Top Biz News

VAT cut aims to curb diamond trade

By Lillian Liu (China Daily)
Updated: 2006-07-14 08:50

"Many diamond industry players in China, including manufacturers, retailers and wholesalers, are now likely to legalize their business," Concept Jewellery Manufacturing Executive Director Fiona Wong said.

And that will take the country's diamond and jewellery industry to a much higher and more professional level, the top executive of the Hong Kong-based jewellery processor added.

A spokesman for Wing Hang Diamond, Hong Kong's leading diamond trading company, said the move would encourage his company to increase investment in its existing mainland gem units.

"That up to 90 per cent diamonds enter the country through illegal channels is a great cause for concern. Chinese Customs collect a very meagre amount of VAT because only over 10 per cent are imported through lawful exchanges," he said.

Diamonds were first recognized and mined in India, with the earliest written reference in Kautilya's Arthasastra (The Science of Economics - 296 BC).

But in February 2005, a joint Chinese-US archaeology team found four corundum-rich stone ceremonial burial axes dating back to China's Liangzhu and Sanxingcun cultures (4,000 BC-2,500 BC) that were believed to be have been polished using diamond powder.

However China has been a late entrant to the diamond trade, setting up cutting and polishing centres to take advantage, like India, of low labour costs. Diamond cutting and polishing is a highly specialized skill concentrated in a handful of cities, such as Antwerp (Belgium), Amsterdam (the Netherlands), Johannesburg (South Africa), New York (the United States), Tel Aviv (Israel) and Surat (India).

Though India handles about 90 per cent of all cut and polished diamonds by number, it accounts for only 55 per cent in terms of value. That's because larger or more valuable diamonds are more likely to be handled in Europe or North America.

Diamonds are sold in carats and valued according to the "4 Cs"  carats, clarity, cut and colour. The carat weight measures the mass of a diamond, with one carat defined as exactly 200 milligrams (about 0.007 ounce).