CHINA Market Updates 2018 A JNA Publication
CHINA Market Updates 2018
Director Irene Foo Publisher & Editor-in-Chief Christie Dang
EDITORIAL Editor Olivia Quiniquini Managing Editor Sze Man Young Assistant Editors Bernardette Sto. Domingo, Dodo To Reporter Elmo Wong Senior Researcher William Yick Administrative Executive Tingo Ko
ADVERTISING Assistant Director Christine Sinn Advertising Manager Tina Hui Account Managers Jennifer Chan, Karen Lam Sales Administrator Cat Lee
MARKETING Assistant Marketing Manager Winkle Yim Senior Marketing Executives Althea Long, Grace Tam Online Specialist Pansy Lo
CIRCULATION & SUBSCRIPTION Senior Circulation Executive Lonita Hui
PRODUCTION Senior Production Manager Jessie Quek Senior Graphic Designer Eva Kam Advertising Administration Eva So
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CONTENTS
OVERVIEW5 Emerging market set for further growth
THE SOURCE7 The world’s major jewellery producer
RISE OF THE10 MILLENNIAL Millennials: threats or opportunities?
MARKET OPPORTUNITIES13 The world’s strongest growth engine OVERVIEW
Emerging market set for further growth
hina, the world’s biggest market for platinum jewellery, also leads global growth in demand for gold, diamond and coloured gemstone jewellery. According to a market study by the National Gemstone Testing Centre, China’s demand for diamond jewellery is estimated at 62 billion yuan (about US$9.7 billion), with a projected annual growth rate of 5 to 10 percent over the next five years. CDespite the economic downturn in recent years, China remains one of the world’s most lucrative jewellery markets, supported by a growing middle-class and higher-income groups. The rise of millennials also provides new opportunities for investors from all regions. In this special supplement, JNA presents the latest updates on China’s jewellery market for enterprises wishing to explore business opportunities in this vast and promising sector.
AT A GLANCE
Platinum China is currently the world’s biggest market for platinum jewellery, with annual consumption estimated at 1.5 million ounces, translating into about 12 million pieces of platinum jewellery a year
Gold China lead global consumption of gold for a fifth consecutive year in 2017 with an annual consumption of 1,089 tonnes, representing an increase of 9.4 percent from the previous year. Consumption of gold jewellery went up 10.35 percent to 695.5 tonnes while that of gold bars rose 7.28 percent to 276.4 tonnes. On top of traditional plain gold items, gold jewellery manufacturers have recently been introducing more fashionable designs in 18-karat gold and marketing them as affordable luxury items for the growing young-consumer market, which is looking for fashionable and daily-wear jewellery
Diamonds Demand for diamonds in China is estimated at about 62 billion yuan (about US$9.7 billion), with a projected annual growth rate of 5 to 10 percent over the next five years
Bridal market Every year, over 11 million newlywed couples are recorded in mainland China, providing huge potential for the bridal jewellery segment
CHINA MARKET UPDATES | 5 | 2018 OVERVIEW
In 2017, China’s total imports of polished diamonds reached 2.43 million carats, rising 32.8 percent from the previous year; in value terms, this amounted to US$2.515 billion, a 23.4 percent increase over 2016. This represented a record high level of polished trading at the Shanghai Diamond Exchange (SDE), figures from SDE showed. While the total volume of diamonds traded at the exchange in 2017 was 492.587 million carats, up 59.30 percent from the previous year, the value of diamond transactions reached US$5.344 billion, an increase of 19.96 percent from 2016. As of December 31, 2017, SDE had 389 members, including 233 foreign members that accounted for 60 percent of the total.
Imports of polished diamonds at Shanghai Diamond Exchange (in US$100 million)
25 22.36 20.33 20.37 20 17.30 17.48 15.84
15 13.11
10 6.99 5.35 4.40 5 2.10 1.16 0.31 0.64 0.77 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Shanghai Diamond Exchange
CHINA MARKET UPDATES | 6 | 2018 THE SOURCE
THEmajor jewellery WORLD’S producer
China’s abundant supply of natural and human resources and its relatively competitive production costs have attracted local producers as well as investors from abroad to set up manufacturing facilities on the mainland to cover demand from both domestic and export markets. At present, China is a major source of freshwater pearls. The country also produces gold and a wide variety of natural coloured gemstones, accounting for a significant portion of global supply. With production facilities concentrated in the southern part of the country, cities such as Shenzhen and Guangzhou (particularly its Panyu district) in Guangdong Province have become major trading hubs for global jewellery players.
