Chinese consumers’ shift to gold jewellery helps push down demand despite wider revival in luxury market.
A recovery in diamond sales in China has stalled after a property sector crisis sapped consumer confidence and Covid-19 restrictions led to a drought of engagements in the world’s second-largest consumer market for the gemstones.
Sales of diamond jewellery dropped 3 per cent last year to $12.8bn in the Greater China region, which also includes Hong Kong, Macau and Taiwan but is dominated by mainland Chinese demand, according to data from Paul Zimnisky, an independent diamond analyst.
A second consecutive year of retrenchment in what the industry had hoped would be its fastest-growing large region has led traders and producers to forecast continued weakness in natural rough diamond prices this year.
Al Cook, chief executive of De Beers, the world’s largest diamond miner by value, said Chinese demand had been dragged down by a fall in the number of new homeowners, a shift towards consumers buying gold jewellery and years of pandemic lockdowns that prevented new couples from meeting.
“We’re going to need to see those factors unwind but I’ll be honest, I think that’s going to take longer than a lot of people thought,” Cook told the Financial Times. “This Chinese consumer issue looks like it’s going to be hanging around for a while.”
Chinese policymakers are struggling with a multiyear crisis in the country’s property sector, as well as deflation and poor investor sentiment.
“It’s the people who bought a flat or house in China who would aspire to buy a diamond,” Cook said.
Prices of natural polished diamonds slumped 18 per cent last year, according to WWW International Diamond Consultants, as falling Chinese demand coincided with US consumers shunning mined stones in favour of cheaper “lab-grown” equivalents.
Analysts said Chinese consumers still strongly preferred natural diamonds, but some retailers were suspected of selling man-made stones advertised as mined.
China’s demand for natural diamonds has dropped up to 50 per cent by volume compared with pre-pandemic levels, said Nikunj Haresh Dobariya of diamond wholesaler Zuri (HK).
“Right now it’s very difficult” to do business in China, he said, adding that he expected it to take another year or so for demand to return.
A pandemic-driven lull in engagements has also contributed to the softer Chinese diamond market. Just 6.8mn couples got married in China in 2022, down from a peak of 13.5mn in 2013, according to the civil affairs ministry. Some provinces have reported a rebound in 2023.
Analysts said the trend remained on a downward trajectory because of China’s declining population. Lai Ming Yii, research manager at Beijing-based Daxue Consultancy, said young consumers were “choosing to be single” for professional and academic development and because they lacked the financial resources for marriage.
Even those tying the knot are steering clear of diamonds. Bobo Liang is one of many Chinese women who plan to marry but intend to forgo a diamond engagement ring amid widespread economic gloom.
“The economy is slowing down and our expectations about our future income are pessimistic,” said the 25-year-old wealth manager in China’s eastern city of Nanjing, who asked to be identified by a nickname instead of her given name. “I’d rather stay away from things that lose their value as soon as I buy them,” she said.
Falling diamond demand has bucked the rebound in China’s luxury market, which grew 12 per cent in 2023, driven by fashion, jewellery and handbag purchases, according to research by consultancy Bain & Company.
Chinese consumers have been looking particularly towards gold jewellery as a safe way to store wealth.
Sales of gold jewelry rose 7.97 per cent to 706.48 metric tons in 2023, boosted by innovation and lightweight designs of gold jewelry products, China Gold Association said. A continued surge in Chinese demand ahead of last month’s lunar new year helped Swiss gold exports reach their highest level in seven years in January, according to Swiss trade data.
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