China’s New Year challenge

Avi Krawitz

The diamond industry is navigating slow economic growth in this Chinese New Year of the Goat. No longer considered the new frontier for the diamond market, China has matured and demand has softened in the past year. The country was the difference between an okay diamond market and a weak one in 2014 into 2015. As a result, the industry has lacked its usual buzz ahead of this Chinese New Year season.

Otherwise known as the Spring Festival, the Chinese New Year Golden Week – taking place from February 19 to 24 – is China’s busiest retail period, and has served as a boon for the diamond trade in the past decade. During a normal diamond trading cycle, as U.S. jewelers are completing their inventory buying for Christmas, their counterparts in the Far East are beginning theirs for the Chinese New Year. This prolonged selling season is followed up by the first quarter restocking period in both markets which has traditionally sustained the trade for the rest of the year.

This year, the diamond market has not received that boost.

The World Gold Council (WGC) noted that the Chinese New Year occurred about three weeks later this year than in 2014, which meant that jewelry retailers deferred their year-end stock building from December to January. Low premiums witnessed in the fourth quarter confirmed the absence of this seasonal effect, the WGC observed.

However, the diamond industry stayed eerily quiet in January, affecting the mood ahead of the festival. In fact, diamond market sentiment has been weak in the past year due in large part to cautious demand from China.

There are a number of factors that continue to influence this slowdown.

[two_third]Significantly, the economy is in transition as the government realized it is too dependent on exports and infrastructure investment, and not enough on consumption. The shift toward being consumer-centric will take several years, and in the interim will likely result in even slower economic growth. Gross domestic product (GDP) rose 7.4 percent in 2014, which was its slowest pace in 24 years, and the government has set a growth target of around 7 percent for 2015.[/two_third][one_third_last]

” China remains the second largest diamond jewelry market and still represents the industry’s strongest growth opportunity.”


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Source Rapaport