In the first ten months of 2010, China’s gold, silver and jewelry consumption increased by 35.6 percent year on year. It was the highest growth rate among all commodity sectors, according to Huang Hai, head of the circulation policy consulting committee of China’s Ministry of Commerce. The commerce ministry also announced that, based on the data of 3,000 retail stores nationwide, gold, silver and jewelry consumption increased by 52 percent year on year during November 2010, and 16.4 percent from October to November 2010.
According to the Diamond Administration of China (DAC), the total transaction volume — including import, export and intermember transactions — on the Shanghai Diamond Exchange (SDE) from January to November 2010 reached $2.57 billion, increasing 90 percent year on year. The total carat weight reached 187.4 million carats during the period, more than twice as much as during the same months in 2009. In addition, membership in the SDE increased to 281.
Choice of Investment
While the diamond retail market has shown steady growth, gold is even more popular with Chinese consumers, not only as a sign of affection but also as an investment. Statistics from the World Gold Council (WGC) confirm that gold investment in China reached 120 tons in the first three quarters of 2010, and two-thirds of Chinese women consider gold jewelry as much an investment as a statement of personal style. WGC predicted that China’s investments in gold would close out at 150 tons in 2010.
Albert Cheng, managing director of the Far East office of the WGC, said during China’s Fifth Summit on Gold and Precious Metal in December 2010 that demand is likely to accelerate because the Chinese regard gold as an effective tool in maintaining and increasing the value of their personal assets, especially in the face of inflation. China’s demand for gold increased an average of 13 percent annually over the past five years, making China the world’s second-largest consumer market for gold after India.
Beginning in 2009, “some Chinese placed large diamonds of high quality on their investment lists, and there is now a continuing trend of diamond investment,” said Sun Fengmin, administrative vice president of Gems and Jewelry Trade Association of China (GAC). “In spite of the severe recession of high-end commodities globally, China saw a boom in consumption in the sector. In addition to traditional gold and silver, diamond investment demand is emerging in China.”
Christmas Season Comes Early
The 2010 Christmas sales season came early in the medium-size to large cities in China and it looked more like a sales event fabricated by retail shops than a traditional holiday. Although Christmas has no religious meaning to most people in China, the retail shops launched early promotion campaigns anyway and extended business hours. Christmas-themed decorations were put up in early December and Christmas songs became the popular in-store music. In Wuhan, some jewelry stores launched promotions on Thanksgiving by giving out coupons redeemable only on Christmas Eve.
Shopping Hong Kong
Data from the Hong Kong Tourism Board (HKTB) reveal that visitors from Mainland China spent around $6.2 billion in Hong Kong during the first half of 2010, with about $4.73 billion spent shopping. Estimates are that at least $3 billion of that amount was spent on jewelry, watches and luxury items.
He Guozhi, manager of the Elegant Watch shop in Times Square, Causeway Bay, Hong Kong, said that his shop sold seven watches priced at more than $150,000 each in October 2010, most of them to repeat clients from Mainland China. Noting that approximately 80 percent of his store’s clients are from Mainland China, he said Hong Kong jewelry and luxury shops are very reliant on the business from Mainland visitors. He is predicting 15 percent to 20 percent growth going forward based on demand from Mainland Chinese consumers during the Christmas season.
In addition, the customers are spending more because of the appreciation of the renminbi, and some big diamond dealers in Hong Kong confirmed that there is increased interest from the Mainland China buyers in stones over 3 carats. Further evidence of the importance of the Mainland customers is the fact that some dealers are even willing to pay the traveling expenses for their best customers.
The Marketplace
• The wholesale market was busy filling orders in December for the sales season of Christmas to January 1.
• Demand remains good for rounds in 0.30 carats to 1.10 carats, D-H, VS, Gemological Institute of America (GIA)-certified diamonds in triple EX, double EX and EX cut grade with none to faint fluorescence. Buyers are sensitive about prices, as usual, but show less price resistance when they have to replenish inventory.
• Demand is good for parcel goods of 0.10 carat, G+, SI and 0.20 carat, G+, VS.
• More sales are being reported above 2 carats in response to the uncertainty of inflation and the depreciation of the U.S. dollar.
Article from the Rapaport Magazine - January 2011. To subscribe click here.