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Hot Rocks: China revs Diamond Market

Chinese demand has helped more than double the prices of rare diamonds over the past five years, according to an industry group, as Chinese investors look for places to park their growing wealth.
“More and more Chinese want to invest in products that have long-lasting value,” said Ari Epstein, the chief executive of Antwerp World Diamond Centre, in an interview.

The dash for diamonds has been spurred by Chinese who are looking to secure their wealth amid uncertain times. High inflation throughout last year created economic fears, as did falling property prices in some of China’s most critical housing markets. That has sent many Chinese investors to different – and sometimes unusual — places to park their money.
Interest in diamonds is relatively new for the Chinese, who have typically gobbled up gold to secure their cash. The World Gold Council recently announced that China is poised to become the world’s largest gold buyer in 2012, surpassing India.
The Wall Street Journal previously reported that pink diamonds have attracted most of the attention in the world’s second-largest economy. The industry has been marketing other types in the area as well. Sotheby’s auction house last year made a special point to go to Hong Kong to show off the Sun-Drop diamond, a yellow diamond that sold for a record $12.4 million in November to an anonymous buyer at an auction in Geneva.
Diamond investors are still limited by the fact that the gems are considered luxuries in China’s mainland and face stiff luxury taxes. Some in the diamond industry would like to change that and are encouraging China’s banks to set up diamond trading desks to bolster existing ones for gold. China Merchants Bank Co. has said it plans to allow some of its customers to trade diamonds through its website.
Mr. Epstein said he expects diamond demand to increase as China looks to build its own trade and become a jewelry manufacturing center. The Antwerp World Diamond Centre is already helping two Chinese companies develop their mining, Mr. Epstein said, adding that China is also working to increase its polishers from a current 30,000. India, by comparison, has one million.
Diamond exports from Antwerp to China were valued at $5 billion in 2011, up 25% from the year earlier and accounting for 25% of global exports. Chinese consumers are also driving demand for gems and are increasingly developing a defining the value of diamonds as love. Western traditions have seeped their way into China and because of it a rising number of prospective brides await diamond rings with their marriage proposals.
Companies such as DeBeers, Tiffany & Co. and Hong-Kong based Chow Tai Fook are also encouraging demand through marketing, filling Chinese women’s magazines with splashy advertising to promote their jewels as the jewelry companies all look to expand across China.
Source – «The Wall Street Journal, China»

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