The United States’ withdrawal of special status to Hong Kong is set to to boost Indian jewellery exports to developed nations and help the country become the world’s largest diamond trading hub, experts said.
Following Beijing’s imposition of national security law on Hong Kong early this month, the independence of some seven million people in Hong Kong was seized by Chinese authorities. This means, citizens in Hong Kong will no longer be able to protest or launch processions against the Chinese government.
Following the Chinese action, the United States on July 14 announced withdrawal of special status granted to Hong Kong. United Kingdom, Australia and Canada also joined the US in condemning Chinese aggression on Hong Kong.
“This move will possibly create opportunities to India in gems and jewellery trade. For the United States, Hong Kong and China are fourth largest importing destinations of gems and jewellery after India, France and Italy,” said Colin Shah, Chairman, Gems and Jewellery Export Promotion Council (GJEPC).
India’s gems and jewellery exports have taken a severe hit the past few months due to the lockdown in India and the world markets. GJEPC data showed India’s gross gems and jewellery exports declined by a staggering 55 per cent to $2.7 billion between April and June 2020, from $6.07 billion in the corresponding period last year.
Hong Kong enjoys a discounted rate of 3.3 per cent export duty for goods shipped to the US due to the special status, while shipments from the rest of the world suffer 7.5 per cent export tax. The United States and China have been in a trade war for three or four years with taxes levied on goods originating from each other.
The President’s executive order ending Hong Kong’s preferential economic treaty under US law effectively ends the territory’s separate customs treatment from China. This means, goods exported from Hong Kong will now be regarded as goods made in China for duty purpose.
“Hong Kong and China exported gems and jewellery worth $980.85 million and $2,622.19 million respectively to the US in 2019. Ending of preferential treaty as per the new order with Hong Kong would open new business avenues for India. Manufacturing business has the potential to witness a shift to India from China,” said Shah.
However, Hong Kong and China are also key destinations for India’s jewellery exports, with nearly 27 per cent directed to that market. A large chunk consists of diamonds and gemstones used as raw materials for onward studded jewellery exports to the US. Many Indian diamond and jewellery companies have their offices in Hong Kong and the move is likely to impact their businesses too.
“The Indian gems and jewellery sector has an opportunity ahead to take a quantum leap and become the global leader trading hub in gems and jewellery,” said Shah.
According to GJEPC, India exported gems and jewellery worth $10.48 billion in 2018-19 and $9.17 billion in 2019-20 to the United States, which is 26 per cent of overall gems and jewellery shipped out of India in those years. Thus US shares a larger pie for the gems and jewellery consumption from India.
Currently, close to 1,400 Indian firms have operations there with an annual bilateral trade at $67 billion in 2018. The stock of US foreign direct investment totaled more than $82 billion in 2017.