A GLOBAL / COUNTRY STUDY AND REPORT ON Jewellery Industry in Hong Kong Submitted to

Gujarat Technological University

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION

UNDER THE GUIDANCE OF MS. Amola Bhatt Assistan Professor Submitted by [Batch : 2012-14] MBA SEMESTER III/IV [Jayeshkumar Chauhan, Enrollment No.: 127290592021] [Mayur Chauhan, Enrollment No.: 127290592022] [Shaileshkumar Chavada,Enrollment No.:127290592023] [Jitendra chihla, Enrollment No.: 127290592024] [Mansi Choksi, Enrollment No.: 127290592025] [Jalpesh Chotaliya, Enrollment No.:127290592026]
L.J. INSTITUTE OF MANAGEMENT STUDIES

MBA PROGRAMME Affiliated to Gujarat Technological University, Ahmedabad December-2013

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STUDENTS DECLARATION
We, following students, hereby declare that the Global/ Country Study Report titled GLOBAL COUNTRY STUDY REPORT ON JEWELLERY INDUSTRY in HONGKONG is a result of my/our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged. If I/we are found guilty of copying any other report or published information and showing as my/our original work, or extending plagiarism limit, I understand that I/we shall be liable and punishable by GTU, which may include Fail in examination, Repeat study & resubmission of the report or any other punishment that GTU may decide.

Enrollment no. 127290592021 127290592022 127290592023 127290592024 127290592025 127290592026

Name Jayesh Chauhan MayurChauhan Shaileshkumar Chavada Jitendra Chihla Mansi Choksi Jalpesh Chotaliya

Signature

Place: .. ..

Date:

L.J. INSTITUTE OF MANAGEMENT STUDIES

INSTITUTE CERTIFICATE
Certified that this Global Country Study and Report Titled GLOBAL COUNTRY STUDY REPORT ON JEWELLERY INDUSTRY in HONKONG is the bonafide work of attached student list with enrollment numbers, who have carried out their research under my/our supervision. I/We also certify further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate. I/we have also checked the plagiarism extent of this report which is % and the separate plagiarism report in the form of html /pdf file is enclosed with this.

Signature of the Faculty Guide MS. AMOLA BHATT, ASS. PROFESSOR

Signature of Principal/Direct MR. SIDHARTH BIST, DIN

PREFACE
This global country study at MBA program develops a feeling about the difficulties and challenges in the business world. Only theoretical knowledge is not important, but practical knowledge along with that is also important as it adds meaning to education.

Through this report we came to know the various aspects of the country, economic and social factors surrounding HONGKONG. We came to know about the environment prevailing in the country for trade and commerce carried out in the country.

This report even includes study of Education industry from the view point of trade between India and Indonesia.

Thus this report is a compilation of Education aspects of Indonesia related to trade and commerce of the country.

ACKNOWLEDGEMENT

The successful completion of this report would not have been possible without co-operation and support of our professor, friends, institute and the university.

We forward gratitude to respected director of our institute for giving us an opportunity to work out this report.

We are also thankful to our project guide Prof. Amola Bhatt, and our GCSR Co-ordinator Prof. Disha Mehta and Prof. Meetali Saxena, with whose help the study was made possible and who provided the full guidance, co-operation and valuable suggestion about this report.

The valuable ideas, recommendation and response are simply adorable. We have been provided all possible guidance and helpful suggestion for accomplishment of this project.

We are thankful to our college friends and all those who have helped us directly or indirectly in the preparation of this report.

TABLE OF CONTENTS SR.NO 1 2 3 4 5 6 7 8 TOPIC INTRODUCTION PG. NO. 7

INTRODUCTION OF JEWELLERY INDUSTRY IN HONG 19 KONG STEEPLE ANAYLISIS OF HONG KONG 25

STEEPEL ANAYLISIS OF JEWELLERY SECTOR IN HONG 32 KONG STEEPEL ANAYLISIS OF JEWELLERY SECTOR IN INDIA COMPARISION BETWEEN INDIA AND HONG KONG RECENT TRENDS BETWEEN INDIA AND HONG KONG IN JEWELLERY SUMMERY 38 44 55 61

