August 17, 2011

Demand From China, US Fueling Diamond Price Surge

Graff CEO, Henri Barguirdjian: Asian Consumers “Understand Now They Have The Affluence To Buy”

Chinese contemporary artist Peng Wei for Graff Diamonds (Image: Robb Report Lifestyle)

Chinese contemporary artist Peng Wei for Graff Diamonds (Image: Robb Report Lifestyle)

Over the past several years, demand for diamonds has soared throughout mainland China as diamond engagement rings have become a “must” for young couples, luxury consumption has surged, and wealthy urbanites have started to see the precious stones as good “portable investments.” Having surpassed Japan to become the world’s second-largest diamond market in 2009, recently Bruce Cleaver, CCO of De Beers, estimated that demand from China, along with the Middle East and India, will collectively account for 40 percent of global diamond consumption, eclipsing long-time leader the U.S. Right now, the U.S. still accounts for 38 percent of total global diamond demand, but China, which accounts for about 11 percent, is catching up quickly.

While business continues to boom in America, as Harry Winston CEO Frederic de Narp recently told CNN, demand for very large diamonds comes “above all from China.”

Of the many major global jewelers looking to take advantage of China’s appetite for diamonds and gold, Harry Winston, which announced plans for rapid expansion in China earlier this year), De Beers, and Britain’s Graff are among the most motivated. As Jing Daily wrote this past May, Graff is taking perhaps the most localized route into the country, deliberately choosing its locations in mainland China, moving quickly to branch into the luxury watch market, and partnering with Chinese contemporary artist Peng Wei on a new advertising campaign. Currently operating two locations in the Chinese mainland, one in Shanghai and the other in Beijing, Graff is readying its first second-tier location in the relatively young but highly lucrative Hangzhou market at the end of the year.

This week, Graff CEO, Henri Barguirdjian told CNBC that demand for diamonds in China — as in many other major markets — is driven not only by a desire to connote status or lifestyle, but also the kind of asset diversification that has pushed more investors into areas like art, wine, and (for wealthy Chinese) overseas real estate. From Barguirdjian’s interview:

LL: Is [diamond] demand intensifying?

HB: Is clearly intensifying a great deal. From the Far East and everywhere else as well. Particularly in America. The affluent client understands the value of the investment in fine diamonds and they are pushing the demand for diamonds even higher.

LL: You recently mentioned to me you are seeing an interesting trend developing on Wall Street where diamonds are now be considered an investment. Can you please explain?

HB: This is something that has never happened before. We are being approached by money managers of very wealthy clients, or the wealthy clients themselves who are all considering investing a small percentage of their portfolio in diamonds. This is something we have never seen in the past. These people never considered diamonds as an investment.

LL: China has always been a big buyer of diamonds. What trends are you seeing coming out of there?

HB: Asian people by culture for the longest time always considered investing in jewelry as a saving for a rainy day. They continue to buy. They only want the finest. They understand now they have the affluence to buy.

Trends in diamond and jewelry buying in China seem to hinge on this last point. In the same way that new Chinese art collectors trek to Hong Kong or scour the globe for paintings by blue-chip Chinese contemporary artists or antiques from the reign of popular ancient monarchs like emperor Qianlong — yet turn up their noses at less established young artists or artifacts from less rosy periods of Chinese history — diamond buyers (who can afford it) in China are fixated on the best and rarest pieces, and they’re willing to pay dearly for them.


Business & Finance / Culture
Tag: china expansion, de beers, diamond, gold... , More
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