Thomas White Global Investing
China
China Stamp
November 18, 2011
A Postcard from the Asia Pacific
China: The jewel in the crown for the global diamond industry

Chinese Couple

The way most young Chinese men and women have been saying “I do” lately has changed the dynamics of the global diamond market, maybe forever.

In the 1990s, diamond company De Beers had lost its sparkle. Its century-old strategy of operating like a cartel, once hailed as flawless, no longer seemed tenable due to competition from several large, new mines. Worse, amid reports about “blood diamonds” funding violent conflicts in Africa, the spreading stain on the stone’s reputation had begun hurting sales in the firm’s primary market.

Beleaguered, De Beers realized then that perhaps it could regain its shine by selling diamonds to an entirely new set of lovers, in distant, unventured lands. Thus, De Beers opened shop in China and made a marketing push so strong that it radically changed the way the Chinese marry, perhaps forever.

Indeed, De Beers’ focused promotional initiative in China over the years is considered a gem of a marketing strategy not just for restoring the polish De Beers had lost, but also for fostering such far-reaching changes in China’s wedding rituals that the country has now become a blockbuster market for the world’s diamond industry. So much so that on the 4th of this month, while announcing Anglo American’s purchase of the Oppenheimer family’s 40% stake in De Beers, Anglo’s chief executive Cynthia Carroll said that “the drastic shift De Beers has helped bring about in Chinese wedding rituals” encouraged her company to pay $5.1 billion for the Oppenheimers’ stake.

Given the trends in China’s wedding market today, Carroll was certainly not exaggerating. Indeed, until De Beers introduced “Zuan shi heng jiu yuan, yi ke yong liu chuan,” the Mandarin version of its iconic slogan “A diamond is forever,” to China in 1993, Chinese weddings were steeped in time-worn tradition. Several rituals involved the exchange of gifts between the bride and the groom, but none that had anything to do with a diamond. For instance, as a part of the most important pre-wedding ritual, the groom’s family gave to the bride a gift of “uang susu” or milk money. But these days, it has become almost de rigueur for a Chinese groom to slip a diamond ring onto his bride’s finger before the wedding. In fact, according to one estimate, more than 40% of Chinese brides buy diamond engagement rings these days. This is a quite a number, given that around 12 million weddings are held in the country every year.

Alongside, the traditional red gown of the bride and the red shirt of the groom are also going out of favor, being replaced by the white lace gown and tuxedo, which match better with diamond jewelry and are considered more modern. In fact, this is a remarkable shift in rituals; given that red has historically been the color of weddings in China. Red stands for love and prosperity and, traditionally, it has been the preferred color for not just the wedding attire but also the invitation, gift boxes, envelopes for cash gifts, and even the decorations in the homes of the bride and the groom. Similarly, a bride’s dowry in times past comprised mostly items of daily use, such as duvets, bedding, and plates as well as some jewelry, silk, and satin. Among wealthy Chinese families, gold and jade jewelry were also given as a dowry. However, as any young adult in China would say today, “Jade is for old people.” These days, a large number of Chinese brides, especially among the urban affluent class, expect diamond jewelry as a dowry and more often than not, their parents do not disappoint them.

Truth be told, De Beers’ aggressive marketing has not been the only catalyst for the transformation in Chinese wedding rituals. The firm’s promotional initiatives have merely fanned the winds of change that have been blowing across the country over the past two decades. Statistically, the average age of a Chinese bride today is 29, which means the generation of Chinese born after the country adopted the single-child policy have begun to get married. Each member of this generation has one set of parents and two sets of grandparents, in other words six people eager to spend on the only child in the family. Moreover, many young Chinese are attracted to Western traditions and they feel in adopting them, they can flaunt their success.

Given these socio-economic conditions, a large percentage of De Beers’ marketing campaigns, including print and television advertisements, sponsored mass weddings, as well as the clever weaving of diamonds into the plots of popular television programs, have been successful over the years. And it is no surprise, therefore, that China today is the second largest consumer of diamonds in the world, after the U.S., and the annual sales of diamonds in the country are expected to touch $2 billion soon.

It is universally accepted that the 4Cs — for cut, color, clarity, and carat weight — are the standard measure of the value of a diamond. But given China’s growing importance in the global diamond market today, perhaps it is time to add to this equation two more Cs — for Chinese Consumers.

 

Image Credit: Alan, Lizixiang under Creative Commons license

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