China spreads its wings to Africa, in search of diamonds

China is the second-largest diamond market in the world and its market share only going to increase further. While worldwide rough diamond supply fell by 3% over the 2006-11 period, China’s rough imports grew by 20% in carat terms. While green Jade/ Jadeite was a central part of Chinese gems culture, diamonds have taken over a pivotal position in the republic.

However, China has no significant indigenous diamond resources to speak of. And to meet the insatiable demand of its urban upper-middle-class for diamonds and other natural resources, China is aggressively pursuing an ‘Africa Invest’ policy. Being a predominant source of diamonds roughs, Africa has been a hotbed for investments from miners worldwide.

Anjin Investments, a JV between Zimbabwe Defence Forces (60%), Zimbabwe Mining Development Corporation (10%) and Chinese investors (30%), is the leading diamond miner in the Marange diamond fields of Zimbabwe. In 2011, Anjin invested close to $500 million to expand its mining operations. Reportedly, Anjin diamond production is humongous and its stockpile is around two to three million carats.

China has also planned an airbase at Zimbabwe’s diamond mines at Marange mainly for safe transport of diamonds out of the country. Interestingly, Anjin’s diamonds are directly exported to Dubai and Hong Kong most of the times. In return for the diamonds, China pays back by helping Zimbabwe to set up defence infrastructure, providing medical and technological supplies etc. Chinese investments however have not been without controversies. Some reports even mention that most of the Quid pro quo happens in form of military arms and ammunitions!!

 

Royalty Free - China Red Army Tiananmen

 

The Chinese diamond footprint in Africa is not limited to one mine investment though and China is seeking more diamond mines in Zimbabwe to augment its resources. Also, Zimbabwe wants to move up the beneficiation value chain and has plans of partnering with Chinese Jeweler – Chow Tai Fook for processing diamonds instead of just exporting roughs.

Besides, the China-Africa link extends beyond Zimbabwe. Earlier in 2011, Sonangol International – a JV between Chinese investors and Angola’s state oil company Sonangol, had acquired a 18% stake in Angola’s Catoca diamond mine. Tanzania too has urged the Chinese government to increase its investments in the country.

Back home, China is setting up bigger diamond processing centres, given its new diamond sources. Arguably, China is also the world’s largest jewelry manufacturing center (not for diamonds though). While this might be a cause of concern for the Indian diamond processors, the enormous Chinese diamond market has enabled India to export around $7 billion of diamonds to China, at least till now.

With its ‘Africa Invest’ policy, mainly resource-led, China is now the biggest trading partner of Africa and has announced huge grants to several African nations. The 2014 Brands of China African Showcase included more than 100 exhibitors from China underlining the importance that Chinese businesses place on Africa. Within its broad game plan of securing natural resources from Africa, diamonds play a key part in serving the growing Chinese appetite for gems and jewelry. And Chinese investments in Africa for diamonds will continue to intensify.

 

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