Poised between China and the waiting world, the Hong Kong International Jewellery Show 2007 is seen by many as a link between the colossus in the east and the rest of the globe. Combining high design standards and a bilingual population with proximity to the vast factories and resources of Guangzhou and Shenzhen, Hong Kong has never looked so attractive to mainland Chinese - and the relationship between the two is intensifying.
High-quality training in Hong Kong has led to the establishment of a vast talent pool that now spreads to the Chinese mainland where huge factories handle short lead-time orders, mass production and research and development. With no sales tax and a welcoming attitude courtesy of the IVS (the Individual Visit Scheme, a seven-day visa introduced to encourage mainland visitors to Hong Kong after SARS), Hong Kong is drawing mainland tourists by the thousand.
The industry as we know it is changing all over the world. According to Didier Brodbeck, chief editor, A World of Dreams, there is a greater emphasis on seasonal trends in jewellery, bringing greater demand for volume, fast turnaround and quality. And nowhere is this easier than in China, the fastest-growing economy in the world.
In his seminar on major trends in jewellery - delivered at the Hong Kong International Jewellery Show - Brodbeck discusses the fashion invasion throughout the major brands: "The concept of 'diamonds are forever' has now been turned on its head. The world is richer, and people want to change. Now jewellery has entered the fashion world, we can launch colours; we launch trends, we launch stones."
Jonathan Yew Chee Ming, director of Malaysian supplier, C My World, agrees: "We need to share world information, and fashion trends will help us build future branding. We're in the fashion industry, and we need to look forward." Using low-cost Chinese manufacturing with international designers, C My World is a classic example of how this new model works for many Asian companies.
It is clear that lower production costs in China are exerting a powerful pull for manufacturers worldwide. Some people even think this is starting a price war. "A lot of US manufacturers find they have to compete. They have to go to China, Thailand, or wherever they find less labour costs today," remarks Robbie Shafiian, director of US-based Shafiian Gem Corp, who believes it's not only the US industry that is affected.
"Italians, for example are the masters in design and workmanship. But they can't compete!" Shafiian continues. "Of course, many of these European manufacturers have opened up companies in Asia as well. The majority go to China just to source diamonds, or find gold, but they do not want to pay high prices for labour in their own countries any more."
With over 30,000 visitors to the Hong Kong Show (most of them from the surrounding countries), it is apparent that the closer the country is to China, the more pressing the issue of competition. While European and American representatives are primarily concerned with fairs closer to home, Asian companies regarded the Hong Kong fair as "the big one". As to how these Asian companies are competing to ensure survival, each has a different view.
Yew's operations are unaffected by Chinese manufacturing. In fact, he has found that much of the intensive handwork and polishing is better produced in China. "China has built up a very good world image - and we cannot make it so cheap in Malaysia. What we need to do in response is make better quality, better branding and a better feeling so that the customer will never regret buying from us.
"We need to build something different than just a cheaper alternative. That would be a sure way to kill ourselves. With branding, good design and quality we stand out. We develop the final packaging ourselves. We need to have the individual touch, because only the branding can survive now. Without this, without quality, you had better stay in China."
In his seminar on tapping the Indian market, Hemant Shah of the Indian Export Promotion Council agrees that branding is vital in a cutthroat trading environment. Although India produces 90 per cent of the world's cut-diamonds by volume (60 per cent by value), Shah acknowledges that China's dominance needs to be tackled head-on. "We need to do for jewellery what we've done for mobile phones. It has to be a 'must-have' item. We need to find people who can design and market jewellery as you would other electronic products, and to promote it as a category."
Shah notes that in the current market, jewellery is not the preferred product for luxury spending: "The greatest loss of prestige for the industry was when we started to sell products by the gram. We need a new prestige. We have a substantial partnership between China and India. We already have the relationship - we just need to take it forward."
