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22 january 2018

liang_weizhang_xx.jpgPrior to joining the Guangzhou Diamond Exchange, Liang Weizhang served as a civil servant of Guangdong Entry-Exit Inspection & Quarantine Bureau as the director of the Kimberley Process Office. He participated in the KP Review missions to South Africa, Zimbabwe, Lesotho, Laos, Bangladesh, Namibia, and Venezuela.

With strong knowledge of the global diamond industry and KP affairs, and as a qualified FGA, DGA of Gem-A, he has the experience of running a diamond and jewelry laboratory as well for a government organisation.

Holding various positions including Vice Chairman of the Gems and Jewelry Testing and Assessment Committee of GAC (Gems & Jewelry Trade Association of China), he is also the Committeeman of the Gems & Jewelry and Arts Appraisal Committee of China Appraisal Society.

As a general manager of the Guangzhou Diamond Exchange since 2015, he has steered it to the second international trading platform of rough diamonds after the Shanghai Diamond Exchange.

Here, in an Interview with Rough&Polished, Liang Weizhang speaks at length about the Guangzhou Diamond Exchange, KP associated matters and various other diamond industry related issues.

Some excerpts:

Please give us a brief history of the Guangzhou Diamond Exchange from inception; services offered, etc., for our readers' benefit.

Guangzhou Diamond Exchange (GZDE) is a diamond service platform established as officially approved by the People's Government of Guangdong Province, according to the national strategy of "One Belt and One Road" and Guangdong's "the Twelfth Five-Year Plan" for the development of gold, other precious metals and jewelry in Guangdong Province. GZDE emerged in the context that Guangzhou has a mature diamond industry cluster and Guangzhou's diamond industry is in need of professional and convenient diamond trade services. At the Kimberley Process Certification Scheme Plenary held in Guangzhou on November 11, 2014, witnessed by diamond industry representatives and government officials from over 70 countries, leaders of the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the People's Government of Guangdong Province and the People's Government of Guangzhou Municipality jointly unveiled the preparation of GZDE. In July 2015, the Exchange was established with the approval of the provincial government.

GZDE contributes to integrate the international supply and domestic purchasing demand, establishing an international diamond platform to offer convenient diamond trading service for diamond and jewelry enterprises all over the world; and to gather enterprises of financing, insurance, logistics, testing, appraising, training and culture promotion, aiming to build up a modern and comprehensive service hub for the diamond and jewelry industry.

What We Serve

i) SettleDiam

Introduction: Since most of the Chinese buyers are located in Guangdong province, they are in dire need of local, efficient and authorized trading platform to facilitate the international trade.

Now GZDE has developed a service product named SettleDiam, to provide professional service of foreign currency settlement and help Chinese buyers to realize efficient payment in international purchase.

Highlights: 1) China’s buyers (mostly from Guangdong province) can complete international purchase and pay through GZDE directly to their suppliers; 2) China’s buyers can make use of other service products of GZDE after such purchase, including diamond processing through ManuDiam service, importing into domestic market through ImportDiam service via Shanghai, or even sell back to international market through SettleDiam service.

ii) ManuDiam

Introduction: China’s enterprises seldom purchase rough diamonds in international market. While the SettleDiam service provided by GZDE solves the problem in foreign exchange settlement, the ManuDiam service is designed to provide processing and manufacturing resource located in Guangdong Province, to offer supports for new entrants of rough diamond business to make purchase decision and cutting plans. Now, China’s buyers can purchase rough diamond through GZDE under international bonded trade and transfer to processing trade in bonded condition.

Highlights: By connecting international trade with processing, GZDE provide a one-stop shop for China’s enterprises to step into the upstream of the diamond pipeline, seeking guarantee and promoting concept of natural diamond by purchasing rough directly, enabling the introducing of professional financial service in supply chains, and expand profits.

iii) BondedDiam

Introduction: For most of the buyers located in Guangdong province, it is very inconvenient to view and purchase diamonds from international market. For bonded viewing, traders or diamonds are travelling between Guangzhou, Shanghai and Hongkong, which cost a lot of time and expenses on logistics, Customs supervison and foreign currency settlement.

