China's Diamond Demand Sparkles

The fifth-largest diamond producer in the world said on November 8 that China's demand for the precious stones will steadily increase in spite of rising prices.

Empresa Nacional de Diamantes (Endiama), the national diamond company based in Angola, said that the Chinese market had accounted for up to 40 percent of its exports annually on average over the past three to five years.

The company is also seeking Chinese partners to help explore, produce and distribute the gemstones.

"We have already set up cooperative relationships with many Chinese companies and we want more," said Antonio Carlos Sumbula, chairman of Endiama. He declined to identify specific partners.

"The diamond mines in the area have a potential reserve (that could last) for 40 years," said Antonio Jose Freitas, marketing and communication manager. He said that it would cost about $500 million in total to explore those mines.

Sumbula said that although a civil war only ended about 10 years ago, the government could ensure a safe business environment for foreign investors in the diamond industry and would provide incentives, including tax breaks.

However, Chinese industry experts said that risks persist in overseas investment by mining companies.

"The exploration technologies of Chinese companies are mature, but it is not a simple decision to make to invest in African diamond projects because of both the political and financial risks," said Cui Dewen, vice-chairman of the China Mining Association.

The Shanghai Diamond Exchange said that its transactions of the precious stones in the first nine months reached $3 billion, up 58.4 percent year-on-year, with the price up 30 percent.

The transaction volume in the first nine months reached 12,038.71 carats, according to the exchange.

China's diamond consumption is set to grow on demand from new couples, said Xu Xiaoxue, senior manager in the investment department of the online diamond and jewelry retailer Zbird.com.

He said China is the second-largest buyer of diamonds in the world after the United States.

"The Chinese diamond market is still developing. Besides first-tier cities such as Beijing and Shanghai, second-tier cities are now gaining more consumption power for diamonds," he said.

Xu noted that the diamond exploration business is monopolized by a few global players, with Chinese companies mostly involved in downstream operations instead of exploration.

"It requires huge money to be active in the exploration sector," he said.

 Source: China Daily