The rapid social and economic development of China in recent decades has allowed this country to become one of the world leaders and centers of power. China currently holds key positions in the world in the production and consumption of the most important mineral raw materials. The diamond market is not an exception, in which China, having surpassed Japan, confidently ranks second behind the USA. With a further increase in the well-being of the population, and having an enormous potential in increasing the consumption of luxury goods, the country has every chance to take first place in future both in the consumption of diamonds and diamond jewelry and in the production of laboratory-grown diamonds (LGD). Moreover, now in China, the production of the LGDs for technical purposes has reached stratospheric levels and their cost has decreased so much that the diamond mining for technical purposes is already a thing of the past.
Diamond deposits in China
China has the largest diamond reserves in Asia. Over the past 50 years, over 20 kimberlite pipes and 100 diamond placers have been discovered in China. Currently, the diamond reserves of the fields discovered are estimated at 23 million carats. About 50% of these discovered diamond reserves are concentrated in the Liaoning Province and are estimated at 11 million carats. In the Shandong Province, the diamond reserves are estimated at more than 9 million carats. The reserves in the Changde area of the Hunan province and the Xinyi district of the Jiangsu province are estimated at 0.5 million carats. Today, exploration is intensively carried out in the area of the South China platform. In 2010, a deposit was discovered in the Wafangdian region with the reserves estimated at 210,000 carats.
At the same time, in 2011, the production was extremely insignificant and amounted to 201 carats only (Table. 1, Fig. 1). In the Liaoning Province, 9 deposits were under development: 6 kimberlite deposits and 3 open-cast ones. The fields are concentrated in the the Wafangdian region. Their development has been underway since 1987. On average, up to 60,000 carats of rough diamonds were mined per year. Kimberlite pipe No.50 has been developed for 20 years and was closed in 2004. More than 65% of the diamonds mined in the Wafangdian region, are gem-quality one, nearly 95% of which are exported to the United States, Belgium and Hong Kong.
One of the key deposits in the Shandong province is Mine No.701 in Mengyin. It has been developed since 1976. Up to 50,000 carats of diamonds were mined annually. In 1995, when volumes mined reached a minimum level, more than half of the operations were suspended. In 1998, with the participation of the Canadian company Abacus Mining and Exploration Corporation, an underground diamond mining system was installed at the mine, which made it possible to achieve a production level of 50,000 carats of diamonds per year. Most of the diamonds mined here are for industrial use, and only 20 percent diamonds are suitable for cutting and polishing. Of these, most of the stones are exported to South Korea, Japan, the USA, Belgium and India.
The deposits in the Changde area have been developed for over 50 years. On average, up to 20,000 carats of diamonds were mined per year, and currently the diamond production almost stopped (Fig. 1, Table 1).
Cutting and polishing industry
Back in 2004, China ranked second in the world after India in the diamond manufacture. At present, the number of workers at the Chinese diamond cutting unis is over 30,000 people, 20-25% less compared with the pre-crisis 2008. The Chinese cutting and polishing industry is mainly concentrated in the Shandong province (5,000 cutters), Guangdong province (12,000 cutters) and Shanghai province (2,000 cutters) that form three large diamond clusters. Most Chinese diamond cutting and polishing units, especially those located in the Guangdong province, currently use the most advanced equipment at all the main stages of the diamond manufacture - determining the stone design, laser cutting and polishing of the facets. Among them, there are giant plants with up to 4,000 personnel. A significant number of factories are owned by foreign investors from Hong Kong, Israel, Belgium, India, Thailand, etc. As a rule, managers and highly qualified specialists at these companies are the invited foreigners. In addition to them, there are a large number of national enterprises with state and private ownership.
Fig. 1. China's diamond industry
Depending on a diamond size, the cost of cutting is $10-15 per carat, which is comparable to the cost in India, and they are of higher quality and 3 times cheaper than in Israel or Belgium.
About 150,000 people are currently engaged in the jewelry production, a significant part of which is concentrated in 2 districts of the Guangdong province: approximately 80,000 people in the area of the Shenzhen city and 40,000 people in the area of Panyu. Being one of the first free economic zones (FEZ), Shenzhen is adjacent to Hong Kong and processes 70% of the Chinese gold, with half of the goods exported through Hong Kong.
In 2009, China became the second largest consumer of diamonds, overtaking the Japanese market. The Shanghai Diamond Exchange alone currently has a turnover of around $1.8 bn.
Diamond mining, imports and exports in China, 2006-2018
According to the Kimberley Process data
The table shows that China has firmly become one of the leading centers in the global diamond trade. Despite the fact that diamond mining in the country is insignificant, in 2018, the PRC exported 12.56 mn carats of diamonds worth $2,193.89 mn, which is comparable with the figures of Canada, one of the top diamond-mining countries in the world.
Synthetic diamonds and LGDs as the first ‘black swan’ of the global diamond business
At the current stage of the global economy development, most major industries faced with global problems that will inevitably lead them to another crisis. According to estimates, the LGD jewelry accounts for more than 2% of the Indian gem and jewelry exports to the United States, which equals to $14 bn. This year, the synthetic diamond jewelry exports are likely to be around $280 mn, according to Business Standard.
China is currently the world's largest producer of synthetic diamonds. Over 600 companies work in the industry. They manufacture up to 400 mn carats of the man-made diamonds annually. The synthetic diamonds in many ways can satisfy the needs of the industry. But there are still areas where the synthetic stones are not able to replace the natural diamonds, so among many challenges, China has a task of the development of its own diamond mining sector, which would reduce the dependence on the rough diamond imports.
Prospects for the development of the diamond business in China
The following factors contribute to the effective development of the diamond business in China:
1. High growth rate of the Chinese economy that contributes to higher well-being of the population and higher consumer demand for the polished diamonds and diamond jewelry. It is worth noting that the diamond jewelry has now become an integral part of the wedding ceremonies in China.
2. Broad support is given by the Chinese government to the diamond jewelry industry development by reducing taxation and supporting the domestic demand.
3. Cheap labor force, the introduction of advanced technologies, a highly developed and dynamic infrastructure for conducting the diamond business and strict quality control allow China to become one of the leading diamond centers in the global economy.
Source: Rough & Polished - Yury Danilov, Ph. D. in Economics, independent analyst and expert
China, Tradewar, US Market, Global economy, Analytics, Chines Government, Hong Kong, Jewellery, LGD, Lab-grown Diamonds, Israel, Belgium