Highlights: 1) Facilitate overseas suppliers to ship goods to mainland China for viewing or exhibition without paying tax; 2) Facilitate Guangdong buyers to view and purchase goods locally and reduce relevant cost; 3) Customs and Entry-Exit Inspection & Quarantine Bureau have built up a joint working area for diamond inspection on the platform of GZDE, providing one-stop services to handle with import and export declaration efficiently; 4) After purchase in Guangdong, it is easy to find diamond processing, jewelry manufacturing, wholesale and retail resources nearby.

iv) ImportDiam

Introduction: According to the policy support from AQSIQ, GZDE is the second officially approved international diamond trading platform in China. At present, GZDE can provide direct import channel for ordinary trade of industrial rough diamonds and can provide with import agent service via Shanghai Diamond Exchange for ordinary trade of diamonds under other categories.

Highlights: Since most of the diamonds purchased by China’s buyers are to be used and sold in domestic markets, the ImportDiam service provided by GZDE makes things easier.

v) FinanDiam

Introduction: As a state holding trading platform, GZDE has advantages to attract financial supports. With GZDE’s supervision of goods flow and credit investigation of member enterprises as a justice and transparent trading platform, financing institution can offer superior support to GZDE members.

Highlights: Providing solution for the financial difficulties of fund precipitation. Facilitate China’s buyers to expand business, especially to step into rough diamond sector.

vi) ATADiam

GZDE can providing agent service for members from mainland China to apply for ATA Carnets, which will facilitate members to participate international exhibitions and shows conveniently.

vii) MarketingDiam

GZDE has been promoting generic marketing of diamond and jewelry culture since its establishment and will always support members with marketing programs.

viii) Gem-Diamond Elite Club

Apart from member enterprises, GZDE is also recruiting individual members who are jewelry fanciers, investors, etc., thus to discover the huge demand from the consuming market and support the business of member enterprises.

Guangzhou Diamond Exchange follow Kimberly Process (KP) as mandatory? Given that the issues related to KP are being debated by all the major diamond centres, what is your say on the topic?

Kimberly Process (KP) is of great importance in keeping the global market for rough diamonds conflict free. As an international diamond trading platform, GZDE has established the by-law and a system of industry self-regulation fully following the KP requirements. On one hand, we share information relevant to the implementation of the KPCS with members, on the other hand, we help the supervisory authority to improve laws and regulation and collect feedback from the industry. GZDE has participated various KP events since its establishment, including review visits, intersessional and plenary meetings. Personally, I work as the KP Focal Point of China ever since 2003. We will continue to promote the development of the KPCS.

Guangzhou Diamond Exchange (GZDE) signed a MoU with the Gem & Jewellery Export Promotion Council (GJEPC) of India last year. What's the progress in the topics undertaken?

GZDE and GJEPC has been taking positive steps in promoting bilateral cooperation under the framework of the MoU:

In December 2016, when GZDE and Guangdong Gems and Jade Exchange(GDGJD) held the Guangzhou International Diamond & Jewelry Annual Meeting 2016, Mr. Sanjay Shah, Diamond Panel Committee Convener of GJEPC, delivered a speech in the topic of India-China Gem & Jewellery Trade Relationship, expressing the good will to further cooperation.

In February 2017, GZDE and GJEPC co-organized the India Diamond Week in Panyu, Guangzhou, gathered more than ten Indian diamond suppliers to participate, providing a convenient trading platform for local enterprises and the international suppliers, and achieving great success.

In July 2017, GZDE and GDGJD led a group of member companies to visit the 34th India International Jewellery Show (IIJS) in Mumbai for purchasing goods and explore business opportunities, which opened a new chapter for the development and cooperation of the diamond industries in both China and India.

