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Shanghai takes on Surat

At noon in Shanghai’s Manhattan — Pudong — Indian diamond traders stream down to the lobby of an 88-storey tower that was once China’s tallest, reports Reshma Patil.

world Updated: Sep 10, 2009 02:18 IST
Reshma Patil

At noon in Shanghai’s Manhattan — Pudong — Indian diamond traders stream down to the lobby of an 88-storey tower that was once China’s tallest. They pick up vegetarian lunch delivered by a Gujarati maharaj (cook) and amble past elaborate security to the fourth-floor of the Shanghai Diamond Exchange where you can hear the Chinese staff address the Shahs of Shanghai as “bhai”.

Of the approximately 230 members in this Chinese version of Mumbai’s diamond bourse, 50 are Indian, the unnamed doors of their offices identified as Indian by marks of red teeka (vermillion).

“Some Indian members speak better Shanghainese than the locals,” said Caroline Yuan, vice-president of the Shanghai Diamond Exchange, China’s official diamond trading platform set up in 2000. While the Exchange opens up a rich Asian market for India's merchants, Chinese export towns are opening up competition by starting diamond-processing factories — even for Indian diamond traders — in cities known for making cheap textiles, toys or machinery. China is cutting the chase to slowly shift the world’s diamond trade from Surat and Mumbai to Shanghai and faraway export towns.

Trade with China, India’s largest trade partner, is the one big hope across the tense borders. After growing 34 per cent last year, bilateral trade sank 32 per cent in the recession-hit first half of 2009. But a new industry confidently eyeing India from China is talking about competition, and not the financial crisis that has hit bigger bilateral trade in iron ore, textiles or toys.

The Chinese are eyeing a market ruled by Indian factories that cut and polish 11 out 12 diamonds set in jewellery worldwide. “China has very limited diamond resources, but it’s the world’s second-largest diamond processing centre after India,” claimed Yuan. “Some Indians run diamond factories in south China,” she said, adding that this Chinese industry is too young to compete with India.

But in June, the Chinese media reported that about 80 factories in southern and eastern China were processing diamonds. That’s no comparison with India’s generations-old diamond industry, but some insiders admit that the Chinese skills are superior. “The increasing number of diamond-cutting factories in China will make them our competitors,” Vasant Mehta, chairman of India’s Gems and Jewellery Export Promotion Council, told HT from Mumbai. “They are growing at rapid speed.”

“The diamond cutting skills of the Chinese are uniform and advanced,” agreed Vikram Shah, who joined the Shanghai Exchange in 2003 when there were hardly half a dozen Indians. In June, the China Daily said more importers are sourcing diamonds from the Chinese, citing their ‘professionalism’.

“The kind of expertise we need is missing in India,” Mihir Shah, owner of Jayam NV that operates a factory in Shandong, was quoted saying. The report forecast ‘China may soon displace India as the leading diamond processor in the world, thanks to favourable policies, a vast pool of skilled technicians and robust domestic demand’.

For now, the Indians in Shanghai are using the Exchange to foray deeper into lucrative markets across China, Japan, Taiwan and Hong Kong. Mumbai native Sudip Shah sits in front of a map of China. “Only India and China are booming. But China is better,” Shah said. “In China, diamonds are easier to sell at higher prices. This exchange also protects members’ legal rights better than Indian organisations.”

The Exchange provides preferential tax and trade policies and paperwork for trade, customs and shipping under one roof. Paperwork to process a shipment of diamonds needs just one day. The Exchange will soon shift to a new address and the Indian members are lobbying for an Indian restaurant in the office.

“The challenge is also the competition among Indians in this Exchange,” said Vikram Shah, but emphasised that Indians still offer better quality, quantity and price than the Chinese. “I’ve never been cheated here. Even when I leave my diamond safe open.”

(With inputs from Gaurav Choudhury in Delhi)