I. A Review of 2014

2014 was destined to be a pivotal and sensitive turning point for the jewelry industry. After more than 30 years of sustained rapid growth, China’s jewelry industry suddenly saw its retail market as a whole lose momentum that year. The market faced a severe crisis of oversupply, the era of jewelry as official gift items came to an end, and the industry’s efforts at transformation and upgrading proved remarkably ineffective. As a result, jewelry companies found themselves enduring unprecedented hardship in their survival struggles that year. Although jewelry enterprises of different business models and sizes experienced varying degrees of impact, and different categories and types of jewelry products showed uneven performance—some hot, others cold—everyone generally felt the sharp decline in sales.

In January 2015, more than 20 members of the Secretariat of the China Jewelry & Accessories Association visited members in nine provinces and cities, including Fujian, and conducted on-site visits or telephone interviews with key enterprises. In a survey of over 600 jewelry companies, more than 90% reported a sales decline of over 10% in 2014 compared to 2013; among these, about 5% saw varying degrees of sales growth. According to our analysis of publicly available data from nine listed jewelry companies—Shanxiahu, Chao Hongji, Lao Fengxiang, Mingpai Jewelry, Zhongjin Gold, Dongfang JinYu, Yuyuan Shopping Mall, Jin Yi Culture, and Cuihua Jewelry—we found that the total operating revenue of these nine listed companies for the first three quarters of 2014 reached 80.7753 billion yuan, down 8.72% from the same period in 2013. Their combined net profits totaled 2.2885 billion yuan, a year-on-year decrease of 9.42%. Among them, Chao Hongji saw its operating revenue increase by 11.43% year-on-year, and its net profit rose by 26.3% year-on-year.

In 2014, the Shanghai Gold Exchange saw a cumulative gold delivery volume of 2,102 tons, down 4.32% year-on-year. According to data released by the Hong Kong Census and Statistics Department, net gold inflows into mainland China in 2014 totaled 813.70 tons, a 30% decrease from the 1,158.20 tons recorded for the entire year of 2013. Based on our consultations with several major gold enterprises, gold jewelry sales saw a slight increase in 2014, while sales of gold bars and other gift items plummeted by 70% to 80%. Affected by factors such as overspending on gold consumption in 2013 and the decline in gold prices in 2014, total gold consumption in 2014 was approximately over 950 tons, representing a 20.8% drop from the 1,200 tons consumed in 2013. In 2014, Beijing Caibai achieved sales revenue of 12 billion yuan. Although sales declined by 10%, both the average weight per item and the number of items sold increased. Profit and tax contributions also rose by 10% each, and the number of service visits reached 1.2 million, an increase of nearly 20% over the previous year.

In 2014, the Secretariat of the China Silver Association conducted a systematic survey specifically focused on the “Chinese Silver Market.” The survey team visited cities including Shenzhen, Guangzhou, Putian, Zhengzhou, Heqing, and Qiandongnan. Through interviews with enterprises engaged in the processing and sale of silver jewelry and silverware, the team learned that the Chinese market for silver jewelry and silverware is substantial, with an annual silver consumption of approximately 4,000 tons. Although several major silver jewelry and silverware processing and sales companies experienced varying degrees of decline in sales in 2014, many other companies continued to expand their business in silver jewelry and silverware. Consequently, in 2014, China’s annual silver consumption for silver jewelry and silverware remained at around 4,000 tons.

In 2014, the Shanghai Diamond Exchange recorded a diamond transaction volume of 5.13 billion U.S. dollars, representing an 18.6% year-on-year increase. Among these transactions, general trade imports totaled 1.711 million carats, up 19.2% from the previous year, with an import value of 2.236 billion U.S. dollars, an increase of 31.1% over the same period. The average unit price of finished diamonds was 1,306.84 U.S. dollars per carat, up 10.02% year-on-year. Thanks to the growing cultural significance of diamonds as symbols of love in China, coupled with the ongoing efforts by several major global diamond groups to regulate the rough diamond market and promote the retail market, China’s diamond retail market has experienced steady growth. In 2014, the total sales volume of diamond-set jewelry products in China’s end-market reached approximately 35 billion yuan.

