Started late with huge potential, China has been a contested market for global jewellers. Under the influence of economic slowdown and China’s anti-corruption policy, the performance of the jewellery industry in the mainland was far from satisfying last year. Principal business performance of most of the listed jewellery companies was disappointing, and it is said that the golden age of the jewellery industry in China has passed. Hong Kong Jewellery has interviewed the managing director of 21GEM, one of the most influential Chinese jewellery media and information platforms in mainland China, Fan Qinfen for an overview of the market in 2014 and the outlook of its developments.
As a veteran in the jewellery industry, Fan is experienced in conducting market research and forecasting gemstone price trends. She has organised numerous China delegations to study overseas market, and has assisted foreign investors to visit China.
HKJM: Hong Kong Jewellery
FAN: Fan Qinfen
HKJM: How was the jewellery market in China generally last year?
FAN: I would say by entering into a period of change, the heyday of China’s jewellery market has ended. Regarding last year’s market situation, the principal business of listed jewellery companies had experienced a plunge, many of them sought for other channels to diversify sources of income. For instance, Chow Tai Fook has ventured into the petroleum business to drive growth. Also, since 2014, with the strong return of the US dollar, the economic slowdown, and money withdrawals from the market, the sustained decline in the prices of global commodities, gold, silver and other hard currencies has put the country into a relatively weak position. The exchange quotation on 27 February 2015 by Shanghai Gold Exchange (SGE) revealed that the gold consumption volume in China over the first three quarters in 2014 fell year-on-year by 205.76 tons or 21.42 percent to 754.82 tons. Despite all these, the currency war did have favourable impact on the industry last year. Specifically, the exchange rate of Japanese yen has dropped dramatically since 2012, bringing a remarkable price advantage to the jewellery products from Japan. Jewellers in Japan took the chance to promote their products to the buyers from China at exhibitions, in a hope to boost the buying moods of consumers. In my opinion, however, this effect will not last long. Furthermore, at the beginning of 2015, many Chinese jewellers decided to source jewellery in Europe due to the weak euro.
HKJM: Some jewellers attributed the slowdown of jewellery industry in China to the anti-corruption policy. What do you think? How could the development of China’s jewellery industry be revitalised in the future?
FAN: In general, the development of economy has ups and downs. It’s normal for the market to go down after reaching a high level. China’s economy will not always keep going up in a high speed. For the jewellery market, the recent slowdown was a market adjustment to the change of economy. Combined with the influence of anti-corruption policy, the statistics have presented a relatively real consumption which is required by the industry’s long-term prosperity. As high-end jewellery products accounted for a large proportion in the market previously, the polarisation of jewellery consumption was intensified. However, as a healthy society, the main force of consumption is basically from the middle class so the sustained consumer purchasing power will determine the industry’s future development. As Goldman Sachs said in a report, the anti-corruption campaign in China has considerably affected its economy but for a short period of time. It will benefit the society in views of the improvement of expenditure efficiency, the relaxation of social tension, and the increase of labour productivity.
China has a large population base and a vast market where there are around 18,000 jewellery retailers operating some 64,000 outlets. Most of them are regional, small-scale, with weak brand awareness, while the market is less concentrated. Hence, it has a vast potential for further development. Moreover, about 60 percent of the consumption growth on luxury products in China was achieved in second- and third-tier cities such as Zhuhai, Shaoxing, and Wuxi where consumers will show a higher consumption capability for high-end jewellery alongside further market development. These markets will be the future for jewellers. The rural land reform which will unleash the consumption potential in rural areas and the liberalisation of tariff policy in Shanghai free trade zone which will further open the China market to some extent, are other stimuli to the growth of China’s jewellery industry.
HKJM: How do you see the status of various types of jewellery in China?
FAN: Comparing to other countries, China market is special due to the decades-long vacuum period of development. New jewellery products in China will usually record brisk sales and then return to normal. For instance, two years ago diamond jewellery received overwhelming responses and now it is steadier now. Used to account for a large proportion in gift shopping sales, gold and diamond jewellery have suffered sales decline owing to the anti-corruption policy; whereas the market of gemstone jewellery has been picking up gradually due to its comparatively small market share. For semi-precious gemstone jewellery, it may need more time to be accepted by consumers in China. A few years ago the price of jadeite jewellery rose like a rocket, it now remains more stable.
HKJM: How do Hong Kong jewellers fare in China? What should they do to adapt to the China market better?
FAN: According to the Hong Kong Trade Development Council (HKTDC)’s survey at 10 cities in the Mainland, respondents widely believed that jewellery products from Hong Kong have unique brand style, trendy designs, and innovative ideas. Eighty percent of them thought Hong Kong jewellery brands are medium- to high-end, and 30 percent considered them as high-end. Generally, Hong Kong jewellery has won a good image among consumers in the mainland. In my viewpoint, jewellers from Hong Kong know Chinese consumers better and have culture connection advantage when compared to foreign brands. Those Hong Kong jewellery brands are suitable to develop medium- to high-end products in China. With the help of mainland consumers’ awareness and favour to them, jewellers from Hong Kong can explore different materials, styles, designs, and price ranges, expanding into other market segments and striving for a bigger market share.
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