China Attempting Another "Largest" – The Largest Diamond Polishing Center
June 15, 09 by Edahn Golan
China's diamond polishing capacity has positioned it as the world's second largest manufacturing center, predicted to continue growing, at least partially at the expense of the Indian industry.
China's polished diamond exports totaled $788 million in the first nine months of 2004, bringing it, to the number two slot. By that time, annual exports were expected to total over 3 million carats, worth an estimated $1 billion.
By the fourth quarter of 2008, diamond exports totaled $772 million and annual diamond trade through the Shanghai Diamond Exchange (SDE) totaled $1.307 billion, a 30.5 percent increase compared to the previous year.
In a recent report, KPMG forecasts suggest that by 2015, China’s share of the global processing business will rise to 21.3 percent, while India’s current 57 percent market share will decline to 49 percent.
In 2006, the Chinese industry got incentives from the government in the forms of tax breaks. A 17 percent VAT on imported rough diamonds was eliminated, and reduced to 4 percent VAT on imported polished diamonds.
With high quality makes, competitive labor costs, and a booming local market, China is starting to cause some concern in the Indian market. India suffered from mass factory closures and a loss of an estimated 400,000 employees in the process from the recent economic downturn.
More and more Israeli, European and even Indian diamond companies are opening plants in the country, which has built a reputation as an industrial power house in almost any area it decides to focus on.
Two elements seem to work at this point in India's favor – cost of labor and tradition.
Polishing a one carat diamond costs in China about 70 percent more than in India – where it costs about $10. This gives India a lead in lower cost goods, where the cost of manufacturing represents a larger component of the total cost of the diamond. Conversely, this lead dissipates with higher cost diamonds.
Tradition is the second advantage, providing India with many years of invaluable experience, which it continually builds upon. China entered diamond polishing in the 80s, lacks the inherent years of experience, but is importing know-how, and trying to set high standards in the quality of polishing, referred to in the diamond industry as the 'make.'