Chapter: 1 Introduction of Hong Kong

Hong Kong is suited in the south-eastern tip of China. With a total area of 1104 square kilometers, the territory comprises Hong Kong Island, Kowloon Peninsula, and the more rural part of Hong Kong- the New Territories, which is also including 262 outlying islands. Hong Kong is ideally positioned at the center of rapidly developing East Asia. Hong Kong, described as a barren rock some 150 years ago, is today a world-class financial, trading and business centre and, indeed, a great world city. Hong Kong has no mineral resources, but has one of the finest deep-water ports in the world. A hardworking, entrepreneurial and welleducated population of about 7 million people serve as the foundation of Hong Kongs productivity and creativity. Hong Kong has many nicknames, but the most famous is "Pearl of the orient" (Cantonese: Dong Fong Chi Chu). It was named according to the shiny city lights from both sides of Victoria Harbor and the high rise buildings. In addition, Hong Kong is also named as "Golden Egg", "The World's most vertical City", The orient Manhattan" "The paradise of shopping", "Food paradise" and "City of life". Hong Kong was occupied by UK 1841, it was formally ceded by China the following year; various adjacent lands were added later in 19th century. Pursuant to an agreement signed by china and UK on 19 December 1984, Hong Kong became the Hong Kong Special Administrative Region (SAR) of the Peoples Republic of China on 1 July 1997. In this agreement, china promised that under its one country, two systems formula, chinas socialist econom ic system would not be imposed on Hong Kong would enjoy a high degree of autonomy in all matters except foreign and defense affairs for the next 50 years.

Culture: East Meets West

Hong Kong is frequently described as a place where "East meets west", reflecting the culture's mix of the territory's Chinese roots with influences from its time as a British colony. Concepts like Feng-Shui are taken very seriously, with expensive construction projects often hiring expert consultants, and are often believed to make or break a business. A popular destination for shoppers from around the world, Hong Kong has everything to offer from the latest European fashion to traditional Chinese wares. Malls, department stores, and designer boutiques offer an amazing contrast to the bustling open-air Stanley Market and Jade Market shopping areas. Every district in Hong Kong has old-fashioned stores that sell Chinese herbal medicine. The largest concentration of these shops is along Bonham Strand and Bonham Strand West in Sheung Wan, where all types of pills, plants, and dried animals are for sale. Hong Kong has an active nightlife centers on two major entertainment districts, LanKwai Fong (Central) and Wanchai. Both areas are frequented by expats and locals alike. For a more quiet evening, a trip to Victoria Peak offers a spectacular view of the city. There is also a promenade along the TsimShaTsui waterfront, which is popular among young Chinese couples. Shopping, a form of entertainment for the people of Hong Kong is even done at nighttime as evident in the Temple Street Night Market. The fusion of east and west also characterizes Hong Kong's food, where dim-sum, hot-pot, and fast-food restaurants coexist with haute cuisine.

Art and entertainment: Entertainment Hub

Hong Kong is a renowned global center of trade, and calls itself an "entertainment hub". In the late 1960s and 1970s its martial arts films become highly popular. Several Hollywood performers, notable actors and martial artists have originated from Hong Kong cinema, especially Bruce Lee, Jackie Chan, Michelle Yeoh, Jet Li and many others. A number of Hong Kong film-makers have also achieved widespread fame in Hollywood, such as John Woo, Wong Kar-wai, and Stephen Chow.

Hong Kong is the center for Canto-pop music, which draws its influence from other forms of Chinese music and Western genres, and has a multinational fan base. The government also supports cultural institutions such as the Hong Kong Museum of Art, the Hong Kong Philharmonic Orchestra, the Hong Kong Heritage Museum, and the Hong Kong Academy for Performing Arts. For cultural development the government's Leisure and cultural Service Department subsidies and sponsors international performers brought to Hong Kong. The production of Hong Kong's soap dramas, comedy series, and variety shows reach audiences throughout the Chinese-speaking world. Magazine and newspaper publishers in Hong Kong distribute and print in both Chinese and English, with a focus on sensationalism and celebrity gossip. The media in Hong Kong is relatively free from official interference compared to Minland China.