Joeson Khor of Ablaze Gem in Malaysia also focuses his efforts on forging strong partnerships with China. Manufacturing and polishing cubic zirconia in Kunming, Ablaze Gem is based in Guangxi province, and supplies stones back to Malaysia. "In my part of the industry, 80 per cent of the production is labour costs," Khor states. "The Chinese technology has advanced enough for us to use it, and we'd be silly not to do it. As I'm supplying the raw material, my side is not really affected. It's a positive influence, as I'm supplying to the Chinese manufacturers as well."
Most other exhibitors at the show acknowledged that competing directly with the Chinese industry would be futile. With the recent addition of Thailand and India to the Asia Fashion Federation (AFF - launched by Japan, China and Korea to forge ties and promote Asian fashion throughout Europe and the US), more emphasis is being made on partnerships: to provide choice for the consumer, improve products and make a point of difference in a vast pool of Chinese talent; however, establishing this point of difference is proving difficult for some.
Singaporean designer Joon Courtenay found that her first forays into the international scene were heartbreaking, when some of her designs "inspired" cheaper Asian knock-offs. "Asia is the whole problem, although Europe is not so hot either," Courtenay exclaims. "Some people come to my stall and bump their heads on the glass trying to figure out how I made my pieces." Courtenay found that some passers-by would whip out a mobile phone to take photos of her expensive, labour-intensive pieces.
"Some of their companies send them over just to rip off new designs. They come in with their buyer standing behind them, while they turn it over with their hands - it's so blatant. They don't get the finer details, the nuances. They don't understand the technology or the craftsmanship that goes into it."
The Hong Kong Show's Fast Action Scheme - a system whereby exhibitors with proof of provenance can report design thieves - served as a warning to would-be pilferers, but Courtenay believes this is often too late. "I guess it's OK if Cartier or Bulgari do it - they have the name. But not the cheap rip-off shops - they have no pride at all."
Most jewellers at the show were alert to any potential design thievery. Indeed, the author witnessed this kind of copy-cat behaviour while talking with Shafiian. A heated discussion took place between him and a passing visitor who was idly inspecting the back of a $US200,000 pearl and diamond necklace. When challenged by Shafiian, the buyer replied that if a piece was put out on display then it was fair game.
"I know that guy - he's not who he says he is. We've just finished this piece, and it's been seen across all the media," Shafiian states. "But if people like this want to knock it off, they'll have to go much poorer quality." Comparing the relaxed laws and attitudes in Asia, he noted, "They can sue you in the United States. This is Hong Kong. Anything goes."
So serious is the problem that the recent China Gems Magazine 2007 called for improvements and sweeping reforms across its disorderly and unsystematised market. It seems even the Chinese industry is awake to the issue of Intellectual Property theft throughout Asia.
Despite these thoughts, Shafiian remains confident of his company's position against the Chinese powerhouse. Primarily a pearl wholesaler, Shafiian Gem Corp's point of difference is also in producing individual showpieces. "If you do produce merchandise in China, if you have the right representatives from your company watching what comes out, it can be less expensive," he observes. "When we make a big piece it has to be done perfectly, and it has to be supervised. That will cost money whether you do it in China, India or wherever.
"Any jeweller in the world can produce a better piece than the Chinese. It all depends who is controlling that. But it also depends on how much of a rush there is, what volume they want to manufacture, how much control they put on that. If the merchandise is finished well, with fine gold and workmanship, any jeweller can do that. You don't have to be Italian, you don't have to be Chinese."
While many manufacturers are happy with Chinese quality and service for quantity and mass-produced items, it appears that this young market has a long way to go to win over the traditional jewellery centres in Thailand and India. Capitalising on Chinese growth through branding, individual design and quality has never been so important Asia-wide. The entrepreneurial Yew sums up the mood of many Asian companies: "If everybody focuses on fighting change and challenging price, the work produced is no good. At C My World, we are not competing at all. It's only how we handle the change. It's knowledge we need to survive."