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Hong Kong’s Rise to Diamond Fame

Hong Kong’s Rise to Diamond Fame

Hong Kong is an important diamond consumer market gateway to China’s consumer market. It is also the gateway of the diamond and jewelry manufacturing facilities in China heading to the global markets.

 

Hong Kong has a long history as a trading center, but it was not until the 1970s that it developed into an important economic and banking center and became a major trading hub powerhouse.

Trading History

Hong Kong’s modern day diamond trading history dates back to the 1950s. At the time, the then-British colony was making its first strides as a modern trading center in the post-WWII era. Neighboring People’s Republic of China was ruled strictly according to communist doctrine, and trade of luxury goods or providing manufacturing for other countries was far from how it viewed itself.

Despite that, the large traffic of businesspeople from the West and the rising Japanese economy, provided it with the start to provide goods from the Orient to visitors and services to international firms looking for low-cost labor. Quickly, the local services expanded from low-cost items to higher end and luxury products. These included, among other things, diamond jewelry.

In 1959, local diamond traders formed the Diamond Importers Association (DIA), a nonprofit organization that played a role in raising Hong Kong’s position as the diamond center in Asia.

Establishing an Exchange

The gradual opening of China to the global economy, specifically the development of outsourcing factories in special industrial zones near the border with Hong Kong in the 1980s, was an important step forward for Hong Kong’s diamond trade. By 1985, diamond manufacturing and trading was significant enough to establish a local diamond exchange, the Hong Kong Diamond Bourse (HKDB).

At the time, the Asia Pacific region emerged as an important market for diamonds and local residents affluent enough to create an international hub in Hong Kong. In June 1987, the HKDB became the 20th member of the World Federation of Diamond Bourses (WFDB).

Relationship with China

The diamond manufacturing facilities that operated in Hong Kong at the time focused on polishing melee to one carat rounds. However, that changed in the late 90s. The transfer of sovereignty from the United Kingdom on July 1, 1997 to China served the local diamond industry well. The growing closeness to China further opened exports to the Red Giant, and resulted in more diamond manufacturing facilities being established there. The downside was that the lower cost labor in Mainland China made polishing in Hong Kong uneconomical, and today there are no known polishing plants in Hong Kong.

The two local diamond organizations, DIA and HKDB, gave rise to a third one, which in many ways incorporated the two together – the Diamond Federation of Hong Kong. Since 2000, the DFHK is focused on building and maintaining Hong Kong as the “World Diamond Centre”.

The consumption and trade of diamonds and jewelry through Hong Kong are typical of Hong Kong’s economy, the world's largest re-export center, according to the local government. With low taxation and free trade, Hong Kong is a magnet for companies seeking to trade with China, cater to Hong Kong’s tourist traffic and affluent residents, and as a central trading location for the entire Far East.

As an important hub, the five large local trade fairs, especially the Hong Kong International Jewellery Show held in March and the Hong Kong Jewellery & Gem Fair in June and September, are among the largest, busiest and most important trade fairs for the global diamond and jewelry industry.

Hong Kong Today

As of December 2014, nearly 400 jewelry manufacturing companies operated in Hong Kong. More than 2,000 exporters were active, employing together nearly 13,000 people, according to the Quarterly Report of Employment and Vacancies Statistics. 

More than a quarter (27%) of the precious jewelry exports were to the U.S. in 2014, rising to 30% in the first half of 2015. More than 16% of exports were destined to the EU in 2014, another 12% to Switzerland and 11% to UAE, according to the Census and Statistics Department.

There are no major diamond polishing facilities anymore in Hong Kong. Most work today focuses on repair and re-polishing diamonds.

Domestically, several of the largest jewelry chains have expanded greatly by opening stores in Mainland China and Macau, including Chow Tai Fook, Chow Sang Sang and TSL. Chow Tai Fook, a De Beers Sightholder, recently expanded into the American market when it purchased Hearts on Fire.

Historic Auctions

Another important aspect of Hong Kong’s diamond center are the large diamond auctions of high-end diamonds held by the largest auction houses, Sotheby’s and Christies. Known for their strong attendance and large attention, some of the most noteworthy diamonds were sold in Hong Kong, including The Star Of China, a D / IF Briolette diamond weighing 75.36 carats that sold for $11.15 million to an Asian private collector. This sale was a world auction record for a briolette diamond.

Another record breaker was a 118.28 carat D / FL Oval-shaped diamond that sold for $30.6 million, a world record for any white diamond at auction and the biggest diamond ever sold at auction.

Trade in 2014:

Polished diamond imports $19.6 billion / 20.1 million carats

Polished diamond exports $13.7 billion

Rough diamond imports $2.2 billion / 13.8 million carats

Rough diamond exports $2.3 billion

Market:

De Beers Sightholders: 4

Alrosa Contract clients: 3

 

The views expressed here are solely those of the author in his private capacity. None of the information made available here shall constitute in any manner an offer or invitation or promotion to buy or to sell diamonds. No one should act upon any opinion or information in this website (including with respect to diamond values) without consulting a professional, qualified adviser.

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