mineral Geological Exploration Bureau.”
Meanwhile, Guangdong is competing with India to be “the world’s top diamond cutting and polishing center due to low labor costs, skilled workers and the tax-free status of imported rough diamonds and exported polished rocks.”