Expectations are rising for the Chinese New Year even as China’s economy is projected to gallop at a slower pace in 2014. Despite the lower economic forecasts, the diamond industry should view developments in China with optimism rather than the cautious outlook many economists hold for the coming “Year of the Horse.”
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The reason for industry optimism and economic restraint are one and the same. China’s new leadership has embarked on a reform agenda to transform the economy from one that relies on government investment into one that is driven by market forces by the year 2020. The transition requires ambitious structural reforms that make the current slowdown inevitable. However, the fact that the world’s second largest economy is encouraging a culture of consumerism will spur industry growth even amid the caution.
In fact, there are a number of factors that ought to reassure the diamond and jewelry industry through the transition period.
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“[The chinese economy has been transformed] from one that relies on government investment into one that is driven by market forces by the year 2020.”
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The slowdown is relative to the booming double-digit growth experienced between 2003 and 2007, and current growth is still enviable by most standards. In 2013, China’s economy is projected to have grown by 7.6 percent, according to the official Xinhua News Agency. While better than the government’s previously stated target of 7.5 percent, it still represents the third consecutive year of declining growth. The government has maintained its target for 7.5 percent growth for 2014.
The data suggests that China is in a process of maturing, which is a good thing for a diamond trade that tends to act irrationally in booming markets.