Historical Background of Hong Kong:

Hong Kong has very rich history. Its opened a new chapter in its eventful history at the stroke of midnight on June 30, 1997 when it re -joined Mainland China from which it had been separated for more than 150 years. The handover as the historic event is commonly called of British rule to Chinese sovereignty was marked by the lowering of the British and Hong Kong flags and the hoisting of the Chinese national and Hong Kong Special Administrative Region flags, a ceremony that was carried out with great protocol. In its early days, Hong Kong with its dry and largely infertile mountainous terrain was regarded as an uninviting prospect for settlement. A population of about 3,650 was scattered over 20 villages and hamlets, and 2,000 fishermen lived onboard their boats in the sheltered harbour Hong Kongs one natural asset. Victoria Harbour was strategically located on the trade routes of the Far East, and was soon to become the hub of a growing trade with China. Hong Kongs development into a commercial centre began with British settlement in 1841. At the end of the 18th century, the British dominated the foreign trade in Canton (Guangzhou) but found conditions unsatisfactory, mainly because of the contradictory viewpoints of two quite dissimilar civilisations.

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All most all the Public and utility services are developed in the Hong Kong between 1861 -1904. The public and utility services include Gas Companying 1861, the Hong Kong Electric Company in 1889, the electric tramways in 1904 and the Kowloon-Canton Railway, completed in 1910. Public education began in 1847 with grants to the Chinese vernacular schools. In 1873, the voluntary schools mainly run by missionaries were included in agrant scheme. The College of Medicine for the Chinese, founded in 1887 with SunYatSen as one of its first two students, developed into the University of Hong Kongin 1911 and offered arts, engineering and medical faculties. Hong Kong had faces many difficulty in its past i.e. During World War I, Japan presented its 21 demands to China. In 1931, Japan occupied Manchuria and tried to detach Chinas northern provinces, leading to open war in 1937. Canton fell to the Japanese in 1938, resulting in a mass flight of refugees to Hong Kong. It was estimated that some 100 000 refugees entered in1937, 500 000 in 1938 and 150 000 in 1939 bringing Hong Kongs population at the outbreak of World War II to an estimated 1.6 million. It was thought that at the height of the influx, about 500 000 people were sleeping in the streets. Japan entered World War II on December 7, 1941, when its aircraft bombed United States warships at Pearl Harbour. At about the same time, Japanese armed forces attacked Hong Kong (December 8, 1941, Hong Kong time). They invaded Hong Kong across the border from China and pushed the British from the New Territories and Kowloon on to Hong Kong Island. After a week of stubborn resistance on the island, the defenders including the Hong Kong Volunteer Defence Corps were overwhelmed and Hong Kong surrendered on Christmas Day. But some good days are came after a period of economic stagnation caused by the United Nations trade embargo on China arising from the Korean War, Hong Kong began to industrialise. No longer could Hong Kong rely solely on its port to provide prosperity for its greatly increased population. The rise of Hong Kongs manufacturing sector began with the setting up of textiles mills. The mills gradually expanded their range of products and, by the 1960s; they included man-made fibres and garments. During this decade textiles and clothing made up about half of domestic exports by value.

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As the public health is more important for any country the Hong Kong Governments also developed health care policy in 1974 to ensure no one was denied adequate health care due to a lack of means. In accordance with that policy, the public sector provides a range of heavily subsidised health care services, available to everyone. The private sector, on the other hand, provides non-subsidised medical services that offer patients more choice and personal care. Hong Kongs health care service public and private meets the highest standards. This is reflected in health figures that show people having longer lives and one of the worlds lowest infant mortality rates. RELIGION Hong Kong enjoys a high degree of religious freedom. The majority of Hong Kong's population practices ancestor worship due to the strong Confucian influence. A sizable Christian community of around 500,000 exists, forming about 10% of the total population. Believers of Buddhist or Taoist also exist. There are also an estimated 70,000 Muslims, between 2,000 and 3,000 Jews, and a few Hindus; Sikhs and Baha'is are also represented. Apart from offering religious instructions, many major religious bodies have established schools and provided social welfare facilities. Hong Kong's religious beliefs are tied to the region's early role as a fishing community. Tin Hau, the protector of seafarers, has been honored with several temples throughout Hong Kong for at least 300 years. HongKongers especially elder generations, go to Taoist or Buddhist temples to appease the deities and, usually, to ask for compassion or good fortune PEOPLE A city of 6.8 million people, Hong Kong is a cosmopolitan metropolis where old tradition blends perfectly with Western culture and post-modern trends. Ethnic Chinese make up the bulk of its population, but there is also a sizeable presence of expatriates and people of different ethnicity, all enjoying the freedoms and prosperity of this city, once a fishing village.