In Nov 2017, GZDE member delegation visited Mumbai again, participating the 1st India Diamond Week, which proved to be another fruitful purchasing journey.

Diamond taxation policy is another topic that needs clarity. How does the tax structure in China make it convenient for traders from overseas? What is the percentage of VAT charged currently? Can you spell out all the benefits offered?

i) The present taxation policy of diamonds is explained as follows:

There are two main kinds of import business in China, i.e. the Bonded Trade and the Ordinary Trade.

The Bonded Trade means that the diamonds are imported into Mainland China under bonded condition, not for the domestic sales market, no tax is to be charged on the diamonds under this kind of trade. In the Bonded Trade, there is one major business which is the so-called Processing Trade, i.e. the diamonds are imported and sent to the diamond processing factories without being collected any taxes, and all the diamond processed will then be re-exported to the international market. It should be noted that, the diamonds imported under bonded condition is allowed to be contracted to the processing factories for cutting/re-cutting and polishing/re-polishing (Bonded Trade to Processing Trade).

The Ordinary Trade means that the diamonds are imported into Mainland China with all the taxations have been completed, and these diamonds can be sold in the domestic market. The taxation is as follows:

excl_29012018_eng.jpg

ii) Another policy regulation of China’s diamond industry is that, the only Ordinary import channel is Shanghai Diamond Exchange (SDE). All diamonds imported into the Mainland China market must go through Shanghai, and most of which are to be used and manufactured in Guangdong Province.

iii) By making full use of the present taxation & import policy and taking advantages of manufacturing resources in Guangdong Province, GZDE provides a one-stop shop for diamond bonded viewing, trading and processing (esp. for rough), as well as agent services of polished diamond Ordinary import through SDE. Traders from overseas enjoy new benefits to trade through GZDE:

They can use the bonded viewing and trading services of GZDE and send goods to GZDE under consignment without paying tax. As Guangdong Province is where the diamond industry is concentrated, it facilitates the trade.

They can get paid immediately after bonded transaction is concluded, since GZDE is approved to carry out cross border foreign exchange settlement in diamond bonded trade.

What is the current membership in GDE, local and overseas? What are requirements for an overseas company to become members of GDE?

GZDE adopts membership-based management and organized diamond trade following the principles of fairness, justice, safety, profession and honesty. The membership system of GZDE consists of Comprehensive Trading members, Trading members, Non-Trading members and Gem-Diamond Elite members (individual members).

Now we have over 300 members, including diamond and jewelry manufacturers, wholesalers, retailers, and service providers such as equipment manufacturers and logistics, insurance, advising companies, 90% of which are from mainland China. The overseas members account for about 10%, including high end diamond suppliers from South Africa, De Beers sight holders, etc.

The requirements for an overseas company to become GZDE members are as follows:

i) Applier must be a legal entity, organization or other operation agencies registered legally and engaged in diamonds, gems and jewelries. Among which, two years of diamond related business is required for Comprehensive-Trading member.

ii) Applier must have a good commercial reputation.

iii) Complete application documents as required and other needed attachments.

Are diamond exchanges (trading floors) still relevant to the diamond business, as not much is highlighted about Exchanges worldwide? Most businesses seem to happen in the privacy of the traders' offices. Your comments?

I think that diamond exchange plays vital roles in promoting the healthy development of diamond industry. First of all, diamond exchange can provide safe and basic infrastructures for diamond trade. Secondly, it is the inner code of conducts of an exchange that matters most in uniting all members, protecting everyone’s benefits and dealing with disputes. Thirdly, exchange is a platform to provide comprehensibly services, including customs, insurance, logistics, designing, processing, laboratories, banks, financial supports, marketing, training, etc. Nowhere else could a trader enjoy the benefits to trade in a safe and convenient place like an exchange and find the needed resources and services through an exchange. In my understanding on the term “place” or “floors”, it can be physical, but also can be virtual.

Aruna Gaitonde, Editor-in-Chief of the Asian Bureau, Rough & Polished