China’s diamond market is experiencing significant challenges as consumers increasingly favor gold. This shift in preference was highlighted by a viral hashtag, “diamonds collapse as gold goes crazy,” which garnered nearly 100 million views on Chinese social media earlier this month. Many diamond owners have shared their regret, with one Weibo user lamenting, “I bought a diamond ring, but since the wedding, it has been sitting in its box gathering dust. Equating diamonds with love is just marketing brainwash.”
Despite being the world’s second-largest consumer diamond market, China’s interest in diamonds has waned, while demand for gold has surged. Analysts attribute this trend to economic uncertainties. “Chinese consumers are looking for ways to preserve their wealth amid weaker confidence,” explained Gary Ng, a senior economist at Natixis. “Gold carries the dual nature of consumption and investment, with better liquidity and more transparent prices than diamonds.”
China’s diamond-jewelry market grew from 1.5% of the global market in 2000 to 13.4% by 2014, but this growth plateaued and declined to 10.2% by the end of 2022. Between 2021 and 2022, diamond sales in China dropped by 11.2%, the steepest decline among major global markets surveyed by De Beers.
Paul Zimnisky, an independent diamond analyst, noted that global volatility in diamond demand has affected consumer sentiment, especially compared to the more stable gold market. He estimated that the diamond market in Greater China, including Hong Kong, Macau, and Taiwan, fell from $13.7 billion in 2021 to $12.8 billion in 2023.
Lab-grown diamonds are also eroding the market share of natural diamonds, said Lai Ming Yii, a research manager at Daxue Consulting. “This affordability is particularly attractive to younger consumers who are price-sensitive but still desire quality and status symbols,” she added.
Chinese consumers purchased 308.9 tonnes of gold in the first quarter of this year, a 5.9% increase from the same period in 2023, according to the China Gold Association. The price of gold reached $2,377 an ounce as of Friday, reported the World Gold Council.
Central banks, including China’s, have been increasing their gold holdings to hedge against geopolitical risks and market volatility. The People’s Bank of China has continued its buying spree, with official gold reserves rising for the 18th consecutive month, now totaling 2,264 tonnes.
Jewelry retailers have felt the impact of these shifting consumer preferences. Hong Kong-based Luk Fook reported a 21.4% drop in revenue from diamond sales in 2023 and is now focusing on promoting gold products. Similarly, Chow Sang Sang noted a decline in diamond jewelry sales but saw a 21% increase in same-store sales driven by gold demand.
Not all companies have fared well. Chinese diamond ring brand I Do filed for bankruptcy restructuring in January 2023, and the DR Corporation saw its profits plummet in the first half of last year. A diamond salesman recounted to Phoenix Media that his team’s sales inquiries dropped significantly from about 150 a month to just 20-30, resulting in only occasional orders.
Despite these challenges, some companies remain optimistic about the future of diamonds in China. Harry Winston opened its eighth Chinese store in Hangzhou in February, and De Beers cited “encouraging prospects for diamond jewelry sales” in its report, pointing to demand from China’s ultra-rich and potential in lower-tier cities.
China’s luxury jewelry sales grew by 17% in 2023, according to PwC China, which identified it as a high-potential segment in the personal luxury market. “I believe that China and India remain the diamond and jewelry industry’s most exciting markets,” said Zimnisky, highlighting their massive populations and fast-growing middle classes. “Jewelry demand is highly correlated to the health of the economy. There will be ups and downs, but the overall longer-term trend remains favorable.”
