The Gems & Jewellery Export Promotion Council (GJEPC) has responded to the detention of 21 Indian diamond merchants in Shenzen province of China, saying that it might walk out of the diamond cutting and polishing business in the country if the situation is not resolved. The Chinese police had detained 21 Indian diamond merchants alleging them of smuggling diamonds from Hong Kong to China and vice versa and that many of these Indians were associated with a smuggling gang, reports say. The External affairs ministry officials, however, rejected the retaliation explanation.

The council mentioned that if the Chinese government has raised detention as a reply to the arrest of three Chinese engineers in India (in reference with the industrial accident last September at Balco’s Korba unit, killing 41), the council will think of pulling out of the country, reports say.

Diamond imports into China come with a 4 per cent duty for members of the Shanghai Diamond Exchange and 18 per cent for non-members. Diamond imports into Hong Kong do not attract any duty. As such, it is attractive for any diamond merchant to export precious stones to Hong Kong. Shenzen, is about an hour away from Hong Kong.

Reports state that 50 percent of India’s total diamond exports to China were conducted by illegal methods through Hong Kong, in an effort to save on tax and be competitive. The Council also mentioned that it would not object provided the Chinese government allows the local judiciary to tackle the matter. The Indian ambassador in Shanghai has been contacted on the matter, by Chinese authorities.