The rapid socio-economic development of China in recent decades has allowed this country to become one of the world’s industry leaders and production centers. Currently, China is setting the pace in global production and consumption of the most important minerals. In this context, the market of rough and polished diamonds is no exception since China happens to be its unmistakable second-largest player after the United States, having squeezed out Japan. Taking into account the growing well-being of China’s population and its huge potential in consumption of luxury goods in the long term this country is going to turn into a major consumer of diamonds and diamond jewelry.
Diamond deposits in China
China has the largest diamond reserves in Asia. Over the past 50 years, China discovered more than 20 kimberlite pipes and more than 100 diamond placers. Currently, the reserves of the discovered deposits are estimated at 23 million carats. About 50% of proven diamond reserves are concentrated in the Liaoning Province. They are estimated at 11 million carats. In the Shandong Province, the diamond reserves are estimated at over 9 million carats. The reserves in the Changde District of the Hunan Province and in the Xinyi District of the Jiangsu Province is estimated at 0.5 million carats. Today, intensive exploration is conducted in the South China Platform. In 2010, a diamond deposit was discovered in the vicinity of Wafangdian and its reserves are estimated at 210,000 carats.
Diamond mining
However, China’s diamond output has been insignificant and in 2011 amounted to only 201 carats (Table 1, Fig. 1). Nine diamond fields are being developed in the Liaoning Province: 6 kimberlite and 3 open-pit mines. The deposits are concentrated in the area of Wafangdian. They have been developed since 1987. On average, they used to produce up to 60,000 carats of diamonds in a year. Kimberlite Pipe No. 50 was developed in the course of 20 years and in 2004 was closed. More than 65% of diamonds mined in Wafangdian is used to make polished diamonds, of which almost 95% are exported to the United States, Belgium and Hong Kong.
Mine No. 701 located in Mengyin is one of the major diamond fields in the Shandong Province. It has been operated since 1976. Annually, the mine yielded up to 50,000 carats of diamonds. In 1995, when its output reached a minimum level, more than half of its operations were suspended. In 1998, the mine was equipped with an underground diamond mining system provided by Canada's Abacus Mining and Exploration Corporation, which made it possible to ramp up production to 50,000 carats a year. Most of the diamonds mined there are for industrial use, and only one in five is suitable for cutting. The major part of polished stones is exported to South Korea, Japan, the United States, Belgium and India.
The deposits located in the area of Chengde have been developed for over 50 years. On average, they used to produce up to 20,000 carats annually.
Fig. 1. Diamond industry of China
Current state and prospects of China's diamond cutting industry
In 2004, China was in the second place in the world after India in diamond manufacturing. Currently, Chinese diamond manufacturers employ over 30,000 people, which is a 20%-25% decrease compared to the pre-crisis year of 2008. The Chinese diamond cutting industry is mainly concentrated in the provinces of Shandong (5,000 cutters), Guangdong (12,000 cutters) and Shanghai (2,000 cutters), forming three large diamond clusters. The major part of the Chinese diamond manufacturers, especially those located in the Guangdong Province, are now using the most up-to-date equipment on all major stages of production – in defining would-be design of gems, in laser cutting and in facet polishing. Among them, there are giant factories with up to four thousand people. A significant number of factories are owned by foreign investors from Hong Kong, Israel, Belgium, India, Thailand, etc. As a rule, they invite foreigners to occupy managerial positions or for jobs which require highly skilled personnel. Apart from these, there is a large number of domestic state-owned and private companies operating in this field.
Depending on the size of diamonds cutting costs range from $10 to $15 per carat, which is comparable to the cost in India, though the quality is higher, and 3 times cheaper than in Israel or Belgium.
Jewelry production
China’s jewelry industry currently employs around 150,000 people, many of which are concentrated in two areas in the Guangdong Province: about 80,000 people work in Shenzhen and 40,000 people in Panyu. As one of the first free economic zones (FEZ), Shenzhen neighbors to Hong Kong and recycles 70% of China's gold production, half of which is exported via Hong Kong.
Diamond trade
In 2009, China became the second largest consumer of polished diamonds, overtaking the Japanese market. The Shanghai Diamond Exchange brought its current turnover to about $ 1.8 billion.
Table 1
China’s diamond output, import and export in 2006-2011
According to Kimberley Process
Synthetic diamonds
At present, China is the world's largest producer of artificial diamonds. The industry employs more than 600 companies. Annually, they produce up to 400 million carats of diamonds. Of course, in many ways artificial diamonds can meet the needs of industry. But there are still areas where man-made stones are not capable of replacing natural diamonds, so among many other tasks China is to tackle the development of its own diamond mining, which would reduce its dependence on imports.
Diamond business prospects in China
The diamond business in China is assisted in its efficient development by the following factors:
1. High growth of the Chinese economy, which contributes to raising living standards and consumer demand for diamonds and diamond jewelry. In addition, diamond jewelry has now become an integral part of wedding ceremonies in China.
2. The Chinese government is providing multilateral support to the development of diamond and jewelry industry by reducing taxation and promoting domestic demand in the country.
3. Cheap labor, advanced technologies and highly dynamic infrastructure for the diamond business, as well as strict quality control enable China to become a key diamond-cutting hub and one of the largest diamond trading floors in the world.
Yuri Danilov, Ph. D., Director of the Department of Regional Subsoil Management Economics, Institute for Regional Economics of the North at Ammosov North-Eastern Federal University
