China Shining, in five years
HONG KONG: The road to Panyu, in Guangdong province in southern China, is paved with diamonds. (Well, almost!) The city just across the border from Hong Kong has rapidly emerged as the “gems and jewellery capital” of China, accounting for more than a fifth of the country’s export of gold and inlaid jewellery alone. In recent years, however, Panyu’s vaulting ambitions have induced it to set its sights a lot higher: it’s now looking to displace Surat as the Koh-i-Noor of the diamond cutting and polishing world.
That could take some doing: today, over 80% of the world’s diamonds are still cut and polished in Surat, where the industry was started up in 1901 and where skilled craftsmen have perfected the fine art of polishing diamonds even as small as a hundredth of a carat! Yet, the warp speed at which China is gaining market share and absorbing technology and skills, while simultaneously leveraging its low labour costs and world-beating infrastructure, has experts predicting the inevitability of its rise to the top, perhaps as early as in five years.
Says Vijay Nahata, MD of the Panyu-based Real Oriental Diamond Product Company: “China is certain to top India in the diamond and jewellery industries in the next few years.”
The governments at various levels are playing a catalysing role in promoting the industry and providing an enabling environment, and the availability of abundant, cheap labour and the famed Chinese work ethic are the key drivers of this glittering growth, he adds.
M. Arunachalam, former president of the Asia Pacific Indian Chambers of Commerce and Industry, concurs with this assessment. “China is fiercely competitive and is slowly taking away market share from India. And although skill levels in Surat are still considered higher, the Chinese could, given their record of recent years, catch up in three to five years.”
In particular, says Jimit Kapadia of Rosy Blue, one of only 93 Sightholders of the De Beers Group’s Diamond Trading Company (DTC), Chinese craftsmen’s finish is a lot superior. “There’s also a lot more diversity in terms of types of jewellery. Some factories do amazing work in setting, polishing and even designing jewellery.”
Yet, notes Kapadia, the brand identity that India has established as a diamond manufacturing centre isn’t going to vaporise soon. “The perception among customers is that India is the manufacturing centre; in fact, diamonds manufactured by us in China end up going to our manufacturing centres in India, from where they are sold.”
“India may have the edge now in diamond cutting and polishing,” says Nilesh Jhaveri of Bhavani Hong Kong, which has 16 factories in India, “but it can’t afford to relax.” Jhaveri himself reckons that within the next three years, “I can foresee that we will be setting up factories in China, and bringing the skills that we have in India out here in order to harness the China market.”
An 11-member delegation of the Gems & Jeweller Export Promotion Council, which travelled to China last year to study the market, concluded that China is “gradually expanding and gaining its share of the diamond processing pie that India enjoyed, with increasing numbers of diamond processors from Israel and Belgium, and even India, setting up bases in China, for a variety of reasons.” The delegation further reported that China “is definitely emerging as India’s arch rival… The Indian market has to wake up and compete healthily to enjoy its dominant position in the world’s cut and polished diamond market.”
One of the cruel ironies of Surat’s feared loss of its status as the crown jewel of the diamond processing industry is that the Chinese workers acquired the skills from Surat craftsmen who were brought in to train them up. In other words, the Surat craftsmen may be effectively “working themselves out of a job”. How’s that for an unkind cut!
Surat merchants fear dragon
SURAT: A determined dragon could dim Surat’s glitter. Increasingly, diamond processors from Israel and Belgium, even India, are setting up manufacturing facilities in China. Not only is China’s labour as cheap as India’s, its skills are getting better by the day.
Agrees Pravin Nanavati, president of the Southern Gujarat Chamber of Commerce & Industry: “China is certainly going to be an important player, and underestimating it could be a big mistake.” Says diamond exporter Jeevraj Surani, who has set up a factory in China: “The country has better infrastructure and lenient labour and tax laws.”
Until now, human skill and semi-automatic machines have helped Indian industry to maintain its lead, according to an IICRA study. But China has the requisite technology to reduce cost further. Another study by KPMG says that India’s share of the global diamond processing industry, which is 57 percent presently, will decline to 49 per cent by 2015.
“The challenge posed by China cannot be taken lightly because the gap between them and us is huge, but it is slowly decreasing,’’ says Chandrakant Sanghavi, regional chairman of the Gems & Jewellery Export Promotion Council.