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While the waves of Western culture have long arrived on the shores of Hong Kong, traditional values are still held by many Chinese people. Worshipping of ancestors live side by side with a night out in an Irish pub in the fashionable area in Central, Hong Kong's main business district Hong Kong is an affluent society with a per capita GDP of US$23,000 in 2003, rivaling those of the most developed economies. Hong Kong is one of the safest cities in the world. Both English and Chinese are the official languages. This bilingualism features in daily life in Hong Kong with many people speaking fluent English. Cantonese is the local dialect and an increasing number of Hong Kong people speak good Putonghua.

FREE TRADE A founding member of the World Trade Organization (WTO), Hong Kong is firmly committed to free and open trade. There is no barrier on trade. Hong Kong does not charge tariff on importation or exportation of goods. Import and export licensing is also kept to a minimum. Licensing is only imposed when there is a genuine need to fulfil obligations undertaken by Hong Kong to our trading partners, or to meet public health, safety or internal security needs. After the reunification with China in 1997, Hong Kong has continued its separate membership to the WTO using the name "Hong Kong, China". INTERNATIONAL FINANCIAL CENTRE AND SERVICE HUB While traces of its past can still be found in the fishing villages scattered in its outlying islands, Hong Kong has emerged from a post-war manufacturing base to a major financial and services centre featuring state-of-the-art infrastructure and highly efficient business services. Its stock market capitalization is only second to Japan in Asia. The stock market of Hong Kong provides a wide variety of products ranging from ordinary shares to options, warrants, unit trusts and debt securities.

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DEMOGRAPHIC OVERVIEW OF HONGKONG

Hong Kong is one of the most compactly populated areas in the world with an overall density of some 6,300 people per square kilometers. Hong Kong has one of the worlds lowest birth rates1.11 per woman of child-bearing age as of 2012, far below the replacement rate of 2.1. With just 1,032 babies born in 2009 to every 1000 fertile women, it is estimated that 26.8% of the population will be aged 65 or more in 2033, up from 12.1% in 2005. The demographics of Hong Kong mainly comprises of ethnic Chinese, making up more than 93.6% of the population. The inherited home of most Hong Kong people originate from various regions in Guangdong. Most Hong Kong people nowadays are the issues of immigrants from Mainland China and around the world after the end of World War II. Despite Filipino and Indonesian foreign domestic helpers being the ethnic minorities, there are over 273,609 foreign domestic helpers in Hong Kong, accounting for 4% of the entire population. The population of Hong Kong increased markedly during the 1990s, reaching 6.94 million in 2005. About 96 % of Hong Kong's population is Chinese, the majority of which are Cantonese. Groups such as the Hakka and Teochew are also extensive. Used in government matters, Cantonese is spoken by most of the local Chinese population at home and in the office, although English is also widely understood and spoken by more than one-third of the population. The remaining 4 % of the population is collected of non-Chinese, and among these is a significant South Asian population. Some Nepalis live in Hong Kong are Gurkhas, who chose to stay after their service to Britain, and their progenies. More than 15,000 Vietnamese, who came to Hong Kong as refugees, have become permanent residents. Around 140,000 Filipinos work in Hong Kong as housekeepers, with other such workers coming from Thailand and Indonesia. There are also a number of Europeans, North Americans, Japanese, and Koreans. Hong Kong is one of the most densely populated countries/dependencies in the world, with an overall density of more than 6,200 people per km square.

