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China’s Jewellery Market

I. Market overview

As a result of the economic slowdown in China in recent years, demand for jewellery has declined. According to the National Bureau of Statistics, jewellery retail sales from businesses above a certain designated scale amounted to RMB319 billion in 2018, up 7.4% from the previous year. It seems, however, that many investors have switched their focus from gold jewellery to gold bars. Figures released by the China Gold Association show that China’s gold consumption in 2018 increased 5.73% year-on-year to 1,151 tons, making the country the world’s leading gold consumer for the sixth year running.

Jewellery in the Chinese market can be divided into three main categories: metal, precious stones and others.

  • Metal jewellery: This includes jewellery made from all kinds of metals, which can be further divided into:

    • Precious metal jewellery: Jewellery made from precious metals, such as gold, platinum and silver. Common examples are platinum jewellery, gold jewellery, silver jewellery and alloy (carat gold) jewellery.

    • Non-precious metal jewellery: In comparison with precious metal jewellery, jewellery made from non-precious metals offers better value for money. Commonly, this kind of jewellery is made from copper and aluminium.

    • Imitation precious metal jewellery: This refers to jewellery made from materials that bear a close resemblance to precious metals. In fact, this kind of jewellery does not contain any precious metals, but it has achieved a large degree of popularity because it can offer certain advantages, notably colourfastness, lower prices and a high decorative value.

    • Thin film jewellery: This kind of jewellery is created using special techniques to bond a layer of precious metal firmly on the surface of another, cheaper material. Examples of this include gold-plated, gold-gilded and forged gold jewellery.

  • Precious stone jewellery: Precious stones are made into ornaments using a variety of processes, including grinding, carving, inlaying and stringing. Thanks to its aesthetic value and innate elegance, precious stone jewellery is becoming increasingly popular. Common precious stone types include diamonds, rubies, sapphires, crystal, jade, pearls, amber and topaz.

  • Other jewellery: Jewellery made from materials other than metals and precious stones. This includes materials such as clay, wood, string, leather and ivory.

Platinum jewellery: China is one of the world’s largest consumer markets for platinum jewellery. According to a report released by the Platinum Guild International, platinum jewellery accounts for about 70% of China’s demand for platinum and about 12 million items are sold on the mainland annually. However, in 2018 retail sales of platinum jewellery in China dropped by approximately 7% from the preceding year. One significant factor in the dwindling demand for platinum is that consumers now prefer to buy gold. Unlike the platinum jewellery markets in countries like Japan, the US and Europe, China’s is dominated by non-branded products which account for about 80% of it.

Gold jewellery: Gold jewellery is very popular in China and accounts for 58% of jewellery trading revenue on the mainland. Figures released by the China Gold Association show that consumers bought 736 tons of gold jewellery in 2018. As consumers tend to pay more attention to craftsmanship and design as their income increases, companies could look to improve the quality and creative design of their products to boost sales in the future.

Diamond jewellery: According to De Beers’ Diamond Insight Report, China is now the world’s second largest diamond consumer. The country’s demand for diamond jewellery is second only to the US, at about US$10 billion. Diamond jewellery is more popular among China’s younger consumers - roughly 80% of those who buy diamond jewellery in China are from the post-80s and 90s generations. This suggests that there is considerable room for expansion in the mainland diamond market.

Luxury jewellery: According to Euromonitor, luxury jewellery sales increased by 15.4% year-on-year to RMB19.4 billion in 2018, accounting for 2.7% of overall jewellery retail sales. Demand for luxury jewellery is on the rise as more women take up employment and begin earning more. Men are more likely than women to buy luxury jewellery as a status symbol.

Made-to-order jewellery: According to a recent industry survey, bespoke diamond wedding rings are the leading choice for 75% of the post-80s and 90s generations living in first- and second-tier Chinese cities such as Beijing, Shanghai, Shenzhen and Chengdu. In recent years, the traditional sales model for finished jewellery products has failed to meet growing consumer demand for exclusivity and individuality. As a result, bespoke jewellery has been gaining traction, so much so that many companies have introduced made-to-order services and are even letting customers take part in designing and making their own jewellery.

