China’s Craze for Gold Jewelry

An exclusive interview with Wu Feng Hau, President of the Shenzhen Jewelry Company – TTF Studio
China’s Craze for Gold Jewelry

The following interview was conducted by Rachel Lieberman of the IDI. DiamondWorld brings this interview exclusively for its readers.

TTF Studio is a branded jewelry company in China, which is engaged in jewelry design and production as well as brand operation management.

TTF has made a great breakthrough into rose gold anti-tarnish technology and obtained a national patent in this area. The high-end jewelry company specializes in seamless inlay, dense nail inlay and micro-inlay technologies and has first-class processes for producing color gemstone jewelry and stainless steel green-burnt jewelry.

TTF has established a marketing center in Beijing as well as an overseas customer service center in Hong Kong, which provides professional services for oversea customers. TTF products have been widely exported to Germany, the US, Japan, Italy, Taiwan and Hong Kong and have entered international high-end consumption markets.

We asked Wu Feng Hau, the president of the Shenzhen Jewelry Company TTF Studio, for input about the growing Chinese diamond and gold jewelry industries.

According to experts, the Chinese domestic market for jewelry is expected to double in the next few years, becoming the largest market in the world. What kind of jewelry do the Chinese people like? What are their preferences when it comes to diamonds?

Mr. Feng Hu replied: “There is no doubt that the current economic crisis has made gold jewelry extremely popular among Chinese consumers. Out of the entire jewelry market in China, over 80% is attributed to revenues from gold jewelry sales. The diamond business is also growing and maturing. Its phase of development has graduated from small-sized jewelry to larger-sized polished diamond jewelry and from solitaire to cluster-setting jewelry.”

We pointed out that China has an emerging middle class of over 200 million and asked if Wu Feng Hau expects jewelry tastes to change as the middle class evolves and matures. Will high-end diamond jewelry become popular following the transition?

Wu Feng Hu points out that current figures indicate that there are actually 300 million middle-class consumers on the Chinese market. He states that this is a clear indication that high-end diamonds are on their way up. He adds: “Our consumers are now contributing to a growing demand for international jewelry, starting from the introduction stage to maturity stage. The Chinese market is moving forward from the growth stage to maturity, which implies that high-end diamond jewelry will become increasingly popular.”

According to Chinese tradition, 2009 is a lucky year to get married. What is the volume of sales of bridal jewelry so far this year?

Wu Feng Hu replies that total jewelry sales revenue in China in 2008 was 180 billion RMB, constituting a 10% growth as compared to the preceding year. During the first half of the current year, jewelry sales revenue has undergone an approximate 20% growth as compared with the same period in 2008. The forecast is for jewelry sales revenue to reach 216 billion RMB this year.

He adds: “In China, on an average, 9 million new married couples tie the knot every year. If each of them buys one diamond ring for an average price of 5000RMB, this would bring 45 billion RMBs worth of diamond jewelry business to the market. If you consider that in 2009 the forecast is for 10% more couples to marry, which would indicate that the bridal jewelry business would also increase by the same percentage, total bridal jewelry sales revenue will exceed 54 billion.”

Despite these impressive data, Commodity Online reports that the global economic meltdown is affecting the Chinese economy. According to Chinese government statistics released in the beginning of the year, only 35% of 6.1 million students who will graduate from college this year will find a job. We asked how this slowdown could affect diamond and gold jewelry purchases in China.

Wu Feng Hu is not particularly worried by these figures. He insists that the 35% unemployment rate among newly graduated students should not affect the jewelry business. He explains: “First of all, these students are only temporarily unemployed. They will undoubtedly find a proper job later. Secondly, these students are not the jewelry industry’s major target group. In addition, many of them come from a strong financial background, so even though they don’t have jobs, they still retain their spending power.”

We pointed out that at the recent ICA Congress held at Panyu, one of the issues under discussion was how foreign firms can gain access to the growing Chinese domestic market, which is the world’s largest consumer of platinum, second largest consumer of diamonds, and third largest consumer of gold. What would you recommend to foreign diamond and jewelry firms seeking to gain access to the Chinese market?

In this matter Wu Feng Hu calls for caution and prudence: “For foreign firms seeking to start business in China, I would say that first and foremost they should refrain from being overly optimistic. It is important for them to conduct studies at the pre-start stage. In-depth understanding of the Chinese market situation and customer needs is essential. Also, it is imperative to choose the right partner for collaboration. It is not smart for foreigners to bring the end products in order to start selling in the Chinese market. The best way is to collaborate with a local partner in China which has manufacturing abilities.”

He continues: “If the foreign firm is looking for retail business, it is better to choose a Chinese partner which has integrated connections with different level organizations.”

International jewelry brands importing high-end jewelry have to pay sales tax, plus VAT plus duty taxes in China. Is there a market for this high-priced luxury jewelry despite the inflated prices? Are there high-quality, home-grown Chinese luxury jewelry chains and if so, are they popular?

Wu Feng Hu lists the whopping taxes that apply to imported jewelry: “For importing jewelry, the duty tax is up to 34%, VAT is 17%, and there is a consumption tax of 5% - all together 54%. Unless the foreign firm is a top global brand it cannot afford to export to China. If not for the heavy taxation, local products would lose their competitive edge in the Chinese Market. In any case, many Chinese jewelry brands are comparable to international brands and are capable of meeting consumer needs in China.”

We noted that the Chinese gold and diamond jewelry businesses are increasingly turning to the e-commerce market. We asked Wu Feng Hu whether this would seem to indicate a globalization trend for jewelry purchases in China and how he thought it would affect Chinese consumers.

Wu Feng Ho agrees that globalization trends are becoming very strong in China. “This development certainly affects e-commerce activities. I believe that in the coming year, Internet jewelry sales will present one of the challenges that the Chinese jewelry business will have to face. This especially applies to jewelry items with comparable prices and uniform standards, such as traditional diamond inlay items and loose diamonds.

Courtesy of the Israel Diamond Institute Portal www.israelidiamond.co.il


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