Q. What are your current titles/functions in the diamond industry, both private and organizational?
I’m the President and one of the founders of the Shanghai Diamond Exchange (SDE), which, authorized by the Chinese Central Government, is the only official platform for the import and export of diamonds in China. I’m also the Vice Chairman of the China National Gemological Association, and Vice President of the WFDB since Oct. 2018.
Q. Tell us about your journey in the diamond industry, how you began and where you are now.
After graduating from university in 1987, I joined China National Arts & Crafts Import & Export Corporation, which at that time belonged to the Ministry of Foreign Business and Economics of China. My department managed gold, jade, pearl, and diamond import and export, so that’s how I started my career in the jewelry import and export business. In 1997, I began to participate in the preparation of the establishment of the Shanghai Diamond Exchange. My colleagues and I had several visits overseas to major diamond bourses and industrial organizations in order to learn about taxation policies and the management of a bourse. In October 2000, SDE was finally established, and I became the President. During the past twenty-two years, I experienced the whole development process of SDE as well as the Chinese diamond market, both of which were started from scratch. I have devoted my career to promoting taxation reforms, market regulations as well as international exchanges, and cooperation in the diamond industry.
Q. What is the current situation in the Chinese diamond market?
Let me start with the jewelry market first. In the first quarter of this year, the retail value of gold, silver and jewelry commodities in China increased by 7.6% year-on-year. However, the year-on-year decline in March was 17.9%, which was the second year-on-year decline since July 2020. Also, the retail value hit a multi-year low in March with the spread of Covid-19 in several major cities. Big brands like Chow Tai Fook, achieved a 12% increase in its retail sales in the first quarter, but still significantly lower than that of the previous quarter. In March, however, the same-store sales in mainland China decreased by 11% year-on-year. Facing the same situation, Luk Fook’s same-store sales of self-operated stores in the mainland increased by 29% from January to February 2022, but the performance began to deteriorate in mid-March. Specifically, the total import of diamonds through SDE to the mainland market in the first two months of this year dropped nearly 20% year-on-year, mainly due to the large volume of import of the previous year and the Chinese New Year holiday. The current Covid-19 surge in Shanghai started in early March, and suddenly SDE had to close at the end of the month with the lockdown of the whole city.
Q. How have the current Covid restrictions affected the local diamond and jewelry industries?
From February to April, the city of Shenzhen was struck by an outbreak of Covid-19, halting trading in the local wholesaling markets and also production at the jewelry factories there. While the jewelry industry in Shenzhen has strived to return to normal since May, they are gradually running out of diamonds with the close of SDE for as long as two months. Some diamond dealers in Shenzhen even sell jade for the time being. While in Shanghai, people have been self-quarantined at home and have worked from home for too long, and are anxious to get everything back to normal. The good news is that in the past week, some public places in Shanghai have been reopened, part of the public transportation is running again and production is about to resume in succession. SDE is also actively preparing for reopening, and if everything goes well, we could return to work in early June.
Q. Looking forward, how will the local industry fare over the next several months?
As the epidemic has gradually subsided, the local government will soon pivot back to economic and social recovery, and try hard to accelerate the resumption of work and production. In view of the serious impact of this Covid outbreak, the government has issued many policies to help the industries, especially private companies, such as the implementation of tax and fee reduction, rent reduction, and other measures that could benefit the enterprises. Specifically, non-state-owned SDE members could enjoy a rent reduction for six months in our building. I think that the local diamond industry just sat down for a moment to gather strength, and will rebound later as long as the demand is still there. The same thing happened in late 2020 and 2021 after the first outbreak of the Covid and several months of lockdown.
Q. What are the challenges and opportunities facing the Chinese diamond market?
The Chinese diamond market does face an array of interwoven challenges. Apart from the Covid-19 outbreak, China’s economic growth is slackening off. Diamond consumers have been used to shopping in brick-and-motor stores, which are now under pressure with the strict Covid restrictions. Moreover, both international and domestic travel restrictions make it not easy to either organize or participate in conferences, fares, tenders, or events. Besides, the younger generation might see the lab-grown diamonds as substitutes for natural diamonds, especially the small ones for fashion jewelry.
Yet the truth is that this is a challenge for every market around the globe. Luckily, every cloud has a silver lining, and the opportunities always hide in the challenges. Due to the international travel restrictions, Chinese consumers could only buy luxury products including diamond jewelry at local stores, which contributes to the performance of the domestic market. In the meanwhile, China’s prosperous e-commerce sector ensures that when the brick-and-motor stores are affected by the Covid outbreak every now and then, business goes to the online stores instead. With the hit of the pandemic, the low-income have suffered the most, while the rich are far less affected and still have strong willingness and purchasing power to pay for diamond jewels. As for the lab-grown diamond, though it endeavors to seize a share of the jewelry market, it is on a different track. The Chinese consumers will not be easily misled by the confusing concepts. They study a lot and have a clear understanding of what they choose, for a marriage proposal or a birthday. After all, the consumers will benefit from a more diversified market, which will in turn lead to the boom of the industry as a whole.
Q. Tell us about your interests/family and anything else you would like to add.
I’m addicted to the arts. In my spare time, I find great pleasure in music, painting, and Chinese calligraphy. I’m also an omnivorous reader. I live in Shanghai with my wife and daughter, who studies orchestra conducting at the Shanghai Conservatory of Music.