Unveiling the Dynamics from China to India: Significance in the Global Gem and Jewelry Market

  In 2024, the global economy continues to navigate a myriad of ongoing changes that have extended from the previous year. Various factors are poised to significantly impact diverse industries, including the gem and jewelry sector. Notably, the pivotal roles played by China and India serve as crucial variables influencing both demand and supply, thereby shaping the trajectory of the market.

Global Economic Prospects 2024

        Many experts foresee a mix of opportunities and challenges in the economic landscape in 2024. Factors like geopolitical dynamics, technological progress, and changes in consumer behavior will play a key role in shaping economic paths. Analysts predict a delicate balance between growth and uncertainty, where certain regions may experience strong expansion while others face economic challenges.

        Analyzing key economic indicators from International Monetary Fund projections, global economic growth is expected to moderate from 3% in 2023 to 2.9% in 2024. Advanced economies, impacted by stringent monetary policies, anticipate a growth decrease from 1.5% in 2023 to 1.4% in 2024. Despite a decline in price rises across various countries, lingering inflationary pressures persist. Global inflation, which peaked at 6.9% in 2023, is projected to ease to 5.8% in 2024, with a return to the preferred 2-3% range anticipated by 2025. (Economists favor 2-3% inflation for the economy.)

        In the 2024 economic outlook, France, Germany, and the United Kingdom are projected to exceed 2023 GDP growth benchmarks, boosting overall Eurozone momentum. India and Italy are expected to plateau. Widespread inflationary pressures impacting consumer prices show a downward trend in major economies, except for China, where inflation increases slightly from 0.7% to 1.7%. Unemployment rates in many countries closely mirror those of 2023 without significant deviations.
        Furthermore, sustained high interest rates may amplify financial costs, even as inflation significantly moderates. Analysts anticipate that the Federal Reserve will maintain a rigorous monetary policy, keeping rates within the range of 5.25-5.50% until Q3 2024. In the Eurozone, considerable economic slack endures, marked by increased financial tightening, declining exports, weak consumer and business confidence, elevated unemployment, and previous energy price surges weakening the economic landscape. The lack of strong growth catalysts suppresses confidence and consumption.
Impacts on Gem and Jewelry Industry
        Partial economic recovery and uncertainties amid opportunities and challenges characterized 2023. Analyzing various developments, several factors influenced the gem and jewelry sector as follows:
        - Consumer Spending Power: The potential for economic contractions may erode consumer purchasing power. As gem and jewelry are considered non-essential, reduced disposable earnings can dampen demand for such superfluous goods.
        - Currency Exchange Rate: Given the global dispersion of raw material sources, fluctuations in exchange rates, especially in widely-used currencies like the US dollar, Euro, Yen, and British Pound, can impact input expenses and influence finished product pricing strategies.
        - Investment: High interest rates and economic instability not only burden financial costs but also undermine investor confidence, which is integral for the capital-intensive gem and jewelry industry. Economic uncertainty could lead to deferred or canceled ventures into new projects.
        - Government Policy: Domestic and international policies significantly shape industry landscapes. Tax reductions, investment incentives, trade promotions, and free trade pacts can bolster competitive advantages. Meanwhile, tariff and non-tariff barriers, along with geopolitical conflicts and sanctions, generate trade obstacles.
        - Others: Digital technology incorporation, fashion trends, and sustainability priorities are crucial considerations as they impact both manufacturers and consumers. Firms that proactively embrace these developments can gain first-mover benefits.
        The mentioned factors require continuous monitoring to guide 2024 marketing tactics. Beyond overarching issues, key market players also introduce potential industry-wide impacts. Based on demand and supply analyses, two countries of outsized significance are China and India - simultaneously enormous consumer markets and global production hubs.
China - Global Consumer Market and Manufacturing Hub
        Over the last two decades, China has experienced remarkable economic growth. Through economic, financial, and fiscal restructuring, national standards have been elevated, positioning China as a crucial player in trade and production, earning it the "world's factory" disignation, underscored by initiatives such as Made in China 2025. These endeavors propel China to the second spot globally in terms of GDP value, currently standing at USD 17.96 trillion, second only to the United States at USD 25.46 trillion. This robust economic advancement has contributed to increased incomes for the population through various drivers, as follows:
     1. Flourishing of Cities Nationwide
        Currently, Beijing, Chongqing, Guangzhou, Shanghai, and Tianjin stand as five Tier 1 cities, each boasting a GDP exceeding USD 300 billion. Simultaneously, Tier 2 cities, with GDP ranging from USD 68-299 billion, include 30 cities that are swiftly evolving into commercial and industrial hubs. Many Tier 3 cities, with a GDP of USD 18-67 billion each, are also thriving, enhancing livelihoods and intensifying demand for jewelry for weddings, gifts, and personal consumption.