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ECONOMIC OVERVIEW OF HONGKONG Slow growth of 1.4% in 2012 is attributed to depressed global demand which has been offset by strong domestic demand and high consumer confidence. Going forward growth is expected to accelerate driven by improved global economic conditions to3% in 2013 and 4-5% through 2016.Hong Kong is a major international financial centre and a leading world trading entity. Hong Kong is amongst the freest economies in the world and is home to some of the region's most important corporate headquarters. In 2012, Hong Kong topped the World Economic Forum's Financial Development Index. In GDP (PPP terms) it stands as the worlds 36th -largest economy. The city resides in an area smaller than the Australian Capital Territory and has a population of about one third of Australias. Hong Kong is a major provider of services to China and is the mainland's designated centre for the internationalisation of the Renminbi. Its economic prospects now depend largely on its links with China. Hong Kongs economic integration with mainland China developed through the 1980s with the establishment of Chinas first Special Economic Zone in Shenzhen, just across the border, transforming a fishing village into a gleaming metropolis of over 10 million people. Investment by Hong Kong industrialists across the Pearl River Delta (PRD), arching from Hong Kong in the East through Shenzhen, Dongguan, Guangzhou, Foshan, Zhongshan and Zhuhai to Macau in the West, has been one of the main drivers of Chinas rapid economic modernisation. Since 2004, the China-Hong Kong Closer Economic Partnership Arrangement (CEPA) has accelerated integration between Hong Kong and the PRD, giving favourable treatment to Hong Kong manufactures and services that meet rules of origin criteria. The non-discrimination against foreign-owned companies under these criteria has allowed some Australian companies to benefit from CEPA and gain greater access to mainland China. Hong Kongs manufacturing sector has moved almost completely to the mainland since the 1980s, and services now dominate its economy, accounting for 93 per cent of GDP. Over the past ten years, Hong Kongs growth has been supported by the tourism industry, notably from the opening to mainland-Chinese tourists, boosting retail sales as well as hospitality and construction.
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The financial services sector is expected to grow further, boosted by Chinas efforts to broaden the international use of the Renminbi. Australian service providers are actively engaged in banking, transport and logistics, employment consultancies, engineering, construction, aviation, architecture, accountancy, legal services, insurance, tourism and retailing. Following the global financial crisis, export-dependent Hong Kong was particularly affected by the slowdown in China and the decrease in demand from key re-exports markets in the United States and Europe, resulting in negative 2.5 per cent growth in 2009. 2010 saw a quick recovery to 6.9 per cent growth before the Euro crisis dampened growth in 2011 (4.9 per cent) and 2012 (1.4 per cent). The fourth quarter of 2012 showed the strongest growth of the year, 2.5 per cent, and growth picked up slightly to record 2.8 per cent in the first quarter of 2013. Exports to the US and Europe were weak, with domestic demand and inbound tourism supporting growth. Hong Kongs budget for 2013-14, the first under new Chief Executive C Y Leung, showed the economy in a strong fiscal position, with higher than expected revenue from land taxes revising the forecast for 2012-13 to a HK$65 billion (A$8.2 billion) surplus, after earlier estimates predicted a HK$3.4 billion deficit.

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GEOGRAPHICAL OVERVIEW OF HONGKONG Hong Kong consists of Hong Kong Island, Kowloon, and the New Territories. The Kowloon Peninsula is attached to the New Territories in the north, and the New Territories are in turn connected to mainland China across the Shenzhen River. In total, Hong Kong has 236 islands in the South China Sea, of which Lantau is the largest. Hong Kong is strategically located at the mouth of the Pearl River Delta in Southern China. It is within a few hours' flight from all major cities in East and Southeast Asia, including Beijing, Shanghai, Tokyo, Seoul and Singapore. Bordered by the Shenzhen Special Economic Zone to the north, Hong Kong has a total area of about 1,100 square kilometers. To the surprise of many visitors, this bustling city also features lush green hill slopes, secluded beaches, leisurely rural landscape and rocky shorelines. Hong Kong is eight hours ahead of GMT and has a sub-tropical climate. The body of water between Hong Kong Island and Kowloon Peninsula is Victoria Harbor, one of the deepest maritime ports in the world. Out of the territory's 1,102 km2, only less than 25 % is developed. The remaining land has been reserved as country parks and nature reserves.Hong Kong's climate is subtropical and prone to monsoons. It is cool and dry in the wintertime, and is hot and rainy from spring through summer. It is warm, sunny, and dry in autumn. Hong Kong occasionally has typhoons.

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TRADE POLICY OF HONG KONG Hong Kong's Trade Policy Hong Kong is a free port which thrives on free trade. Its open door policy has enabled it to become one of the world's largest trading economies and an international financial and commercial center serving the Asia-Pacific region and the Mainland of China. The cornerstone of this approach is a strong and credible multilateral trading system. The World Trade Organization (WTO) which came into being on 1 January 1995 to succeed the General Agreement on Tariffs and Trade (GATT), provides wired rules and disciplines for the conduct of multilateral trade. Hong Kong is a founding member of the WTO and has been participating actively in its activities. This attests to Hong Kong's dedication to an open and free multilateral trading system. Hong Kong has continued its separate membership since July 1, 1997 using the name "Hong Kong, China". Hong Kong became a member of the Asia-Pacific Economic Cooperation (APEC) and the Pacific Economic Cooperation Council (PECC) in 1991. Hong Kong belongs, in its own right, to the Asian Development Bank (ADB) and the World Customs Organization (WCO). It is an associate member of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and relates, in varying degrees, to the United Nations Conference on Trade and Development (UNCTAD). Since April 1994, Hong Kong has been an observer of the Trade Committee of the Organization for Economic Cooperation and Development (OECD). Hong Kong continues to participate actively in APEC, PECC, and the OECD Committees as from July 1, 1997 using the name "Hong Kong, China". The free trade policy means Hong Kong preserves no barriers on trade. Thus, Hong Kong does not charge tariff on importation or exportation of goods. Import and export licensing is also kept to a minimum. Licensing is only imposed when there is a genuine need to fulfillduties undertaken by Hong Kong to our trading partners, or to meet public health, safety or internal security needs.