CHINA MARKET UPDATES | 7 | 2018 THE SOURCE
Shenzhen
According to the Shenzhen Gold & Jewelry Association, as of September 2017, the total value of jewellery manufacturing and processing in Shenzhen reached approximately 150 billion yuan (about US$23.4 billion), and the wholesale and retail trade volume was approximately 45 billion yuan (about US$7 billion).
Quick facts on Shenzhen’s jewellery industry
Registered jewellery companies >5,000
Individual business operators Total value Wholesale >15,000 of jewellery & retail value production Jewellery wholesale markets US$7 billion ~30 US$23.4 billion
Workforce in the jewellery industry >150,000
Shenzhen-based companies’ forecast on their prospects in 2018
Very Positive 20%
Relatively Positive 63%
Others 17%
01020304050607080
Shenzhen-based companies’ outlook on the city’s jewellery industry in 2018
Very Strong 23%
Relatively Strong 57%
Relatively Weak 20%
Pessimistic 0%
01020304050 Source: Shenzhen Gold & Jewelry Association
CHINA MARKET UPDATES | 8 | 2018 THE SOURCE
Freshwater Pearls
China is the world’s largest producer of freshwater pearls, accounting for over 90 percent of global production. In addition to the country’s major freshwater pearl-producing area in Zhuji in Zhejiang Province, other cultivation areas include Jiangsu, Shanghai, Anhui, Jiangxi, Hunan, Hubei and Sichuan.
Quick facts on Zhuji’s pearl industry (all figures are estimates)
Freshwater pearl aquaculture area 380,000 acres
Number of pearl farmers >3,000
Annual output of freshwater pearls 73 percent of global production
80 percent of China’s total production
Number of pearl manufacturing operations 315
Number of trading companies 162
Annual production of pearl jewellery >30 million pieces
Value of annual output ~5 billion yuan (around US$785 million)
Source: Guangdong Gems & Jade Exchange
Gold According to the China Gold Association, China's total production of gold in 2017 was 426.14 tonnes, a decrease of 6.03 percent compared to the previous year. In 2017, the actual consumption of gold in the country was 1,089.07 tonnes, an increase of 9.41 percent compared to 2016. Industrial and others 90.18 tonnes Gold coins (up 19.63%) 26 tonnes (down 16.64%) Gold jewellery 696.50 tonnes (up 10.35%)
Gold bars Gold jewellery 276.39 tonnes (up 7.28%) Gold consumption Gold bars in China (1,089.07 tonnes) Gold coins
Industrial and others
Source: Ministry of Natural Resources of the People's Republic of China
CHINA MARKET UPDATES | 9 | 2018 THE RISE OF THE MILLENNIAL
MILLENNIALS: threats or opportunities?
The rise of the millennial market segment has reshaped the world’s retail landscape. Some studies estimate that there are around 400 million millennials in mainland China, five times more than the 80 million people in the US who were born between 1982 and 1998. This new and powerful generation has already started to influence China economically and socially. On the retail front, this group of young and energetic consumers has prompted a radical shift in jewellery retail operations. More new products, marketing initiatives as well as transaction and payment methods have been introduced in the jewellery market in order to seize the new opportunities presented by the millennial generation.
Millennials
• Prefer personalised service, products and brands
• Lead an active and entertaining lifestyle
• Are filled with anxiety
• Rely heavily on mobile devices and technological advances
CHINA MARKET UPDATES | 10 | 2018 THE RISE OF THE MILLENNIAL
AT A GLANCE
• According to De Beers, China has the world’s fastest-growing diamond jewellery sector, with a 10-year compound annual growth rate of 12 percent. Demand is driven largely by millennials and the bridal market. • The millennial generation (aged 18 to 29) acquires diamond jewellery at a considerably higher rate than older women (aged 45 to 54). • Online shopping has become a major habit of millennials in China. Studies show that from January to September 2017, China’s online retail sales reached 3.6826 trillion yuan (about US$579.13 billion), growing by 29.1 percent over the same period in 2016. Meanwhile, data from the Nielsen Consumer Confidence Index indicate that Chinese consumers’ confidence index has been higher than the global average for four consecutive years. • Consumers born between 1980 and 1989 (Post-80s) and between 1990 and 1999 (Post-90s) spend a lot of time on social media platforms and are vulnerable to the influence of friends and colleagues on the WeChat community and key opinion leaders (KOLs) on various social networks. Today, more and more retailers and brands use social networks to sell their products. Some have even launched their own “micro shop” on these platforms.