    2. Burgeoning Middle Class
      China's middle class has experienced significant growth in recent decades. The National Bureau of Statistics defines middle-income households as units of three people earning RMB 100,000-500,000 annually (around USD 13,938-69,691). Average individual income has doubled since 2013, now sitting at RMB 31,370 (USD 4,374). More than 50% of the population, surpassing 700 million Chinese, is now classified as middle class. Consulting firm BCG projects an additional 80 million middle-class and upper-class individuals during 2022-2030, with 70% expected to come from Tier 3 cities and below.
        This expanding middle class, primarily consisting of working-age adults, exhibits a propensity to purchase discretionary products such as jewelry. China contributes to around 25% of global luxury spending, with reports indicating that Beijing, Shanghai, Shenzhen, Guangzhou, and Hangzhou lead in jewelry consumption. When categorized by consumption preferences, the top three jewelry types are gold (57%), jade (21%), and diamond (11%). China has historically been a major global consumer of gold jewelry, holding a 30% total global share until economic turmoil in 2022 allowed India to claim the top position (Data from World Gold Council).
source https://ecommercechinaagency.com/opportunities-for-jewellery-in-china/
On the supply side, China is the world's largest gold producer, producing approximately 375 tonnes. Special economic zones have been established to support the "world's factory" initiative, with various provinces housing cities that serve as manufacturing bases, including those for gem and jewelry production.
        - Guangzhou: An established high-end jewelry and findings production hub, Guangzhou boasts over 1,000 gem-polishing factories along with numerous wholesalers and retailers.
        - Shenzhen: Specializing in diamond and gold jewelry manufacturing, Shenzhen serves as a production base for numerous top brands. Ongoing logistics upgrades have transformed Shenzhen into a pivotal Chinese trade, transport, and jewelry manufacturing epicenter.
        - Ketang: Situated in Shanwei city, Ketang is home to abundant carving and engraving factories. It also serves as a major hub for faceted beads, offering inexpensive gems like aquamarine, garnet, and low-grade quartz. In addition, Ketang plays a significant role in trading beaded gems.
        - Yangmei Town (Jieyang City, Guangzhou Province): Recognized as a high-quality jadeite jade processing and polishing center.
        - Tengchong and Ruili (Yunnan Province): Bordering Northern Myanmar, these cities facilitate vibrant cross-border commerce, with Myanmar merchants actively trading jadeite and colored stones.
        These diverse locations contribute to China's role as a globally significant jewelry production stronghold, supporting export-oriented manufacturing for renowned Chinese, Hong Kong, and foreign brands.
        Despite facing macroeconomic challenges, China's exceptionally high savings rate acts as a buffer for financial positions. According to World Bank data, China ranks third globally in the savings-to-GDP ratio, standing at 47%, surpassed only by Qatar at 58% and Norway at 51%. The robust savings rate helps China leave financial positions relatively unscathed. It is expected that Chinese tourism and spending will rebound to pre-COVID levels this year.
        Furthermore, several factors are poised to catalyze market growth, including gift-giving traditions during festivals, the practice of intergenerational jewelry inheritance, the use of adornments for wealth preservation, and evolving preferences among younger consumers influenced by external cultures, seeking self-expressive jewelry. According to the US International Trade Administration, China already holds the position of the world's largest e-commerce arena, commanding nearly 50% of total online transactions. With over 710 million Chinese citizens engaging in digital purchases, the total projected e-commerce sales are expected to reach USD 3.56 trillion by 2024, presenting compelling opportunities. Therefore, those who comprehend the intricate dynamics of consumption and foster consumer intimacy have the potential to unlock success in this captivating market.
India – A Market of Youth and Middle Class
        According to 2023 data from Worldometer, India holds the title of the world's most populous country, boasting over 1.428 billion people, with a working-age population reaching up to 900 million individuals. Despite the challenges posed by the COVID-19 pandemic, the Indian economy has displayed remarkable resilience, rebounding swiftly and expected to grow by 6.4% in the current fiscal year ending March 2024, following a -7.2% contraction in the previous fiscal year. This economic rebound underscores India's strength, prompting S&P Global, the economic credibility rating agency, to predict that India will ascend to the position of the world's third-largest economy by 2030. Presently, India holds the fifth rank, trailing behind the United States, China, Germany, and Japan. The driving forces behind India's economic growth include aspirations to become a global manufacturing hub, advancements in technology and innovation, foreign investments, and an uptick in labor productivity.
        India has a rich history associated with the gem and jewelry industry, spanning thousands of years, similar to China. This enduring legacy has propelled India into a major global player in diamonds, colored stones, and gold jewelry. The industry has become a significant contributor, accounting for 7% of India's GDP, creating over 4.64 million jobs, generating substantial income, and contributing to the nation's prosperity. Two pivotal factors fueling this growth are as follows:
1. Industrial Promotion and Government Support
        The government has established specialized agencies, including the Gem and Jewelry Export Promotion Council (GJEPC) and the Gem & Jewelry Skill Council of India (GJSCI), to enhance the industry's competitiveness. Special economic zones dedicated to the gem and jewelry business, strategically located in cities like Mumbai, Hyderabad, and Jaipur, provide fiscal and non-fiscal incentives, attracting both Indian and foreign companies. E-commerce policies facilitate online trade, particularly for small and medium enterprises, which constitute 85% of the industry. Banks actively extend credit to gem and jewelry businesses, alleviating working capital constraints. Also, trade agreements with key partner countries have been established to broaden market access.
source https://www.ikonmarket.com
2. Growth of the Middle Class
        In 1990, India had approximately 30 million middle-class consumers, less than 1% of the population. With economic reforms spurring GDP growth, the middle class has expanded progressively. Current estimates place the Indian middle class at 31%, around 442 million, expected to reach 38% by 2031. This burgeoning middle class is a catalyst for economic advancement, contributing to increased consumption of gold for both personal adornment and investment, reflecting the cultural significance of gold in the Indian subcontinent. The Indian and Chinese markets collectively account for a substantial 56% of global gold jewelry demand.
        While Indian jewelry purchases remain closely tied to weddings, constituting over 50-55% of demand, the expanding middle class and a relatively young population with a median age of 28 indicate a rising trend in fashion jewelry for daily wear, making up 35-40% of the total demand (Data from World Gold Council).
In terms of production, Surat, a crucial commercial center in Gujarat State and the global hub of diamond polishing, serves as the origin for up to 90% of the world’s polished diamonds. It is also the world’s leading diamond trading center. Recently, a new diamond bourse spanning over 6.6 million square feet was opened in Surat. This diamond bourse is envisioned as an integrated center that is expected to create 150,000 new jobs, in addition to the already over 1.5 million people employed in Surat’s diamond industry. Furthermore, Surat is one of India’s major production centers for lab-grown diamonds.
        Beyond Surat, Mumbai stands as another significant Indian center for trading polished diamonds, with a market that seamlessly blends both traditional and contemporary jewelry. Mumbai is also renowned as the fashion capital. Jaipur, a major production hub with skilled craftsmen, is particularly known for crafting traditional jewelry and is also renowned for the production and trade of various precious stones and ornaments. Hyderabad, often named "the city of pearls," has gained global fame for its pearls, including locally crafted precious and semi-precious stones jewelry.
        While the COVID-19 pandemic severely impacted India's economy in the past, especially the manufacturing sector, which heavily relies on labor and faced high raw material price volatility causing supply chain disruptions, there has been a notable shift towards online platforms. This shift is particularly evident in purchases made through online channels, especially in the category of imitation jewelry and fashion accessories, which have experienced a significant surge in sales. This has led to a rapid resurgence of the market.
        The primary demographic fueling these online purchases comprises young individuals with an interest in foreign cultures and fashion trends, showcasing an increased reliance on online media consumption. The casual jewelry market, reflecting personal identity with contemporary designs or easily accessible fashion jewelry, appeals to both men and women, presenting a viable option to address the demands of this evolving market.
In conclusion
        China and India, as significant global consumer markets and pivotal players in supply chain connectivity, exhibit parallels in their economic landscapes. The growth of their urban economies has led to the expansion of a robust middle class, propelling both nations into influential consumer groups shaping the global gem and jewelry market. While the majority of middle-class consumers currently reside in the European Union and the United States, a noteworthy shift is anticipated in the next decade, with India, China, and other Asian nations (excluding Japan) taking the lead. Projections for 2035 suggest that two out of four global middle-class consumers will call India and China home.
        Considering consumption dynamics, it is undeniable that both the Chinese and Indian markets play crucial roles, significantly impacting global trade. Simultaneously, in terms of production, both nations have implemented policies fostering the growth of their respective industries, positioning them as competitive forces on the global stage. India and China are perceived as both partners and competitors to other nations. Engaging in fierce competition may not always be optimal; however, adopting a Win-Win policy, finding common ground for mutual economic benefits through collaboration, shared ecosystems, broader market access, resource sharing, technology exchange, skill transfer, and joint research and development efforts can contribute to the sustained development of industries in both countries. This cooperative approach reflects the wisdom of adapting, akin to a willow bending with the wind to endure storms.


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