- The recent Hong Kong show was better than expected. Can you elaborate please?
A few weeks before the Hong Kong show, the Hong Kong and China markets started to pick up after the Chinese New Year holiday. Sales and sentiment improved significantly. The Southeast Asian market also performed well over the past year, with local economies in countries like Thailand, Indonesia, the Philippines, and Cambodia showing strong growth.
On Rapnet, there has been a reduction in the quantity of goods offered, leading to a better balance between supply and demand. After the holiday season, people were eager to replenish their stock, especially with diamond prices being lower.
Overall, everything has turned out well. The polished diamond sector at the airport exhibition (AWE) was well received, with many inquiries about larger and higher-quality stones (4 grainers and up, particularly 3-5 carats and bigger). There has also been a steady return in demand for smaller goods (5 per carat and smaller) in the Chinese market.
- What is the situation today in the diamond market in Hong Kong and in China?
The Hong Kong show demonstrated improved sentiment and increased demand in the Hong Kong and China markets. This positive change is largely due to China’s recent policy aimed at boosting internal consumption and improving liquidity of the economy, which has clearly taken effect. Additionally, the equity market has shown a good recovery over the past two months.
- Are lab-grown diamonds cutting into demand for natural diamonds in Hong Kong and China?
Hong Kong and China respond quite differently compared to the US market. While consumers in this part of the world are aware of lab-grown diamonds, their adoption remains low. In Hong Kong, retailers are not yet offering lab-grown diamonds, though some retailers in China have started to do so. Over the past 18 months, prices of lab-grown have significantly dropped. Chinese consumers are highly sensitive to price levels and retail prices of lab-grown diamonds (e.g. 4 grainers selling for USD 300-400 at the retail level) have attracted some attention and buyers. However, lab-grown diamonds are still in the early stages in China, and major adoption has yet to occur.
- Are you seeing new markets for diamonds developing in other Asian countries?
Asian markets are rebounding as traditionally diamond jewellery demand correlates with economic development. GDP growth has been steady, benefiting from the China+1 strategy and strong exports. In recent years, many diamond manufacturers have diversified by setting up facilities or collaborating with manufacturers in Southeast Asia (e.g., Cambodia, Thailand, Vietnam), which has significantly boosted local economies. The increased trade within Asia has become more apparent, establishing Asia as a robust economic zone. Consequently, the Asian market has definitely recovered.
- How are changes in tariffs and regulations in the US and in China impacting the industry?
Jewellery exports to the US from Hong Kong and China will no doubt be impacted by an additional 10% tariff. This tariff will likely be shouldered among manufacturers/exporters, retailers, and consumers. Exporters from Hong Kong and China will need to collaborate with US importers and retailers to share the additional cost/duty among all parties. Unlike the Hong Kong system, which only taxes profits, the US government imposes a 10% tariff regardless of profitability. This tariff places a burden on the entire supply chain.
The jewellery industry must prioritize collaboration to discuss and absorb this cost. The US importers and retailers may increasingly turn to other Southeast Asia manufacturers for more competitive prices. Despite this, I remain optimistic that Hong Kong and China’s jewellery manufacturing and production capabilities, as they have demonstrated that they can produce high-value and quality products for the global markets. It’s crucial for the industry to maintain the spirit of cooperation and mutual support through these challenges.
- If Chinese demand for diamonds has declined, what are they buying now?
Chinese demand for diamonds has declined since 2019-2020, one of the reasons leading to lower prices in recent years. While Chinese consumers had been buying more gold until about a year ago, they are now starting to purchase diamonds again, albeit not in large quantities. There is significant potential for improvement as the Chinese economy is expected to grow over the next 6-12 months. With gold prices rising, Chinese consumers are buying less gold.
The Chinese government is implementing various policies to boost consumption demand. Although there are no subsidies, manufacturers have discovered how to strengthen pure gold to allow for diamond settings in jewellery. Larger chains are now buying diamonds ranging from 1-15 points to set in pure gold, creating a new and well-received product among Chinese consumers. This trend may become prominent in the next few years.
- Is there anything you would like to add about the diamond industry in Asia?
The diamond industry in Asia mirrors the state of the economy. When the economy thrives, the diamond industry follows suit. While everyone is waiting for China to rebound, I believe China is already showing signs of improvement and performing well independently. This will positively impact other Asian countries as well. I am optimistic about the next couple of years.