The wedding market: The wedding market is the main market for jewellery sales in China and accounts for about 50% of mainland consumer jewellery sales. In 2017, more than 10.6 million couples got married in China, and numbers are expected to remain at least at this level for the next few years. As jewellery items are seen as essential components of traditional Chinese weddings, the jewellery market is sure to benefit from the increasing popularity of marriage.

Festival market: The level of jewellery sales on the mainland is very much influenced by festivals and anniversaries. Many people have a habit of buying jewellery as a gift to celebrate birthdays and festivals, especially the Lunar New Year and Valentine’s Day. Many shopping malls also organise promotional activities tied in to these festivals.

Men’s market: As well as traditional jewellery items, such as rings, the men’s market also includes solely masculine items like tie clips, cufflinks and belt buckles. According to a research report on China jewellery market confidence and trends, male jewellery consumers mainly buy jewellery for their own use, for investment and for collection. Compared with the relentless growth in overall demand, though, the development of the mainland male jewellery market is relatively slow. To address this situation, companies could try to place greater emphasis on innovative product designs, cultural connotations, point-of-sale promotions and advertising.

Junior market: In accordance with Chinese traditions, people give longevity locks, bracelets and necklaces to children as goodwill tokens and as way of wishing them a healthy and happy life. In particular, the kinds of gold jewellery items that can be worn and have inflation-proof value are the top choices among parents with an eye on managing finances. With the implementation of China’s ‘two-child policy’, demand in the junior market is expected to grow. Nevertheless, when compared with the adult jewellery sector, where new styles are launched on a regular basis, the children’s jewellery market offers fewer choices. It also receives less promotional support than adult jewellery.

Senior market: The elderly put a higher priority than younger people do on jewellery that is both inflation-proof and has a demonstrable sentimental value. According to industry sources, the elderly age group’s spend on jewellery is no longer restricted to the four main traditional items – gold rings, gold bracelets, gold earrings and gold necklaces. They are now exhibiting a growing preference for jade, ruby and sapphire jewellery.

China’s 2018 jewellery imports breakdown:
HS CodeDescription2018
(US$ million)
17/18 Growth (%)
7101Pearls, natural or cultured, not strung, mounted or set, or temporarily strung for convenience of transport34.1-48.9
7102Diamonds, whether or not worked, but not mounted or set8,865.113.1
71023100Diamonds, non-industrial, unworked or simply sawn, cleaved or bruted718.7
15.2
71023900Diamonds, other non-industrial8,141.412.9
7103Precious stones (other than diamonds) and semi-precious stones, not strung, mounted or set; ungraded, temporarily strung for convenience of transport492.33.3
7105Dust and powder of natural or synthetic precious or semi-precious stones25.9-6.7
7106Silver (including silver plated with gold or platinum), unwrought or in semi-manufactured forms, or in powder form1,191.7
-8.8
7107Base metals clad with silver14.7
-5.8
7110Platinum, unwrought or in semi-manufactured forms, or in powder form3,138.2
6.6
71101100Platinum, unwrought or in powder form1,276.2
-3.7
71103100Rhodium, unwrought or in powder form227.0
64.9
7111Base metals, silver or gold, clad with platinum18.7
-8.5
7113Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal1,497.1
62.4
7114Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal or of metal clad with precious metal6.5
-52.7

Source:Global Trade Atlas

II. Market Competition

The majority of jewellery processing enterprises on the mainland are located in Guangdong, Shandong, Shanghai, Fujian and Zhejiang. Guangdong is the country’s main location for jewellery production, while Shenzhen and Panyu are the leading centres for jewellery processing. According to mainland jewellery industry studies, 20 key locations, including Xiangcheng in Jiangsu, Panyu and Luohu in Guangdong and Zhuji in Zhejiang, have earned themselves the label of “China’s Precious Stone Jewellery Specialised Industrial Base”. Among them, Shenzhen accounts for 70% of China’s total jewellery sales.   

Even though China has the craftsmanship required by many top international brands, the industry has yet to catch up in terms of brand names because its product design still trails behind overseas brands. Foreign companies dominate the mainland high-end jewellery market with their long-established brand history and superb design technology. Most Chinese brands are mid-to-high-end brands targeting middle-class consumers.

The huge potential of China’s consumer market has led to many of the world’s leading jewellery brands making moves to enter the mainland market. These include De Beers, the world’s largest dealer of diamonds, Cartier, the celebrated French jewellery and watch giant, and Perles De Tahiti. A number of Hong Kong brands, most notably Chow Tai Fook and TSL, have also followed suit.