Profile of diamond jewellery acquirers in China (% of age vs total female population in 2016)
Diamond jewellery acquirers
39 49 12
Female population
30 43 27
020406080 100
Age 18-29 Age 30-44 Age 45-54
Source: De Beers’ Diamond Insight Report 2017
Internet usage across different generations and cities in China in 2017
Post-00s* 11.8% 35.2% 18.0% 35.1%
Post-90s* 14.9% 36.1% 18.1% 31.0%
Post-80s 15.1% 32.8% 19.2% 32.9%
Post-70s and older 12.7% 31.6% 20.1% 35.6%
All Internet users 14.4% 33.6% 19.0% 33.0%
020406080 100 120 1st-tier cities 2nd-tier cities 3rd-tier cities 4th-tier cities and others
Source: QuestMobile TRUTH China Mobile Internet Database, December 2017 *Totals may not add to 100 due to independent rounding
CHINA MARKET UPDATES | 11 | 2018 THE RISE OF THE MILLENNIAL
The use of Apps is more common among younger Internet users in China. On average, each post-00s consumer (born between 2000 and 2009) uses 21.9 Apps on his/her device(s), while each post-90s uses 20.5 Apps.
App usage among Internet users in China
Number of Apps 25 Dec 2016 21.9% Dec 2017 20.5% 19.6% 19.4% 20 17.0% 15.8% 15.7% 14.6% 13.4% 15 12.3%
10
5
0 All Internet users Post-00s Post-90s Post-80s Post-70s and older
Source: QuestMobile TRUTH China Mobile Internet Database, December 2017
Top 10 international luxury brands preferred by Chinese millennials
1 Cartier 6 Swarovski
2 Tiffany 7 Van Cleef & Arpels
3 Bulgari 8 Chopard
4 Piaget 9 Chaumet
5 Be Beers 10 Harry Winston
Source: NGTC’s Whitepaper on China’s Cultural Consumption Market in 2016-2017 (Jewelry & Wrist Watch Section) Diamond Index Report
CHINA MARKET UPDATES | 12 | 2018 MARKET OPPORTUNITIES
THE WORLD’S strongest growth engine
Despite the downtrend in China’s GDP growth in recent years, the country remains the world’s biggest growth engine in the jewellery industry. Latest figures from the World Gold Council’s Gold Demand Trends show that jewellery demand in China grew by 7 percent in the first quarter of 2018, reaching a three-year high at 187.8 tonnes. De Beers’ Diamond Insight Report 2017 meanwhile notes that China’s diamond jewellery sector has more than tripled in size within a decade, and is the fastest growing in the world. For platinum, the decline in Chinese jewellery demand has been reversed and turned into moderate growth, says the Platinum Guild International (PGI) in its Platinum Jewellery Business Review Q4 2017.
CHINA MARKET UPDATES | 13 | 2018 MARKET OPPORTUNITIES
Gold jewellery
The week-long Chinese New Year holiday, which coincided with Valentine’s Day, boosted sales of gold jewellery, including Year of the Dog-themed designs. Fashionable designs in 18-karat gold (K-gold) and 3D hard gold continue to grow in popularity among consumers in China. The World Gold Council’s report states that consumers are increasingly tempted by the innovative, fashionable and non-traditional designs offered in these categories. Jewellery in 22-karat gold, which benefit from looking like 24-karat items without being as soft, is also gaining momentum in the market.