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Chapter: 2 Introduction of Jewellery Industry in Hong Kong

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Hong Kongs jewellery industry was well-known for its flexibility and value for money. While most value-chain activities used to be conducted in Hong Kong, in the 1990s, manufacturing processes were increasingly shifted to southern China, leaving mainly the higher value-added processes in Hong Kong. The jewellery industry earned its receipts from both local retail and exports. The retail sector benefited from the influx of Mainland Chinese tourists in the early 2000s, while the export sector continued to be one of the largest exporters of precious jewellery in the world. Hong Kong jewellery industry can be divided into two main categories: precious

metal jewellery and imitation jewellery. In terms of production and sales volume, precious metal jewellery gets the lions share. Manufacturers in Hong Kong are specialized in creating contemporary design jewellery set with diamonds, precious and semi-precious stones as well as pearls. Jewellery made in Hong Kong is highly renowned all over the world and attains a higher standard of craftsmanship over their counterparts in other South East Asian countries; nevertheless it lags behind the state-of-art technology of Italy and Japan. Hong Kong leads the world in the production and consumption of 24kt gold With Hong Kongs reunification with Mainland China, many manufacturers have moved their production facilities back to China, especially mass production and labor intensive jewellery. Shenzhen is developing at a fast pace in chain-making and jewellery casting from medium to low end price range; in Panyu county around 250 factories are found, the majority belongs to Hong Kong manufacturers that produces jewellery adorned with diamonds, precious stones and pearls. These companies maintain their facilities in Hong Kong for design output, management and control and not to mention the production of high end jewellery which requires a more skilled craftsmanship. In view of the restructuring of the jewellery industry in Mainland China, the levels of efficiency and technology standard have improved as a result of joint venture with foreign producers like Hong Kong. Certain production phases are made in their factories in Southern China and subsequently ship back to Hong Kong for other value-added processes before delivery to overseas customers. This phenomenon can explain an increase in imports and re-exports and a cut-throat competition existing not only in the local market, but also with Thailand, Singapore and Korea who profit either from rich resources of raw materials or a rise in the production capacity.

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In general, jewellery products made in Hong Kong can be classified in 3 categories: 1) jewellery made of precious metal, mounted with diamond, gem jade, pearls, etc; 2) jewellery made of precious metal, NOT mounted with diamond, gem jade, pearls, etc; 3) Other jewellery and related articles made of precious metal or precious stones. Hong Kong is the worlds fifth largest exporter of precious jewellery and the worlds second largest exporter of custom jewellery. It is also the leading production centre for pure gold items, the major centre for jade production and the leading trading and distribution centre for pearls. On top of all that its also the capital of Asias diamond trade

Industry Trends
Articles of jewellery are getting more fashion oriented. Innovative designs are important for moving up-market. In doing so, it is necessary for manufacturers to have more metallurgical knowledge. New technology also allows the development of new or innovative designs. Jewellery, which used to target the high-end market, is also following more closely with the fashion trend and targeting at the younger, middle income level market segment, some in the form of brand jewellery. Recent technological development allows massive production of jewellery products with good quality and competitive prices. While Hong Kong's jewellery industry remains basically a handicraft industry, a number of larger establishments have made use of sophisticated and automated production equipment. These manufacturers integrate advanced production techniques, such as electroforming, with handicraft skills to enhance their efficiency. They install computer-aided design and manufacturing (CAD/CAM) systems, as well as computer numerically controlled (CNC) machine tools in their product design and manufacturing processes. New technologies also enable Hong Kong manufacturers to develop new materials for fashionable jewellery items other than fixing defects and to increase the accuracy of the designed output.

