China may soon displace India as the leading diamond processor in the world, thanks to its favorable government policies, vast pool of skilled technicians and robust domestic demand, according to Business Daily. China has around 80 diamond-processing companies located mainly in Guangdong, Zhejiang and Shandong provinces, employing nearly 60,000 people. Contrast this with India, where nearly 1 million people are involved in the diamond industry, spread across thousands of factories in the country.
In Qingdao, the Jinghua diamond-processing factory is currently humming with activity as nearly 400-odd technicians design, cut, polish and test different sizes of stones. Yan Lijie, a technician at Jinghua, said that the workers are racing against the clock to ship 2,000 refined diamonds to Belgium.
Added to the din and hustle is the lack of space in the facility. The 2,000-square-meter (21,528-square-foot) working area has become extremely crowded with the addition of 50 new employees early this year. Zhu Xinwei, general manager of Qingdao Jinghua Diamond and Jewelry, said that the economic recession has not hurt Jinghua's business, and the company is planning to recruit 200 new employees for its eight factories this year, to supplement the present staff of 3,000.
Jinghua is representative of the diamond-processing sector in China. "Although the economic recession has brought down some of the smaller players, a majority of the Chinese companies are still operating smoothly," Zhu said.
Contrast this with India. It has been reported that since 2008, more than 2,000 companies have shut and thousands of technicians have lost their jobs, after diamond exports took a nosedive due to the rapid contraction in global demand.
By 2015, China's share of the global diamond-processing business could grow to 21.3 percent, while India may see its share fall to 49 percent from the present 57 percent, said a recent report published by KPMG. "The market is in an upward trend. In three years, China will surpass India in diamond processing," said Huang Zhaoyong, vice president of marketing at Y&M Jewelry, a diamond processor.
Deng Weiguo, general manager of Aiffany Jewelry, a mid-scale player, agrees that the industry has been gaining ground in the country. Robust domestic demand for diamonds has also increased the optimism of diamond processors. China is now "the fourth-largest diamond consumer worldwide, and demand is growing," said Wang Fang, an employee of the Gems & Jewelry Trade Association of China.
The diamond trade in China got a major boost in 2006 when the government scrapped its value-added tax on imported rough diamonds and reduced taxes on polished diamonds from 17 to 4 percent. According to the Shanghai Diamond Exchange (SDE), in 2007, China's refined diamond imports jumped 194 percent year-on-year, to $147 million, and it is estimated to have reached $900 million in 2008.
The skill sets of Chinese technicians are also considered to be far superior to those of their Indian counterparts. "The diamond-processing sector in India has a long history, but their quality is worse than China," said Yan from Jinghua.
Added to this is the fact that in recent years, many foreign importers are now sourcing diamonds from Chinese producers rather than Indian ones, due the high level of professionalism in the industry here. So much so that many Indian firms are now setting up units here. "The kind of expertise we need is missing in India," said Mihir Shah, owner of Indian firm Jayam NV, which has a factory in Shandong province.
The path, however, is not easy for Chinese processors, as their labor costs are still more expensive than those of their Indian competitors. "The cost of processing one carat in China is $17, compared with $10 in India," said Deng from Aiffany.
As part of an effort to diversify their market reach and in an effort to minimize the effects of the global economic crisis, many Indian companies have begun looking east towards China for their future, including jewelry and diamond companies, www.israelidiamond.co.il confirms.
One of the firms looking to expand to China is Indian fine jewelry retail giant Gitanjali, which is planning to double its retail outlets in China from the current 45 to more than 100 in the next three years.
Mehul Choksi, managing director of Gitanjali Group, told Indian Express the reasons for choosing the Chinese market and its labor force: “The labor in China is far more disciplined and consistent when it comes to cutting diamonds and precious stones. We plan to make an investment of about $3.5 million in China as there is a huge domestic demand here especially for platinum jewelry."
In addition to the Gitanjali retail business, the Indian jewelry maker also maintains two diamond and jewelry production facilities in China employing about 4,000 people.
India is now keeping, and selling, more diamonds for itself, the Economic Times writes. With prices of polished diamonds slumping as much as 15 percent during this recession, the precious stone is being increasingly bought for investment purposes. Domestic consumption of diamonds has doubled during the past three months, from 2 percent to 4 percent of total production. Although the percentage is minuscule compared with the global demand, with gold falling out of favor with investors, diamonds are fast emerging as alternative.
India processes about 90 percent of world's polished diamonds. "[The r]ecession has sent the message across to those who were looking for the right opportunity to invest in polished diamonds. Over the last three months alone, the domestic demand for polished diamond[s] has doubled," said Praveen Nanavati, past president of the Surat Diamond Association.
According to the Surat diamond industry, global demand is beginning to recover and should improve in the coming months. But stock market volatility, combined with higher gold prices, is encouraging domestic consumers to invest in polished diamonds.
"People are switching over from gold to diamond[s]. While the price of rough diamond[s] has gone up significantly, that of polished diamond[s] is going up slowly after touching a new low due to [the] recession. This has created a good opportunity for people to invest in the precious stone," said Mehul Choksi, chairman of the gem and jewelry committee of the Federation of Indian Chambers of Commerce and Industry (FICCI).
While the Gem & Jewellery Export Promotion Council (GJEPC) has no specific figures, it maintains that the demand for diamond-studded jewelry in India has also increased significantly during the past year. Domestic demand for diamond jewelry rose by 25 percent in the past three years, of which around 5 to 10 percent has occurred in the last one year alone.
"For the last few months, the industry has witnessed good demand from consumers for expensive diamonds bigger than 1 carat. When diamonds were available at 15 percent [less], investors found it to be a new investment option," Vasant Mehta, chairman of GJEPC, told ET.
Experts believe there is immense opportunity in precious stones, but investors should also be aware of the challenges. "There is a huge potential for investment in diamonds. But while investing, one needs to [know] about the [need for] quality certificate[s] to ascertain the purity of the stone. Also, purchasing diamond[s] at [the] retail level is different from [purchasing stock], and [the] price is not always transparent. So one should be in the know [about] the price at which...diamonds are being offered," said Neelesh Hundekari, who looks after the consumer and lifestyle industries at global consulting house AT Kearney.