In 2014, China’s annual pearl production reached approximately 800 tons, still accounting for over 95% of the global total. Domestic sales of pearls amounted to roughly 10 billion yuan, representing an increase of about 20% compared to 2013. Meanwhile, the market continues to show a positive trend characterized by declining production volumes, improving quality, and rising prices. The colored gemstone market has become increasingly diverse in terms of varieties and styles, with a slight increase compared to 2013. The amber market continued the growth momentum from 2013, with prices remaining on the rise, a relatively active market environment, and robust consumer demand. Although fashion jewelry brands have stepped up research and development as well as promotion of new, environmentally friendly products, their expansion in the domestic market has remained sluggish.

In 2014, the jade market remained the coldest sector. Whether in specialized markets, retail stores, or counters, overall consumer interest was generally weak. Most companies saw their sales performance continue to decline by 30% to 60% compared to 2013, and a significant number of businesses found that their sales revenue fell short of covering operating costs. Sales of jade varieties such as white jade, crystal, and agate also declined by 20% to 30% for the vast majority of companies, while sales of jewelry featuring the once-popular combination of gold and jade experienced a slight drop as well. The total sales volume of the jade market likely fell below 15 billion yuan.

According to statistics from the General Administration of Customs of China, in 2014, China’s total exports of various jewelry products reached 63.13 billion U.S. dollars, representing a year-on-year increase of 26.03%. Among these, exports of jewelry made of precious metals or plated with precious metals amounted to 48.519 billion U.S. dollars, up 67.89% over the previous year; exports of other products made of precious metals totaled 5.233 billion U.S. dollars, down 56.93% year-on-year; exports of gold and silverware fell to 1.204 billion U.S. dollars, a decrease of 41.27% compared to the previous year; pearl exports reached 122 million U.S. dollars, down 35.5% year-on-year; exports of pearl and gemstone/semi-precious stone products stood at 708.7 million U.S. dollars, a decline of 25.34% over the previous year; and exports of imitation jewelry totaled 2.37 billion U.S. dollars, with a year-on-year increase as high as 114.92%. The substantial and sustained growth in imitation jewelry exports over the past two years has been a notable highlight. While it remains unclear whether the growth in precious-metal jewelry exports is linked to exchange-rate fluctuations, the decline in exports of gold and silverware, pearls, and gemstones/semi-precious stones likely reflects the sluggishness of the international jewelry market.

According to data from 5,000 retail enterprises closely monitored by the Ministry of Commerce, retail sales in 2014 grew by 6.3%, a slowdown of 2.6 percentage points compared to the previous year. Among them, online retail sales increased by 33.2%, shopping malls grew by 7.7%, and specialty stores, supermarkets, and department stores saw growth rates of 5.8%, 5.5%, and 4.1%, respectively. According to statistics from the All-China Commercial Information Center, in 2014, retail sales of the 100 key large-scale retail enterprises nationwide rose by only 0.4% year-on-year, with retail sales of gold, silver, and jewelry declining by 11.6% over the same period. In 2014, according to data from the National Bureau of Statistics, among the total retail sales of consumer goods by enterprises (units) above the designated size nationwide, sales of gold, silver, and jewelry reached 297.3 billion yuan, representing zero growth compared to the previous year.

Based on this, after comprehensively analyzing information from all aspects and comparing data from various channels, we believe that the total sales volume of China’s jewelry retail market in 2014 will not be less than 500 billion yuan.

