China's Diamond Imports Nearly Double as VAT Slashed

China’s imports of polished diamonds leaped 87.3 percent to $201 million last year. The big jump is attributed to the cut in Value Added Tax (VAT). By value, total diamond imports passing through the Shanghai Diamond Exchange, including rough diamonds, surpassed $210 million.

The Shanghai Diamond Exchange said that imports in 2006 equaled the combined value of imports in 2004 and 2005.

As of July 1, VAT on imported polished diamonds was reduced from 17 percent to four percent. VAT on imported rough diamonds was waived. Since 2002, there has been no customs duty on rough or polished diamonds.

After the change in VAT on diamond imports, imports in the second half of 2006 almost tripled to $147 million.

In the past few years, a one carat diamond ring replaced the traditional 24-karat gold bracelet as the common bridal gift, mostly in the big cities.