Focus

Diamonds becoming an investor's best friend

By Shen Jingting (China Daily)
Updated: 2010-07-12 10:21

Beijingers are seeing diamonds as a good investment besides stock and property markets. [MIKE CLARKE / FOR CHINA DAILY]

If you ask Beijingers about the two things they are most interested in from South Africa, they are likely to say the World Cup and diamonds. With football fans yelling, singing and dancing as they have watched the performances of the 32 national soccer teams in the World Cup in recent weeks, South Africa has certainly grabbed a lot of short-term attention.

But Beijingers' long-term interest is increasingly being snared by the idea of buying diamonds and treating them as investment products.

Diamond sales in Beijing have surged since May, the season along with June that Chinese people typically choose for their weddings. Part of the reason for the surge is the fact that newlyweds were buying more rings containing the sparkling gem.

Beijing's largest diamond marketplace - M&L plaza - saw a 30 percent rise in revenue in May and June, compared to previous months.

Other department stores, such as Gongmei Group, Beijing Caibai and Hiersun Diamond Plaza, have all experienced a revenue rise of between 20 percent and 40 percent.

Buying diamond wedding rings is becoming increasingly important for young Chinese couples, according to research conducted by Hiersun, a leading Chinese jewelry company that claims around 80 percent of Chinese couples in some big cities now buy diamond rings when they tie the knot.

However, industry experts say the sharp rise in diamond sales is about more than a growing trend to buy diamond wedding rings; people are seeing diamonds as a good investment.

Sales officials from M&L said wealthy people from provinces including Shanxi, Zhejiang, Jiangsu and Inner Mongolia are the ones buying up most of the capital's diamonds.

The buyers are especially interested in unset stones.

"I clearly remember a Shanxi client purchasing nine loose diamonds at one time in our store, paying 3 million yuan in cash," said Li Pengcheng, market director of M&L.

Similar purchases of unset diamonds have become common recently, said Li.

A customer chooses diamonds at a jewelery center in Beijing. [Bao Fan / for China Daily]

He said it might be because of the recent sluggish performance of the stock market and property market, causing investors to divert their money into other profitable channels.

Qiao Haitao, marketing director with popdiamond.com, one of the largest diamond transaction websites in China, said a Beijing woman bought a four-carat diamond for 1.28 million yuan in April.

The sale was the largest online transaction nationwide at the time.

The woman later participated in a CCTV interview and said the deal was a good one for her.

"In future, if I mortgage this diamond, it will be mortgaged at its market price, and the price could be far above the figure I purchased it for," said the woman, who is surnamed Yang and who works in the financial industry.

The Beijinger has become known among netizens as "zuiniu wanggou nu" (or most powerful online buying woman).

In total, around $3 billion-worth of diamonds were sold in China last year, according to statistics from the Gems & Jewelry Trade Association of China.

The volume of diamonds bought surpassed that of Japan and took China to second place in the ranking of diamond importers worldwide, behind the United States.

Sales of diamonds suitable for investment - usually those with a weight of more than one carat - are likely to increase by 40 percent this year, the association said. It is possible that more than 100,000 diamonds heavier than one carat will be sold in China within the year, the association estimated.

There are several reasons why Chinese people are increasingly favoring investing in diamonds.

Firstly, the supply of diamonds is limited and diamond prices have rebounded since the global financial crisis started in 2008.