By Jim Trippon

Fresh glimmers of China’s consumer prosperity have arrived in the form of a new report from the usually dry government-run Xinhua News Agency. Xinhua says China overtook Japan last year to become the world's second-largest diamond market.

Trade on the Shanghai diamond exchange jumped by 16.4 percent to more than $1.5 billion last year, boosting China ahead of economically stagnant Japan. The U.S. remains the world’s number one market for the precious gems.

Xinhua says “the year-on-year rise, when much of the rest of the world was mired in deep recession, was because of China's boisterous economic growth in 2009. As the economy continued to develop in a stable manner, consumer demand for jewelry continued to grow, especially for diamonds for the wedding market," Xinhua explains.

We have often looked to the soaring sales figures from China’s auto industry to provide an indicator of consumer confidence and spending power. Last year China raced past the United States to become the world’s leading car market.

China's increasingly affluent middle class and its vast pool of customers are also key factors behind the sudden rise of diamond sales in the world's most populous country.

Advertising and marketing are also crucial to this trend. Diamonds have not always been considered important symbols for weddings in China, where jade and gold pieces have traditionally been given as gifts.

Demand for diamonds started to develop in the 1990’s when De Beers brought its global advertising campaign to China, tapping into the Chinese desire for conspicuous consumption and pursuit of Western luxuries.

Every year about 10 million couples get married in China, and the figure is expected to reach 11.82 million in 2010, according to the Ministry of Civil Affairs.

As we so often find, China is once again headed for global leadership. De Beers, the largest diamond producer in the world, expects that China will surpass the US to become the world's largest diamond consumer market by 2020.

Once again, we see the growth of China becoming an increasingly important driver of the global economy.

Jim Trippon,
China Stock Digest Editor-in-chief

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