II. Trends in 2015

Over the past 30-plus years of reform and opening up, we’ve become accustomed to double-digit annual growth rates in the jewelry industry. In 2014, China’s economy experienced its slowest growth rate in 24 years, at 7.4%. Under the “new normal,” everyone is now preparing for the possibility that economic growth could slow further in 2015. Similarly, we’ll have to accept the reality that the jewelry retail market may have zero growth in 2014, and we’ll also face an even tougher journey ahead in 2015—perhaps even enduring the painful consequences of some processing companies going out of business and certain specialized markets and retail stores closing their doors. Nevertheless, we believe that the jewelry retail market in 2015 may perform somewhat better than in 2014, with total retail sales for the year expected to reach around 550 billion yuan.

1. The new normal fosters greater hope.

At the press conference following the 18th National Congress, General Secretary Xi stated that the people’s aspiration for a better life is precisely our goal and driving force. Throughout history, people’s pursuit of a better life has always been inseparable from the beauty of jewelry. The central government’s anti-corruption efforts are ongoing and universally praised across the country. However, anti-corruption is by no means about banning the wearing or collecting of jewelry. The First Lady herself wears and gifts pearl jewelry to international friends, demonstrating that the pursuit and appreciation of jewelry’s beauty is a shared human aspiration. As a timeless and beautiful industry, jewelry will continue to hold ever-greater market potential and promising prospects as people’s living standards rise.

In 2015, even with an economic growth rate of 7%, China remained the world’s fastest-growing economy. The annual GDP increase of roughly 800 billion U.S. dollars was also the largest in the world. In other words, the overall trend of China’s rapid economic development has not changed, and the foundation for realizing the Two Centenary Goals has not changed either. China’s position as a global leader in jewelry manufacturing and consumption remains unchanged, and the trend of people’s growing ability and desire to consume jewelry has not changed either.

As everyone knows, corruption is often linked to jewelry—but jewelry itself is never the root cause of corruption. Jewelry possesses unique cultural attributes, evokes a sense of value, and holds significant worth for collection and inheritance. Throughout history, both East and West, jewelry has served as an important medium for expressing emotions; love, friendship, family ties, and more can all be conveyed and forged through jewelry. Under the new normal, people place greater emphasis on quality and pursue refined taste. Therefore, only when jewelry sheds its worldly trappings and the stench of materialism can its exceptional cultural essence truly shine, and only then will the jewelry industry have brighter prospects.

2. The New Normal in the Jewelry Industry

In 2014, the jewelry market experienced a downturn—not so much due to broader socio-economic conditions as to an oversupply crisis and a lack of innovation. The jewelry industry’s enormous potential for development and bright prospects depend on transformation and upgrading, driven by distinctive innovation and creativity. The jewelry industry must inevitably establish a new normal that adapts to social developments and industry-specific characteristics; rationalization, differentiation, and culturalization are likely to become key orientations for the industry’s new normal.

As growth slows down, jewelry companies—whether out of necessity or by choice—are all seeking a more rational approach to development: shifting from relying on opportunities to relying on strength, from focusing on scale to emphasizing quality, and from depending on operational efficiency to placing greater emphasis on product excellence. This may well be an inevitable path forward. Meanwhile, as consumers continue to mature, they’ll become increasingly rational. Consumption behaviors such as “not striving for the best, but aiming for the most expensive,” “not valuing quality, just going for the cheapest,” and “following trends and buying more as prices rise” will significantly decline.

Homogenization is an age-old issue that continues to spark controversy in the jewelry industry; yet, it is also an inevitable outcome of a market characterized by supply falling short of demand. In a competitive marketplace where supply exceeds demand, differentiation represents a crucial path forward. Differentiated products not only meet the objective need for diversification in the consumer market but also serve as the primary means of satisfying consumers’ growing desire for personalization—and, more importantly, they constitute a vital direction for enterprises’ innovative development. Moreover, differentiated development is itself a key indicator of both market maturity and industrial maturation.

Everyone understands that jewelry without culture is merely cold stone and hard metal. At the heart of jewelry culture lies beauty—discovering beauty, creating beauty, spreading beauty, collecting and wearing beauty, and encapsulating all this beauty in jewelry pieces and jade carvings, deeply rooting it in the hearts of consumers. Sales staff must convey the essence of jewelry’s beauty to consumers; this process also requires fostering a strong corporate culture and embedding product-specific cultural elements.

