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China challenges India's cutting edge in diamonds

June 15, 2009 10:49 IST

India is beginning to face new competition in the diamond business from China. Despite having no traditional connections to the diamond business, China has over two decades emerged as a formidable power in the trade.

It is today the world's largest diamond processing centre after India.

According to Chinese government statistics, the country's diamond processing trade averaged 3 million carats a year between 2003 and 2007. There are now over 80 diamond processing trade enterprises in the country, employing close to 30,000 workers.

A recent KPMG report predicted that by 2015, China's share of the global processing business would be 21.3 per cent to India's 49 per cent (India currently accounts for 57 per cent).

China, however, remains more expensive than India. Estimates put the cost of processing one carat in China at $17 compared to $10 dollars in India.

But, Chinese labour is considered more skilled and disciplined than its Indian counterpart, with higher productivity off-setting the cost differential.

The diamond trade in China received a major boost in 2006 when the government scrapped VAT on imported roughs and reduced taxes on polished diamonds from 17 to 4 per cent. In the latter half of 2006, China's refined diamond imports jumped 194 per cent year on year, to $147 million, according to the Shanghai Diamond Exchange.

The Indian-owned firm of Jayam NV, a diamond firm here in Antwerp, has a factory in China, in Shandong province (and another in Thailand). "We only deal with sawables and higher end products," said its owner, Mihir Shah, by way of explaining why the company does not manufacture in India. "The kind of expertise we need is missing in India."

He added: "The Chinese workforce is simply more disciplined and productive, perhaps because of their near universal rates of literacy."

Abraham Pinkusewitz, a Jewish diamantaire, agrees. Like Jayam, Pinkusewitz Diamonds also chose to open its factory in China over India. "You only need to go to the two countries to see the difference," he said. "India's workshops are small and not so efficient. The scale and professionalism of Chinese factories is far superior."

Pallavi Aiyar in Antwerp
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