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Like other industries, the trend of consolidation also happens in the jewellery industry, especially in the US. In the past decades, the numbers of jewellery manufacturers and retailers in the US have declined substantially. At the same time, the business of the smaller retailers has steadily declined as they struggle to compete against mass merchants such as Wall-mart, Target and Costco, which have successfully captured a bigger share of consumer spending. Wall-mart, for example, has risen to be the leading jewellery retailer in terms of sales turnover in the US. A recent survey by Research and Markets Ltd also reported that 20% of fine jewellery shoppers in the US made their purchases at these outlets. Mass merchants usually have stronger bargaining power than their suppliers; Hong Kong exporters are expected to face downward pressure on their ex-factory prices and provide more value-added services to win buyers' orders. On marketing and distribution, some Hong Kong jewellers have built up their own branded jewellery or licensing agreements. While this is an effective strategy to enhance long-term competitiveness, it may also require local jewellery manufacturers to move into distribution. Apart from establishing direct retail outlets, the rapid development of online shopping in recent years is also noteworthy. It is expected that the application of ecommerce in the jewellery sector will continue to proliferate. Over the longer term, the development of internet shopping represents a new direct sales method for Hong Kong jewellers in promoting their products. General Trade Measures Affecting Jewellery Exports In China, all gold trading at the wholesale level for producers and wholesalers now takes place in the Shanghai Gold Exchange, introducing market prices to the transactions. In 2004, China removed all barriers to gold licensing for manufacture, distribution and retail of gold jewellery products, and allowed some mainland companies to import gold jewellery. In August 2010, China announced to let more banks import and export gold, open trading further to foreign companies, increase foreign members on the Shanghai Gold Exchange, and also study ways to allow foreign qualified bullion suppliers to deliver to the exchange. Effective from May 2005, the value added tax (VAT) on exports of jewellery articles of gold and precious materials under general trade is exempted, but the VAT on the import content of such trade, collected when imported into China, is not rebated. Starting from

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July 2007, for certain pearl, precious stones and precious metal, the rebate rate was reduced from 13% to 5%. On the other hand, effective from April 2009, the export tax rebate on imitation jewellery has been lifted from 5% to 9%. Diamond (including rough diamond and unset polished diamond) imports and exports under general trade are required to go through the declaration formalities with the customs located inside the Shanghai Diamond Exchange (SDE). Diamonds directly entering SDE from overseas are exempted from import duty, value-added tax and consumption tax. All diamonds traded in SDE are exempted from value-added tax. Diamonds entering SDE from domestic sources can enjoy tax refund, and the tax collected at the processing stage shall be fully refunded when diamonds are exported, while those flowing from SDE to overseas cannot enjoy tax refund. For diamonds channelled from SDE to the domestic market, no import duty is required but the value added tax (4% for polished diamonds but none for rough diamonds) shall be duly paid. The consumption tax is not collected until the stage of retailing, at a rate of 5%.

In response to the concern that diamonds from a few African sources might have been sold through illegal channels to finance civil wars and conflicts among neighbouring countries, the World Diamond Council (WDC), with some participating countries, have come up with a certification scheme to keep track of the rough diamonds exported from the African conflict areas (the so-called Kimberley Process). Both Hong Kong and China, as signatories to the Kimberley Process, has introduced this certification scheme since 2003. Accordingly, all parties in Hong Kong carrying on a business of importing, exporting, carrying (including carrying rough diamonds in transit and transhipment), buying or selling rough diamonds must now be registered with the Trade and Industry Department (TID). They are also required to obtain Kimberley Process (KP) Certificates issued by TID before the import and export of rough diamonds. In July 2008, the US extended the economic sanctions against Burma (Myanmar), which include a prohibition on virtually all imports from that country. Separately, effective from September 2008, imports of rubies and jadeite mined or extracted in Burma as well as articles of jewellery containing such gems into the US are banned. This ban is noteworthy for Hong Kong and mainland jewellery exporters because it applies to jewellery from any location that contains Burmese rubies and/or jadeite. In addition, exporters of rubies, jadeite and jewellery thereof from
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non-Burmese sources are required to implement measures to prevent trade in Burmese covered articles. In the EU, environmental and health concerns continue to be major issues. The EU has Jewellery Industry in Hong Kong banned the imports of jewellery containing nickel, which can cause allergic reactions when in contact with skin. While this measure provides Hong Kong jewellery products made of other materials a niche in exporting to the EU, other suppliers have started to catch up as they adjust to the requirement. In addition, imitation jewellery containing lead is also under strict regulations under the US Consumer Product Safety Commission. Other than the above official regulations, various organisations are issuing qualifications to various jewellery materials. They include the World Gold Council, the Natural Colour Diamond Association (NCDIA) and the Diamond Training Company (DTC) For example: Tanzanite Foundation has developed a grading system for tanzanite. Gaining their qualification is an increasing trend, and their measures are expected to be a standard in the future.

