It's a Shame: China's Diamond Decline
February 20, 25
The diamond industry has been waiting for demand in China to bounce back. And waiting. And waiting.
Three years of zero Covid tolerance finally came to an end in December 2022, but the long-awaited recovery did not follow.
Quite the opposite, in fact. Demand for diamonds among China's 1.4bn people population was down by as much as 50 per cent last year (according to analyst Paul Zimnisky).
After a decade as the world's second biggest diamond buyer (the US is number one) it has now been overtaken by India.
And there's barely a company report or news story charting the diamond decline that doesn't mention China as a primary cause.
Earlier this month De Beers slashed its production guidance for 2025 and said it expected to reduce the company's book value because of weak demand, especially in China.
Chow Tai Fook, the jewelry giant that has 7,500 stores across mainland China, posted a 21 per cent plunge in the value of retail sales for the three months to 30 September 2024.
Luk Fook, with over 3,400 outlets, reported a 35 per cent slump in same-store sales of diamond jewelry on the mainland in the last quarter of 2024.
And Tse Sui Luen Jewellery, which posted a $48m loss last September, expects a far bigger one in March when it publishes its annual results. It blames weak demand on Mainland China.
So why has China failed, so spectacularly, to deliver the recovery that was so widely anticipated?
Lab grown diamonds are part of the story, although the truth is that they account for no more than 10 per cent of the market share.
The country has suffered a collapse in its real estate market, its GDP growth is slowing, and marriage rates - together with the purchase of diamond engagement rings - have been falling for a decade.
I Do, a Chinese diamond ring brand, has filed for bankruptcy because of a slump in demand.
Investors are switching from diamonds to gold - currently surging in value - and Donald Trump, as newly-elected US president, has wasted no time in reigniting the US-China trade war by imposing tariffs on its exports.
But there's something very particular about China that is also driving the diamond slump, a factor absent from any other country. And that's luxury shame.
President Xi Jinping has, in recent months, been intensifying his campaign launched back in 2011 against displays of wealth.
It's part of a broader "common prosperity" initiative, aimed at reducing inequality and discouraging ostentatious displays of affluence.
The message, in short, is that if you've got it, don't flaunt it. And if you haven't got it, don't buy it.
The government is cracking down on what it calls "money worshipping" and "wealth flaunting" in a country that has over 98,000 ultra-high-net-worth individuals ($30m-plus) together with huge variations in wealth between the big cities and huge rural expanses.
There are no legal restrictions as such, but the Chinese Communist Party (CCP) that's ruled the country for the last 75 years effectively controls all media, and has been sending out some very clear messages.
Social media influencers who brag about their luxury lifestyles have been blocked on Douyin, the Chinese version of TikTok. And despite reforms that have allowed capitalist ventures to flourish, the CCP is now promoting the good old-fashioned communist ideals of low consumption and equality.
Ideals that may fit the CCP agenda, but ideals that are not great for the revival of China's diamond demand.
Have a fabulous weekend.