The arrival of so many foreign brands has inevitably seen them competing for market share with local brands. The mainland jewellery market is currently dominated by brands such as Chow Tai Fook, Chow Sang Sang, Luk Fook, Laofengxiang, Lao Miao, Ming Jewelry, and Chow Tai Seng.

Overall, jewellery brands are developing rapidly and stepping up their expansion into China’s second- and third-tier cities. Over the next few years, many of these brands will need the help of franchisees to complete their moves into the second-, third- and fourth-tier cities. Given their superior local resources, many of these franchisees will be well equipped to access sales channels in these new territories.

III. Sales Channels

Mainland jewellery retail and wholesale channels can be divided into the following categories: jewellery counters at shopping malls, specialty stores and experience stores. Chinese consumers mainly shop for jewellery at weekends and on public holidays, typically making their purchases at department stores’ jewellery counters. The proportion of consumers making their purchases at independent shops and chain stores, however, is on the increase.

Over the past few years, China’s jewellery brands have increasingly moved into e-commerce. The success of its ‘website + experience store’ concept, for instance, has seen zbird.com expand swiftly on the mainland. Chow Tai Fook and Chow Sang Sang have their own B2C platforms. Many see the O2O model as the way forward for jewellery companies. However, despite the recent explosive growth of e-commerce across China, the fact that online sales of jewellery currently account for just 5% of the industry total demonstrates that the market is still very much dominated by traditional brand-name jewellery stores.

For many, trade fairs in China offer the most effective means of getting the latest information on the jewellery sector in China and beyond, while also being the best places to meet dealers. Mainland jewellery fairs scheduled for the second half of 2019 include:

DateExhibitionVenue
23-26 August 2019Chengdu International Jewelry Fair (Autumn Edition)New International Convention & Exposition Center Chengdu Century City
6-9 September 2019Hangzhou International Jewellery FairPeace International Conference & Exhibition Centre, Hangzhou
31 October-4 November 2019Tianjin International Jewellery FairMeijiang Convention & Exhibition Center, Tianjin
28 November-1 December 2019China International Jewellery & Gem Fair - ShanghaiWorld Expo Exhibition and Convention Center, Shanghai

 

IV. Import and Trade Regulations

2019 import tariffs of jewellery items:

HS CodeDescription%
7101Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; pearls, natural or cultured, temporarily strung for convenience of transport0, 21
7102Diamonds, whether or not worked, but not mounted or set0-4
7103Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport3, 4
7105Dust and powder of natural or synthetic precious or semi-precious stones0
7106Silver (including silver plated with gold or platinum), unwrought or in semi-manufactured forms, or in powder form0
7107Base metals clad with silver8
7108Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form0
7109Base metals or silver, clad with gold8
7110Platinum, unwrought or in semi-manufactured forms, or in powder form0, 3
7111Base metals, silver or gold, clad with platinum3
7112Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal0-8
7113Articles of jewellery and parts thereof, of precious metal, or of metal clad with precious metal8, 10
7114Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal or of metal clad with precious metal10
7115Other articles of precious metal or of metal clad with precious metal0-10
7116Articles of natural or cultured pearls, precious or semi-precious stones (natural, synthetic or reconstructed)10

Source: Customs Import and Export Tariff of the People’s Republic of China 2019

A consumption tax of 5-10% is levied on all jewellery sold in China.

The Shanghai Diamond Exchange is China’s only legal channel for the import and export of diamonds for general trading, as well as for the domestic sale of rough diamonds transferred-out in the course of the processing trade. For details of its import and export policies, customs supervision policies, tax policies and foreign exchange management policies, refer to www.cnsde.com/enindex.aspx.

The Shanghai Gold Exchange began operation on 30 October 2002, with its launch seen as a sign that China’s gold sector is moving towards complete marketisation. For details of its business code of conduct and other relevant laws and regulations, refer to www.en.sge.com.cn/.

In May 2003, the mainland abolished the licensing system for businesses trading in gold or silver products. As a result, the production, processing, wholesale and retail of jewellery are all now fully deregulated, meaning that any individual can now register to operate a business in the jewellery production, processing and wholesaling sectors.