3. Changes in Jewelry Retail Products

In 2015, the jewelry sales market was generally cautiously optimistic; although the overall market size of 500 billion yuan is likely to continue expanding, product categories may show a trend of three rising and three falling.

(1) Traditional gold jewelry, diamond jewelry, and colored gemstone jewelry continue to grow steadily. The annual demand for over 13 million newlyweds, as well as rigid demands during festivals, weddings, birthdays, and milestone anniversaries, remains robust. On New Year’s Day 2015, sales at Beijing Caibai Department Store increased by more than 10% year-on-year, with total sales reaching 520 million yuan over the three-day holiday period.

(2) The market share of religious-themed jewelry and related products will see a significant increase. Protection and blessings are important spiritual needs in people’s daily lives. Jewelry and carvings featuring religious motifs will continue to occupy a large share of the market. Sales of Buddhist treasures such as turquoise, amber, pearls, agate, mother-of-pearl, and crystal are expected to rise.

(3) Sales of personalized jewelry and emotionally resonant, humanistic products are set to increase. Products featuring innovative designs, unique styles, and imbued with emotional significance—especially those crafted by master artisans—have consistently been in high demand on the market. The rise of numerous independent designers and custom studios will further fuel the growth of the personalized-products market.

(4) The jadeite market remains sluggish. Ongoing military conflicts in northern Myanmar make it unrealistic for jadeite prices at the source to decline. In China, the finished-jadeite market has a relatively large inventory, and most merchants, facing high production costs, are unlikely to lower prices easily. Even if some stores close down, their goods continue to circulate within the industry. As for other types of jade—such as white jade, agate, and crystal—their places of origin are relatively abundant; thus, the upward trend in prices of high-end materials will likely ease, while prices of mid- and low-end varieties may see greater declines. The ample supply of various jade types will also make it difficult for the jadeite market to show any significant improvement.

(5) The gold gift market is not looking promising. Due to gold’s monetary attributes, people have become accustomed to equating gold gifts with cash. Under the new normal of sustained high-pressure anti-corruption efforts, the traditional gold gift market will shrink sharply. Moreover, most institutions are not expecting a significant rise in gold prices, which will also make it difficult to spark enthusiasm for gold investment and collecting.

(6) Sales at individual jewelry stores will generally find it difficult to increase. Although the China Jewelry & Gemstone Association has been pointing out for years that there is a severe overcapacity of retail outlets in the jewelry market, the number of new stores added in 2014 was still considerable. In 2015, the likelihood of a significant boost in the overall jewelry retail market is relatively low, and it’s inevitable that sales per individual store will continue to decline.

III. Countermeasures for 2015

For the jewelry industry, digesting existing market inventory, innovating and developing marketable products, resisting price wars, stepping up brand marketing efforts, reducing hype and sensationalism, and focusing on practical resource integration will be crucial pathways for the jewelry market to stabilize and rebound.

1. Digest existing market inventory and innovate marketable products.

Some estimates suggest that the total value of inventory in the finished jewelry market currently amounts to several trillion yuan. Given today’s consumer spending power, it’s likely that these products won’t sell out for years to come. Moreover, these products suffer from serious homogenization, and a considerable portion even exhibit rather crude craftsmanship. Therefore, it has become an urgent priority to find new sales channels or redesign and upgrade these products—transforming existing stock into active consumption and turning the crisis into an opportunity for growth.

Under the new normal, people’s desire and ability to demand jewelry will only increase, not decrease. Eliminating outdated production capacity and tapping into new growth areas through innovations in materials, design, and craftsmanship represents a crucial pathway for the industry’s transformation and upgrading. First, we must further explore new materials for jewelry and jade to meet consumers’ diverse and personalized needs. We should vigorously promote the rejection of producing, selling, and wearing jewelry made from dyed materials, thereby aligning with people’s growing environmental awareness. Second, we should actively advocate for and protect products that possess independent intellectual property rights, consciously resisting the production and sale of pirated and counterfeit goods, thus fostering the development of product differentiation.

