RAPAPORT... The gross domestic product (GDP) of China rose in the first three quarters of 2008 by 9.9 percent year-on-year, 2.3 percentage points lower than the growth posted in the same period of 2007. The numbers, reported by China’s National Bureau of Statistics, reflect the impact of sequential severe natural disasters in the country, as well as world economic and financial turmoil.
This was the first time in the past five years that China’s GDP growth rate fell below 10 percent. The central government described the national economy as having “steady and fast growth with a good overall situation.” Given the current global situation, China’s GDP growth is still relatively high. Its financial and banking systems are relatively healthy compared with other countries and the renminbi currency is stable.
Since exports are critical to China’s economy and global demand has decreased substantially, thousands of export-oriented factories — especially those producing toys — have closed down and many more might not survive this winter. The government is considering various measures to support exports and, in particular, to offset export declines by stimulating domestic demand from the country’s 1.3 billion population.
Market Slows DownNot surprisingly, most members of the Shanghai Diamond Exchange (SDE) interviewed by RDR recently were concerned about the current market situation and reported reduced sales. Although the trade media in China cited booming retail sales during the National Day Golden Week Holiday, those sales were thought to represent gold and platinum jewelry rather than diamonds. The next sales peak will come at the end of January for Chinese New Year.
On the other hand, suppliers are offering more discounts for the goods. Li Yi, purchase manager of 9 Diamond, a well-known website-based diamond jewelry retailer in China, told RDR that the discount rate for 0.50-carat round D to G, VS increased substantially recently and triple EX goods were much easier to find in the market.
Many SDE members agree that because the diamond jewelry business in China relies heavily on purchases by newlyweds — and that number holds pretty steady — the mainstream size from 0.15 carat to 0.70 carat won’t be affected much, but sales of bigger diamonds larger than 1 carat might be impacted. Although trade members generally believe that the China market is less influenced by world economic and financial turmoil, as compared with other countries, they concede that market uncertainty for them might show up in early 2009.
Payment collection also is being affected. Zhang Bin, an attorney with the V&T Law Firm, who specializes in providing legal services to SDE members, said there were an increasing number of lawsuits related to payment collections filed in recent months between SDE member sellers and non-SDE member buyers.
China Diamond Exchange Center In spite of the current uncertainties of the diamond market, most SDE members are looking to expand in 2009. Designed to solve the problem of severe shortage of office space in the current SDE, the new China Diamond Exchange Center, located in the financial and trading center of Pudong, Shanghai, is in the final stage of construction and will be ready for occupants at the beginning of 2009.
Yan Nanhai, SDE vice president, told RDR that the new 14-story, H-shaped building will provide approximately 540,000 square feet of office space, with typical office areas of 540 to 1,600 square feet and even larger. The 230 current SDE members, who will be required to move to the new building to conduct diamond business, will be housed on the third to tenth floors. The eleventh to fourteenth floors will accommodate the trading hall and various diamond administration and government departments for the one-door service of customs clearance, Kimberley Process (KP) certificates and value-added tax (VAT) invoicing.
During the final two weeks in October, SDE members were asked to select their room numbers in the new building, with their order determined by their trading volume in 2007. Some companies, such as Dalumi Shanghai, that have been based in Shanghai for years, will relocate to much larger office space. Companies currently based outside Shanghai, such as Cheung Ning Diamond, which recently announced expanded marketing plans, also will move into the building.
There will be many more diamond industry players in China in 2009 and more competition for market share. There also will be more job opportunities, especially for high-level and experienced employees. According to the recent statistics from the Diamond Administration of China (DAC), the total trading volume on SDE from January to September 2008 reached $985 million, with a year-on-year increase of 44.3 percent, $429 million of which represents polished diamond imports.
Observers say that the diamond industry in China has more potential for growth and more opportunities for advancement because it is a relatively young industry, especially compared with other countries.
The Marketplace• The wholesale market slowed down after the National Day Golden Week Holiday retail season.
• Most in demand are rounds in 0.15- to 0.70-carat G+, VS and 0.15- to 0.50-carat I-J,VVS and 1-carat+ H+, VS+.
Article from the Rapaport Magazine - November 2008. To subscribe click here.