On 1 December 2004, Guangdong launched a pilot scheme aimed at de-linking gold prices from workmanship fees within Guangzhou’s jewellery retail market. The practice was extended throughout Guangdong from 1 September 2006. As stipulated in the Interim Measures for the Separate Marking of Retail Price and Workmanship Fee for Gold Jewellery Items in Guangdong’s Jewellery Market, the prices of gold jewellery items in the Guangdong market are now displayed in the form of ‘material price + workmanship fee’, in contrast to the traditional method of pricing on a ‘per gram’ basis. The practice of de-linking gold prices from workmanship fees has also been adopted in a number of other cities, including Shanghai and Chengdu. Conversely, in Fujian province, with the adoption from 1 May 2015 of a new set of gold jewellery pricing rules by the Gemmological Association of Fujian, the practice of price and fee decoupling has been reversed. In other words, material costs and workmanship fees for gold jewellery items are now no longer marked separately in Fujian.

The GB 11887-2012 Jewellery - Fineness of Precious Metal Alloys and Designation came into effect on 1 May 2013, superseding GB 11887-2008 Jewellery - Fineness of Precious Metal Alloys and Designation. The new standard has removed specific provisions relating to hazardous elements and the testing of hazardous elements, while incorporating a number of additional relevant standards issued subsequently.

The GB/T 18781-2008 Cultured Pearl Grading, which supersedes GB/T 18781-2002 Cultured Pearl Grading, came into effect on 1 May 2009. This standard specifies text descriptions for quality factors and grades of cultured pearls. In terms of the overall standard, requirements are laid down for the six freshwater cultured pearl quality factors of colour, size, shape, lustre, smoothness and the thickness of pearl layers (in the case of nucleated pearls).

The national standard GB/T 23885-2009 Jade Grading, drawn up by the National Gems & Jewellery Technology Administrative Centre of the Ministry of Land and Resources, came into force on 1 March 2010. This standard provides clear definitions and classification rules for ground and polished natural jade, both inlaid and non-inlaid. The GB/T 29155-2012 Transparent (Colourless) Jade Grading, in force since 1 October 2013, applies similar rules to transparent colourless jade.

From 1 October 2011, the QB/T 4182-2011 Ornament Marking has applied to domestic sales of jewellery, precious metal jewellery and ornaments made up of inlaid jewellery, jewellery, and precious metals. It specifies the basic principles, content and requirements of ornament markings.

The No. 1 Revision of the GB 11887-2012 Jewellery - Fineness of Precious Metal Alloys and Designation came into force on 4 May 2016. The revision covers the following aspects: Chapter 4: Fineness Range and Appendix B.1 Description Method, replacing “999 (gold, platinum, white gold, palladium and silver” with “pure (gold, platinum, white gold, palladium and silver”; Chapter 7: Designation Rules, adding to these rules “no other content may be added before or after the designation” to the designation details of the first item of precious metal jewellery and “the provisions of Designation Basis Table 1: Precious Metal Materials and Fineness”.

The national coloured gemstones grading standards GB/T 32863-2016 Ruby Grading and GB/T 32862-2016 Sapphire Grading both came into effect on 1 March 2017. These standards specify the grading rules for unenhanced or heat-treated natural rubies and sapphires that are not mounted or set, faceted, ground or polished, and mainly apply to their grading in terms of colour, purity, quality and lustre.

The GB/T 34098-2017 Quartzose Jade—Classification and Nomenclature has been in force since 1 February 2018. This standard classifies quartzose jade into three major categories and seven varieties and gives the definitions for the basic name, trade name and other technical terms of quartzose jade.

Five national standards on jewellery came into force on 1 May 2018. The GB/T 16552-2017 Gems: Nomenclature, the GB/T 16553-2017 Gems: Testing, and the GB/T 16554-2017 Diamond Grading superseded the earlier 2010 versions; the GB/T 34543-2017 Yellow Diamond Grading is China’s first grading standard for coloured diamonds and sets detailed rules for yellow diamonds on the levels of scope, terminology, definition, grading, and so on; while the GB/T 34545-2017 Emerald Grading, a new standard for the grading of coloured gemstones, mainly uses colour, purity, quality, cut and lustre as testing standards.

Content provided by Picture: HKTDC Research
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