China gold jewellery demand Q1 2017 Q1 2018 % change
Tonnes 175.6 187.8 +7
Source: World Gold Council’s Gold Demand Trends Q1 2018
Platinum jewellery According to PGI, the jewellery category is enjoying moderate growth in China following a recent downturn. High-end jewellery is gaining momentum as living standards in China improve. 74% of diamond jewellery pieces sold in China in 2016 were in platinum
Source: De Beers’ Diamond Insight Report 2017
CHINA MARKET UPDATES | 14 | 2018 MARKET OPPORTUNITIES
Diamond jewellery Chinese Diamond Jewellery Demand (US$ billion) 9.7 10
8
6
4 3.1
2
0 2006 2016
Type of diamond-only jewellery acquired (% of all pieces)
2016
49 28 13 10 Rings
Necklaces / Pendants 2014 Earrings
Other 67 18 5 10 (Inc with other precious stones)
020406080 100 Source: De Beers’ Diamond Insight Report 2017
According to De Beers, demand for diamond jewellery in China had been dominated by solitaire designs, which accounted for 81 percent of pieces sold in 2016. Necklaces and earrings however have gained market share in the total number of diamond jewellery pieces sold in China, and this trend is likely to continue with repeat purchases.
Value and volume of diamond jewellery purchased in China in 2016 (%)
50 43
40 37 37
30 30 26 26
Value 20 Pieces
10
0 Tier 1 cities Tier 2 cities Tier 3 cities Source: De Beers’ Diamond Insight Report 2017
CHINA MARKET UPDATES | 15 | 2018 MARKET OPPORTUNITIES
In a vast country with a population of more than 1.3 billion, consumer behaviours and buying preferences can differ from city to city. In China, demand for daily wear and fashionable jewellery in the first- and second-tier cities such as Beijing, Shanghai and Guangzhou is robust, whereas purchases of items with a relatively higher investment value such as 24-karat gold jewellery are stronger in the third- and even fourth-tier cities. With demand in the more sophisticated cities reaching maturity, cities in the third tier and below have become a more important driver of growth and contribute the most value.
Major cities in China
Tier 1 (4) Beijing, Shanghai, Guangzhou, Shenzhen
Chengdu, Hangzhou, Wuhan, Chongqing, Nanjing, Tianjin, Suzhou, Xi'an, Changsha, New tier 1 (15) Shenyang, Qingdao, Zhengzhou, Dalian, Dongguan, Ningbo
Xiamen, Fuzhou, Wuxi, Hefei, Kunming, Harbin, Jinan, Foshan, Changchun, Wenzhou, Shijiazhuang, Nanning, Changzhou, Quanzhou, Nanchang, Guiyang, Taiyuan, Yantai, Tier 2 (30) Jiaxing, Nantong, Jinhua, Zhuhai, Huizhou, Xuzhou, Haikou, Urumqi, Shaoxing, Zhongshan, Taizhou, Lanzhou
Source: China Business Network Co Ltd (CBN)
Compared to the US’ diamond jewellery acquisition rate of about 70 percent, only 20 percent of Chinese city dwellers own diamond jewellery, indicating immense untapped market opportunities. The bridal sector is another key area of growth in jewellery demand. More than half of jewellery sales in China is estimated to be wedding-related; and the less developed the cities, the higher the market share. In 2016, there were 11.328 million newlywed couples in China. Demand for bridal jewellery is likely to continue as jewellery items are seen as essential to Chinese weddings. On top of diamond engagement and wedding rings, traditional gold jewellery also plays an important role in Chinese weddings.
CHINA MARKET UPDATES | 16 | 2018 MARKET OPPORTUNITIES
Major jewellery occasions/festivals (gifting and self-purchase)
Jan to Feb Chinese New Year
Feb Valentine’s Day
May Labour Day
20 May (520) Lovers’ Day
Jul Chinese Valentine’s Day
Oct China National Day
11 Nov Singles Day/Double 11 shopping carnival
Source: China Business Network Co Ltd (CBN)
Active jewellery brands in China
Brand Estimated number of outlets in China
Originating from Hong Kong
3DG Jewellery 300+
Chow Tai Fook 2,000+
Chow Sang Sang 400+
Luk Fook Jewellery 1,500+
TSL 300+
Mainland Chinese brands
Caibai Jewelry 20+
China National Gold Group 2,000+
Chow Tai Seng 2,000+
Darry Ring 100+
I Do (Hiersun) 600+
Ideal 500+
Lao Feng Xiang 1,000+
Lao Miao 100+
Leysen 600+
CHINA MARKET UPDATES | 17 | 2018
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