China a golden opportunity for Indian jewelers
By Shehla Raza Hasan
KOLKATA - Diamonds may be a woman's best friend, but the burgeoning demand for
gems and jewelry in China and India's expertise in handcrafted jewelry may well
signal a new era of friendly business relations in this sector between the two
Asian giants.
According to research done by India's Gems and Jewelry Export Promotion Council
(GJEPC), the Chinese gems and jewelry market is growing at the rate of 8-10%
annually, while diamond consumption is estimated to grow at 15%. China's gold
consumption value will total almost US$18 billion with an annual
export value of more than $15 billion by 2010, making China the third-largest
national gold market after India and the US. China, which was virtually
nonexistent in the field of man-made gems and cubic zirconium (CZ) processing a
decade ago, is now one of the major CZ producers alongside India, Korea, Taiwan
and Thailand. Their growth in the sector has been phenomenal in spite of very
meager domestic consumption.
With these facts and figures in mind, the GJEPC sent an 11-member delegation to
China in September to explore the possibilities of doing business in the
jewelry industry. A study of the markets and possible business prospects
between the two countries generated several revelations. The underlying intent
of the Indian side was to determine whether China is a potential market for
Indian gems and jewelry or a potential threat, and to promote two-way trade
between India and China. By projecting China as a potential market rather than
a threat, the council would draw itself closer to the new benchmark it has set
in reaching $16 billion in jewelry exports to China by 2007.
The delegation visited key towns and provinces in China where an advanced level
of business is done in the jewelry sector. These included Panyu, a Pearl River
Delta town (officially a district of Guangzhou) known as the "jewelry city" of
China; Wuzhou;
Shanghai; and
Hong Kong.
The council made three main observations in its report:
First, China is definitely emerging as India's arch-rival in the jewelry
sector, and India has to wake up and compete if it intends to maintain its
dominant position in the world's cut and polished diamond market.
Second, China will become the world's leading jewelry consumer and processor by
2010, spurred by its growing power tariff cuts and the liberalization of the
market. China's jewelry market has been growing at more than 8% annually since
the 1980s and it has become one of the few countries whose domestic consumption
exceeds $10 billion annually.
Third, a year-by-year analysis shows that in 2001, China's domestic market for
jewelry posted a record high of $9.64 billion while the country exported $2.53
billion in jewelry. In 2002, gold consumption reached roughly 250 tons, making
China the fourth-largest global consumer of gold jewelry. In platinum
consumption, China has overtaken Japan as the market leader. Already, more than
52% of the platinum jewelry in the world is made in China. China also occupies
1.8% of the world's diamond market share. Annual sales of pearls and precious
stones amount to $24 billion. With an average growth of more than 6%, China's
jewelry market is predicted to surpass $21.7 billion in 2010, accounting for
10% of the world's market.
However, in the diamond-processing sector, China still has a long way to go;
India processes 120 million carats of diamonds a year, compared to China's 2.4
million carats, which translated into diamond sales of just $740 million. China
also has only about 10,000 diamond-cutting and processing units, compared to
India's 800,000 to 1 million. China has about 25,000 people working in the
industry, compared to India's well over a million. However, China has the
advantage of disciplined labor, coupled with an impressive quality of
workmanship. Aware of China's potential, De Beers, the South African
conglomerate, has been busily developing the Chinese market since 1997.
China is gradually expanding and gaining its share of the diamond-processing
pie that India enjoyed, with increasing numbers of diamond processors from
Israel, Belgium and even India, setting up bases in China. Wealth creation in
China is leading to more domestic consumers, while India has to rely almost
solely on exports. De Beers' move into China has been seen as a way for the
world's largest raw diamond supplier to reduce its dependence on India. The
quality of Chinese workmanship is steadily improving, and policies such as
single-window official clearance are highly attractive to foreign businessmen.
It is not surprising that a number of international brands have opened up
retail outlets in major cities such as
Beijing, Shanghai and Guangzhou.
Most prominent have been jewelers from Hong Kong and
Taiwan who have reoriented their
businesses toward the Chinese mainland. Four Hong Kong jewelers, namely Chow
Tai Fook, Tse Sui Luen (TSL) Jewelry, Chow San San and Luk Fook Holdings, rank
among the top 10 diamond jewelry brands in China, according to the trade
magazine Gold Jewelry.
The Indian side also explored some other aspects of the Chinese industry, such
as that Indian manufacturers might consider manufacturing in China to
capitalize on the country's advantages. Many Indian diamond companies have a
presence in China already, and the jewelry industrial park at Panyu offers a
ready pool of skilled labor. In addition, the Shanghai Diamond Exchange could
become a potentially useful way for Indian diamond exporters to supply cut and
polished diamonds to their customers.
A few statistics will further illuminate the state of the jewelry trade between
the two countries.
India's jewelry exports to China (millions of US$)
Fiscal year
Cut and polished diamonds
Gold jewelry
Colored gemstones
Others
Total
2002-3
0.07
-
0.01
-
0.08
2003-4
0.03
-
0.01
-
0.04
2004-5
0.72
0.75
0.33
0.01
1.81
India's jewelry imports from China (millions of
US$)
Fiscal year
Cut and polished diamonds
Gold jewelry
Colored gemstones
Others
Total
2002-3
-
0.10
1.88
-
1.98
2003-4
0.45
0.16
2.01
0.07
2.69
2004-5
-
0.26
2.15
0.14
2.54
Source: GJEPC, Mumbai
- : negligible amount
The Council made the following recommendations:
Indian companies should have more interaction with, and visits to China to
understand the Chinese approach of management and implementation better, and
strive to inculcate this understanding in their individual companies.
Indian representatives should visit more jewelry fairs in China.
The Indian industry should work out a strategy to supply cut and polished
diamonds to the Shanghai Diamond Exchange members.
The Council can, and should participate in Chinese jewelry fairs to study the
growing market as well as displaying Indian products.
Investing in China, in particular Wuzhou and Panyu, is highly recommended.
China should be regarded more as a potential market than a threat to Indian
products.
To consider the recommendations given for improvement of the synthetic stones
industry in Trichy (aka Tiruchirapalli, a city in the Indian state of Tamil
Nadu).
Clearly, India's current strength in the gems and jewelry industry will be
seriously undermined if it does not respond to the emerging China challenge in
the sector. The time has come yet again for the two countries to become
partners. With 2006 already hailed as the year of India-China friendship,
jewelers should cash in on a golden opportunity. Furthermore, the jewelers'
recommendations to closely monitor events in China, mimic successful practices
of the Chinese industry and exploit Chinese institutions and the Chinese market
for their own advantage have a general applicability that clearly transcends
their own industry.
Shehla Raza Hasan is a freelance writer based in Kolkata, India.
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