By Wang Jin and Yu Jianqing

The jewelry consumption is on the rise in China. Lots of evidence, from diamond rings that enjoy rocketing sales to jades that are getting increasingly popular, from the increasing number of jewels in pawn shops to the crowded jewel identifying sites, has revealed the growth of the jewelry industry in China. The industry has a trend of surpassing many other businesses.

Why the jewelry industry is big but not competitive?

Before the mid-1980s, the jewelry industry in China is very small, with the annual output value being only RMB 100 million then. Twenty years later, the annual output value has exceeded RMB 140 billion. The job opportunities provided by the industry have increased from 20 thousand 20 years ago to 3 million at present.

According to the statistics, the current annual sales of Platinum has amounted to 1.4 to 1.5 million ounces, the annual consumption of diamonds has exceeded $1.1 billion, the annual demand for gold jewelry has reached approximately 200 tons and the growth rate of jewelry consumption maintained 15 percent in recent years in China. Currently, the annual sales for jade and pearl jewelry, diamond jewelry, and gold jewelry are RMB 40 billion, RMB 30 billion and RMB 30 billion respectively in China, making China an attractive market to the whole world. 

The Chinese jewelry enterprises are now trying to expand the market and they are growing fast. Currently, there are 5000 manufacturers, among which 500 ones enjoy an annual sales volume of over RMB 100 million, in China. The jewelry processing and selling centers in Shenzhen, Panyu and Dongguan are of considerate scales; some special jewelry bases like Sihui, Jieyang, Pingzhou and Ruili Jade Processing and Selling Bases, Zhuji Pearl Producing Base and Wuzhou Artificial Jewelry Producing, Processing and Selling Base have come into form; and some large Jewelry Centers like Yangzhou and Huadu are attracting much attention, gradually exhibiting the cluster effect.

"After over 20 years' development, the jewelry industry has become an important industry in our national economy." said Zhang Longzhi, the vice president of the All-China Association of Industry & Commerce. It is reported that in 2005 the domestic sales of jewelry amounted to RMB 140 billion in China and the industry earned $ 5.49 billion worth of foreign exchange for China through exports. China has become one of the countries that have the highest sales of jewelry. Some foreign experts predicted that China would become one of the most competitive jewelry processing and trading centers in the world in 10 years.

However, brand construction of the jewelry industry in China is lagging behind in spite of prosperity of the industry. "There are a great number of small-scale enterprises producing low-grade and low-price jewelry. The processing techniques are quite outdated, so the products are not delicately processed and designed, lacking distinguishing feature and quality. The brands are at the primary stages. The general level of the industry is still low. These are some bottlenecks for the development of the jewelry industry in China." said Wang Yongqing, the vice general secretary of the Gemmological Association of China.

Wan Zikun, president of the Chamber of Commerce for Jewelry and Precious Metals Industry of All-China Federation of Industry & Commerce, thinks that "Brand construction of the jewelry industry in China developed quite recently. Though China has become the third largest trading country in the world, the internationally famous brands are far from enough; especially in the jewelry industry, there's almost none."

How to create world famous brands? 

In the Pearl Development Forum of China 2006 held in this April, the participants expressed their views on their common concern, namely, why the jewelry industry in China is big but not competitive?

China is a major place of pearl production which enjoyed a rich pearl culture. According to the statistics from the Gemmological Association of China, the pearl output in China amounted to 1500 tons in 2005, accounting for 95 percent of the world's total output. The output of freshwater pearl accounted for 99 percent of the world's total. However, the pearl output value of China only accounted for 8 percent of the world's total. As far as the selling prices are concerned, Chinese pearls are sold at an average price of $113 per kilometer while the average price of French Polynesia pearls (commonly known as "Daxidi" pearls) exceeds $10 000 per kilometer. The price difference is quite striking. The "Hometown of Pearls in China", namely Zhuji in Zhejiang Province, is the major place of freshwater pearl production in China. Most of the pearl enterprises there only export pearls as raw materials or produce medical and health products and cosmetics with the pearls. Few of them exclusively engage in jewelry sales.

Moreover, the jewelry industry is large but not competitive and the lack of world brand leads to low prices and added values. These are the common problems faced by the whole jewelry industry in China. The insiders have pointed out that the jewelry industry in China is suffering from low threshold and techniques. There are a large number of jewelry enterprises in China but most of them are of small scales. Yang Hongbin from Department of Foreign Trade of the Ministry of Commerce said that in 2005 there were approximately 5800 jewelry enterprises in China, among which only slightly over 100 enterprises have an annual export of over $ 10 million, accounting for 1.9 percent of the total number and nearly 90 percent of the enterprises have an annual export of less than $ 0.5 million.

Enterprises are the major force which can carry out the brand strategy and innovation is the foundation for the jewelry enterprises to create world brands. Wan Zikun holds that it is necessary for the jewelry industry in our country to adopt the brand strategy; for the jewelry enterprises, creating their own brand is the best way to gain competitiveness.
At present, many famous foreign jewelry enterprises have entered into China, making the competition even fiercer. However, it is not easy for them to gain large market shares in the Chinese market because it takes some time for the foreign brands to "localize" and thus the Chinese jewelry enterprises could get time and good opportunities to grow. Wan Zikun points out that the Chinese jewelry enterprises need to enhance their research and development capacity, originality in design and technology in manufacture so as to create world brands of China.

The jewelry guild is trying to lead the enterprises to create their own brands. In 2005, the Chamber of Commerce for Jewelry and Precious Metals Industry of All-China Federation of Industry & Commerce launched a series of brand projects for jewelry among its members, named "Famous Gold, Gem & Jewelry Brands in China", "Model Gold, Gem & Jewelry Shops in China", "China Jewelry Brands", and "Special Gold, Gem & Jewelry Bases in China". Wan Zikun said the famous gold, gem and jewelry brands in China could grow into world famous brands and this was also the ultimate goal of the Chamber's project. The Chamber would carry on this project in the later half of the year. Lu Wenjing, the deputy general secretary of the Chamber, said that the Chamber would try to help the enterprises forge their brands.

It takes time to foster brands. To our pleasure, there are over 20 Chinese jewelry brands that are recognized as "Chinese Famous Brands" and "Well-known Brands in China". On the way to fame and success, there will be an increasing number of jewelry brands forging ahead together.