Jewellery exporters feel heat of Chinese slowdown.

Indian gems and jewellery exporters have already started feeling the heat of Chinese slowdown. The Chinese offtake of Indian diamonds both directly and through Hong Kong has declined in the past three months.

Due to its lower duty structure, Hong Kong serves as a hub for the gems and jewellery trade in the region and is the second largest importer of Indian gems and jewellery. China is the largest buyer of Indian diamonds through Hong Kong and it buys them both for manufacturing and retail. A higher duty structure has restricted the direct exports of Indian goods to China, though the country is among the top 20 export destinations for India.

As per the data made available to Financial Chronicle by Gem and Jewellery Export Promotion Council (GJEPC), in the past three months, the Chinese offtake has significantly declined due to economic slowdown in the country.

Indian exports to Hong Kong were down by 29 per cent from $868 million in April 2011 to $615 million in April this year and in May it declined 12.60 per cent from $923 million to $806 million. However, due to the Hong Kong jewellery show in June, there was a marginal rise in exports of four per cent in that month.

On the other hand, in the month of June, Indian direct exports to China, though comparatively smaller in size, declined 74 per cent. “The slowdown has just started affecting Indian exports. We anticipate that it will sustain in the coming months as well,” said Sabyasachi Ray, executive director, GJEPC.

“Considering the slowdown in the consumer market in China, it looks like the coming months will be much slower. If there is some drastic reduction in both rough and polished diamond prices, we might see some offtake by September-October. Or else, it is going to be tough for the Indian exporters,” said Anup Zaveri, partner of Polar Star and co-convenor of diamond panel of GJEPC.

“In the past two months, the company’s exports are seeing around 50 per cent drop in offtake by China. Due to slower retail sales, the importers also have increased the credit period from 120 days to 180 days,” he said.

For Indian exporters, who are already hit by lesser offtake by the US in the recent years, dip in Hong Kong exports is a double blow. Both, in May and June the exports to the US were lower than their year ago levels.

Mehul Choksi, CMD of Gitanjali Gems, finds that the enthusiasm about the China growth story and the burgeoning gold and diamond market is not there. However, Choksi is convinced about the medium and long-term growth prospects in the country.

Source : wrd.mydigitalfc.com