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Certs a Must

Sep 1, 2012 12:01 AM   By Julius Zheng
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Among the U.S.–based laboratories, certificates from the Gemological Institute of America (GIA) are by far the most popular certs in China for over .30-carat round diamonds, especially with cut grades of triple EX or double EX, with none to faint fluorescence. GIA offers a Chinese language tutorial on the 4Cs on its website, www.gia.edu, to educate consumers in choosing diamonds. GIA certs are especially popular among internet-savvy consumers. There are also a lot of third-party internet forums that discuss GIA certificates, which fuel their popularity as well. In addition, the majority of the website retailers in China primarily offer GIA goods, which further reinforces its dominant position.

   Seung-Hae Moon, managing director of GIA Asia Pacific Education, told Rapaport Magazine that GIA is advertising in six leading consumer magazines in China, and has distributed GIA certificate window displays and 4Cs counter cards to many local retailers. GIA’s education division also is offering a Graduate Gemologist (GG) residency course in Shanghai. The second class just graduated in August, adding around 20 new Graduate Gemologists in China, where GG diplomas are still very scarce.


   Laboratory reports from International Gemological Institute (IGI) are the second most popular among the U.S.–based certificates. IGI also emphasizes consumer education and professional education, offering training to retail salespersons and diploma courses in diamond grading.
   Because both GIA and IGI certificates are issued overseas, Chinese retailers often offer the diamonds with a local certificate in Chinese issued by domestic labs as a secondary certificate of quality. Occasionally, there are diamonds with certificates from EGL USA and other European Gemological Laboratory labs, and certificates from American Gem Society (AGS) Laboratories. However, the availability and presence of diamond certs from these labs are not nearly as prevalent. 


At the recent eighth annual conference of Zhejiang Province gold and jewelry firms, Shi Hongyue, vice chairman of the Gems & Jewelry Trade Association of China (GAC), addressed the overall market situation and industry challenges in China. He explained that the jadeite market has declined sharply. High-end jadeite has risen to very high prices but few consumers are buying, while low-end jadeite is difficult to sell, even though the price has been reduced.

In addition, according to Xinhua News, the Shanghai Diamond Exchange (SDE) traded 42.88 million carats of diamonds in the first four months of 2012, a 45.4 percent decline year on year. Total trading reached $1.255 billion, with a narrowed increase of 8.6 percent. The total import of polished diamonds was $639 million in the first four months, with a narrowed increase of 5.6 percent.

The China jewelry market is facing two major challenges, according to Shi. First, the diamond and jade section of the market has cooled in the midst of continued global economic turmoil. Second, the industry is overbuilt on many levels, from manufacturing to retail. Shi cited the excess production capacity and presence of too many trading centers.

Of the more than 100 major jewelry centers, over one-third of them do not have enough occupants and business, Shi noted. There are too many jewelry retailers, who are heavily concentrated in the first-tier cities, with a wide variety of business models, including regular shops, franchise outlets, high-end clubs, sales counters in department stores and website-based retailers. As a result, he said, the market is overstocked with inventory and does not have enough liquidity, leading to fierce price wars.


But it’s not just the number of players, Shi said. Many jewelry manufacturers are suffering from a sharp decline in orders and low profits. In recent years, the price of tourmaline surged by five to ten times, and jadeite more than ten times, which attracted a lot of speculative investment. Business people and investors unfamiliar with the jewelry industry rushed into the business, and many real estate projects were built around the concept of creating jewelry industry and trading zones. Even veteran industry members were eager to expand downstream and upstream. As a result, many manufacturers expanded their production capacity, while retailers participated in manufacturing, and manufacturers opened retail shops.

To combat the current oversupply and overexpansion problems, Shi called on the industry to increase efficiency, develop human resources and team building, and increase risk management and creativity.

 “The China jewelry industry has experienced ten years of rapid growth, and also the low point in 2009,” he concluded. “The year of 2012 might be more difficult, but the difficulties are meant to come and meant to go, and the survivors will become even stronger. I believe jewelry is a beautiful industry and so is the future.”


Diamond retail sales and wholesale trading were quiet in August because of weak overall demand and the summer vacation in Israeli and Belgian trading centers.

There is continued demand for round .30-carat to 1.10-carat, D-H, VS-SI, Gemological Institute of America (GIA)-certified diamonds in triple EX and double EX cut grade, with none to faint fluorescence. But the demand is much less than it was in 2011 and retailers and dealers are very cautious about building up inventory.

Halfway through the year, retailers have lowered their projections for 2012 sales. Buyers are expecting to visit the upcoming September Hong Kong Show for more pricing guidelines and indications of market trends.

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