China’s back in the bling game! Indian diamond traders cheer as sales sparkle again

China has resumed purchasing diamonds cut and polished in India after nearly two years, boosting rough diamond prices and lifting hopes of Indian diamond traders. Chinese buyers bought diamonds from India to replenish their stocks at the Hong Kong International Jewellery Show during March 4-8.

Chinese buyers had only bought gold in the last two years. This has impacted India's diamond exports which counts China as its second-largest export market after the US.

Chinese purchases of Indian diamonds augurs well for Surat, India's diamond cutting and polishing hub, as it is expected to reboot production and generate jobs. The diamond city has been languishing for the past two years in the absence of orders from China.

India cuts and polishes nine out of 10 natural diamonds sold in the global market. "Buyers were cautious and they mainly bought small diamonds. We are happy that Chinese buyers have started showing interest," said Vipul Shah, managing director of Asian Star, a diamond exporter from India. "We can see green shoots of recovery. Hopefully, FY26 will be better for Indian diamond exports."

Traders said the mood among buyers was comparatively much better at last week's jewellery show in Hong Kong than at the Jewellery & Gem World Hong Kong show last September.

Chinese consumers had turned conservative since the pandemic, shifting to spending on gold believing that the value of the yellow metal appreciates at a faster pace than diamonds.

India's diamond exports to China are routed through Hong Kong. In FY24, Indian diamond exports to Hong Kong fell by 28%. They plunged 60% this fiscal year till February.

Early signs of recovery in Chinese demand are already causing a spurt in rough diamond prices.

"We are cautiously optimistic about the recent uptick in diamond demand because we are not sure how long it will last. Diamond prices are being quoted 3-4% higher which we believe is a bit premature. Our members have observed at the recently concluded Hong Kong fair a lot of enquiries from buyers of mainland China," said Kirit Bhansali, chairman of the Gem & Jewellery Export Promotion Council. The diamond exporters pointed out that the global market dynamics have changed compared to previous years.

"As compared to the September 2024 fair, the recently concluded Hong Kong Jewellery show performed better, signalling a potential stabilisation in the market. However, the industry seems to be settling into a new normal, with the turnover of jewellery companies now approximately 30% to 40% lower than in previous years. This recalibration of the market size requires stakeholders to adjust expectations and strategies accordingly," a GJEPC executive said.