2. Resist price wars and focus on brand marketing.

Although price competition is an important and unavoidable means of competition in our jewelry industry at this stage, price wars not only harm the interests of individual companies but also disrupt the market, erode consumer confidence, and undermine the healthy development of the industry. Therefore, we must promote differentiated development centered on innovation, break away from the cycle of product and marketing model homogenization among enterprises, and reduce the foundation for launching price wars.

Brand strategy is a crucial channel for the sustainable development of enterprises. Compared with internationally renowned and Hong Kong-based jewelry brands, China’s locally established, well-known jewelry brands still have a certain gap to close. In consumers’ minds, these local brands not only lack a clear cultural positioning but also fall short of offering distinctive products that are truly competitive in the market. To boost brand marketing, the most important thing is to develop products that embody unique characteristics and seamlessly integrate mainstream societal culture, jewelry culture, and corporate culture into the products themselves—thereby building core competitiveness and earning consumers’ trust.

3. Reduce hype and sensationalism; focus on practical resource integration and action.

Over the past period, hype surrounding new product varieties, scarcity of resources, investment value appreciation, discount promotions, auction prices, attention-grabbing effects, and marketing concepts—indeed, all these tactics have stimulated consumers’ purchasing desire and temporarily ignited market fervor. However, as jewelry knowledge continues to spread and consumers become increasingly mature, more and more rational consumers are growing calmer and more discerning toward such hype.

In the future, it will be increasingly difficult for enterprises to go it alone or to pursue the “big and comprehensive” or “small but all-encompassing” approach. Instead, refined development—highlighting specialized expertise, integrating resources, and pursuing win-win cooperation—will become the key direction for enterprises to grow stronger, more resilient, and sustainable in the long term. Enterprises that possess capital, channels, platforms, design capabilities, or advanced processing technologies can forge powerful alliances with one another. This collaborative approach will not only represent the greatest opportunity amid industry overcapacity crises but also offer the best path forward.

4. Conduct thorough education and training to enhance overall quality.

Talent is a crucial cornerstone of corporate competitiveness, and education and training serve as vital support for the industry’s sustained and rapid development. In 2014, the China Jewelry Association conducted a special survey on the current state of jewelry education in China. The survey revealed that approximately 90 schools nationwide offering jewelry-related degree programs annually produce around 7,000 to 8,000 professional talents for the industry. As a specialized training institution dedicated to the retraining of talent in the jewelry industry, the Beijing Jewelry Training Institute conducted various training programs for more than 3,100 participants in 2014.

The jewelry industry is a cultural industry that, by its very nature, requires innovative cultural development. Managers, technicians, designers, sales personnel—and even consumers—must all undergo a process of continuous improvement in their qualities and capabilities. Only through the ongoing enhancement of the overall competence of those working in the jewelry industry can we better meet the evolving needs of increasingly sophisticated consumers and, at the same time, more effectively promote innovation in areas such as products, culture, services, and business models. Therefore, actively embracing learning, being adept at learning, and continuously engaging in self-education have become an inevitable trend.

At the Central Economic Work Conference held in mid-December 2014, it was proposed that in 2015, we should strive to maintain stable economic growth and continue implementing an active fiscal policy and a prudent monetary policy. At the same time, it was emphasized that the active fiscal policy must be forceful, while the monetary policy should place greater emphasis on maintaining an appropriate degree of tightness or looseness. We are confident that the overall trend of steady economic growth will remain unchanged; at the same time, we recognize that the pressure to sustain this growth will be considerable. Therefore, as jewelry enterprises, we must remain keenly attuned to the situation, courageously overcome difficulties, proactively embrace innovation, build up our strengths steadily, and with patience and wisdom, look forward to a bright future for the jewelry industry.