The Chinese diamond industry was not spared from the effects of the global economic slowdown in 2015. Despite significant economic headwinds, China’s jewellery market continues to grow, albeit at a slower pace.

Some diamond companies said their business aspirations on the mainland are on track, with a number of active players even expanding their reach overseas.

From rough sourcing, cutting and polishing to jewellery design, manufacturing and marketing, the Chinese diamond industry has maintained its momentum in the last two decades. In this feature, diamond manufacturers shared with JNA their insights about China’s luxury jewellery market and its future growth potential.

Rough diamond sourcing

There is always high demand for rough diamonds from Chinese diamantaires who provide polished diamonds to overseas buyers and local retailers. Since domestic consumption has surged in recent years, the Chinese retailers’ demand for polished diamonds has started to surpass that of overseas buyers and – to complete the circle – polished stones bought by overseas jewellers often ended up as finished jewellery pieces sold in China.

China is the world’s second-largest diamond manufacturing centre after India but diamond wholesalers and retailers in the country purchase most of their polished diamonds from overseas suppliers, resulting in high-cost pressure for the sector, said David Wang, chairman of Shenzhen Cheungning Diamond Co Ltd.

However, the sector may soon wean itself off its dependence on imported polished diamonds with the establishment of the Shenzhen Rough Diamond Exchange Co Ltd (SRDE), which already obtained its registration certificate for bonded warehouses from the Shenzhen Customs House, Wang revealed.

According to Wang, SRDE – co-founded by Shenzhen Overseas Chinese Town Co Ltd, CITIC United Asia Investments Ltd, Beijing LDY Asset Management Co Ltd and Shenzhen Cheungning Diamond Co Ltd – is the first bonded warehouse for gemstones and jewellery materials in Shenzhen. It obtained its licence from the Shenzhen municipal government in August 2014, with a registered capital of $15.2 million.

The industry is now facing more challenges, Wang said. “The diamond and jewellery sectors have shown signs of decline in recent years. Some form of natural selection is going on. Shrinking consumption, combined with cut-throat competition, is reducing profit margins and encouraging illegal practices like smuggling. Under such circumstances, a diamond company can only strengthen itself, becoming more competitive in order to survive,” he explained.

SRDE was founded to meet the demands of the industry, providing bonding, warehousing, viewing, and import agency services for rough and polished diamonds, and coloured gemstones, as well as financing services for companies, revealed Wang.

He also underscored the importance of liquidity management for the industry. “The jewellery sector is vulnerable to macroeconomic conditions, and the inventory costs required are enormous. We have to figure out a way to help diamond companies solve liquidity issues. We have to help them obtain the necessary financing and open new funding channels. The industry has adopted the ‘hang together or hang separately’ strategy, creating a peer-to-peer lending platform to solve liquidity problems. The SRDE can help the industry build a complete end-to-end service for its healthy and long-term development.”

SRDE, which has started operating, is anticipated to receive goods amounting to $100 million in 2016, Wang continued. This figure is expected to double in the next few years.

“2016 will be a crucial year for the diamond industry. A company should keep adjusting its strategies to strengthen itself. It should use legal means to build up its brand and image in the market. We hope the market will recover and boom again in 2016. It’s important that every stakeholder stays upbeat and toughs it out,” he said.


Jack Jiang, managing director of Eurostar Diamond (Shanghai) Co Ltd, said he expects the market to show some signs of improvement in the second half of the year. “The Chinese diamond market was at its most volatile in 2015. It felt like living through a long winter, not just severe fluctuations. We don’t expect the first half of 2016 to be too different from the second half of last year, but with the readjustment and diversification of the industry chain, we expect to see more healthy competition and more professionalism in the second half of the year,” Jiang said.

In order to build a more competitive industry, Jiang believes that all stakeholders – upstream and downstream – have to work closely together to consolidate resources and push for professionalization. “There will be reduced inventories in the first half of 2016, which will lead to market adjustments and standardisation; hence, we have a brighter outlook for the second half of 2016,” he said.

Jiang said the crisis will only bring out the best in the industry. “We have hit rock bottom, but that only gives us the chance to start all over again. A lot of brands and manufacturers are repositioning their products, and trying to take advantage of their own strengths. They will make better products and provide better customer service, that’s for sure. The whole luxury goods sector is put at a low ebb since Chinese consumers buy most of their luxury items from other countries but jewellery is an exception. Traditionally, people buy jewellery at home, not abroad. This will help the industry survive,” he continued.

Diamonds in the Chinese market are mostly bought as engagement and wedding gifts or as a form of investment. Facing the e-commerce revolution and the popularity of customised jewellery, Jiang said the industry should embrace the C2B model and create a more standardised market. In other words, professionalization is the way to go, from the upstream to the downstream sectors.

Upstream manufacturers do not only need to obtain high-quality rough goods and enhance their production capabilities, they also need to listen to their customers to understand what they need, work with them to create demand, and focus more on bespoke products, he added.


Lack of originality and cut-throat competition have always hampered the growth of the Chinese diamond industry. Richard Shen, CEO of Tesiro, which operates more than 500 stores in mainland China, said the company has put its focus on innovation, be it in designing, marketing or retailing.

Shen revealed that Tesiro still managed to record double-digit sales growth in 2015.

“We launched our Blue Flame diamonds a few years ago, thus introducing the premier Belgian cut to Chinese consumers. In fact, each of our products has a story to tell. This cultural and sentimental approach to jewellery-making is what we’ve insisted on for almost two decades. That’s what keeps us growing in spite of the challenges over the years,” he said.

A strong marketing strategy is one of the company’s strengths, according to Shen. “We want our jewellery collections to be acknowledged by trade professionals but we also want them to be loved by end-consumers. We have accomplished the latter through the entertainment industry,” he said.

Cultural values

Last year, the television series Diamond Lover, sponsored by Tesiro, was aired in mainland China. Through the popular series, the company’s jewellery collections managed to reach a large group of potential consumers. Shen said such a big investment was rare in the diamond industry but it would eventually pay off since it exposes the audience to the trade and the diamond jewellery pieces worn by their favourite actresses. This is beneficial not only for the brand but also for the whole jewellery sector. He added that Tesiro would continue to use television and movies to promote diamonds, especially Belgian-cut stones.

Shen is optimistic about the industry’s outlook in China due to the country’s huge population. “The number of middle-class Chinese almost equals that of the whole population of the US, and a big population means big spending power. It also helps that traditionally, Chinese consumers like to buy for the sake of investment. Education will allow more Chinese consumers to appreciate the value of diamonds. Moreover, China is still developing, and greater wealth will mean a bigger market for the industry,” he said.
Shen also pointed out the significance of jewellery in Chinese culture.

“The diamond is something that can be passed down in the family for generations; it is something that is full of sentimental value. It will never become obsolete, even in the Internet and e-commerce age. The demand for diamonds in China will only increase as the quality of life improves. The key is to strike a chord with consumers, and that’s where the cultural aspect of jewellery comes in,” he said.

[Source:- jewellerynewsasia]

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