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Chapter: 3 Steeple Analysis of Hong Kong

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S: SOCIAL CULTURE
Structurally, one of the first laws to define people's relationships was the Hong Kong Matrimonial Ordinance passed in 1972. The law set the precedence to ban concubinage and same sex marriages with a declaration for heterosexual relationships with one partner only. Other economic changes include families in need of assistance due to both working parents. In particular, foreign domestic helpers have become an integral part of the household since the late 1980s.Traditional Chinese values such as "family solidarity", "courtesy" and "saving face" carries significant weight in the minds of the people. Hong Kong's mainstream culture derives from, or is heavily influenced by, the Cantonese from the neighboring province of Guangdong, China. There are also substantial communities of Hakka, Fukien,Teochew and

shanghaise people.

SOCIAL STRUCTURE National Language Cantonese Bilingual society Two major system of social stratification Europeans & Chinese Dual-income family Gender discrimination occurs Materialistic Secret society and lubrication

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T: TECHNOLOGY The People's Republic of China (the Mainland) is widely recognized as having a strong research culture and sound technological capability. Emphasis placed on science and technology (S&T) development has been a major force behind the Mainland's rapid technological advancement in recent years. The substantial volume of research results produced by the Mainland's network of S&T institutions offers valuable opportunities for technological collaboration between Mainland China and the Hong Kong Special Administrative Region (HKSAR). We believe that Mainland's rich technological resources is a key source of input and a critical catalyst for the innovation and technology development of HKSAR's industries. More importantly, leveraging on the Mainland's research capabilities strategically will contribute to the economic development of both places. To facilitate more technological joint ventures between the Mainland and the HKSAR, it is essential for interested parties to have access to information on Mainland institutions engaged in science and S&T activities. We hope that the information contained in this site can be of help to readers who are looking for collaboration opportunities with the Mainland. The following are the areas of technology sectors in Hong Kong: Automotive Parts & Accessory Systems Biotechnology Chinese Medicines Communication Technologies Consumer Electronics Environmental Technology Integrated Circuit Design Logistics & Supply Chain Management Enabling Technologies Nanotechnology & Advanced Materials Opto-electronics Textile & Clothing

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E: ECONOMIC In 1995, Hong Kong was ranked as the eighth largest trading entity in the world. It is one of the Asian Tigers, along with Singapore, Taiwan and South Korea. Over the past two decades Hong Kong economy has more than quadrupled in size with an average GDP growth of 7.5% in real terms. However, the real GDP began to grow lesser in the recent years; 4.8% in 1995 and 4.7% in 1996 as many labor intensive industries have been relocated to China and Southeast Asia. The GDP in 1997 was slightly higher, at approx. 5.4% due to the recovery of domestic demands. Hong Kongs GDP is lower compared to Southeast Asian countries particularly to other Asian tigers where average GDP is 8%. The local workforce is enjoying continuous rise in income not only in money terms but in real terms too. However, for a business entity, cost escalation may be a key consideration while setting up a business in Hong Kong (Econy Outlook for East Asian 1997).

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E: ENVIROMENTAL Hong Kong is located on China's south coast, 60 km (37 mi) east of Macau on the opposite side of the Pearl River Delta. It is surrounded by the South China Sea on the east, south, and west, and borders the Guangdong city of Shenzhen to the north over the Shenzhen River. The territory's 1,104 km2 (426 sq mi) area consists of Hong Kong Island, the Kowloon Peninsula, the New Territories, and over 200 offshore islands, of which the largest is Lantau Island. Of the total area, 1,054 km2 (407 sq mi) is land and 50 km2 (19 sq mi) is inland water. Hong Kong claims territorial waters to a distance of 3 nautical miles (5.6 km). Its land area makes Hong Kong the 179th largest inhabited territory in the world.

As much of Hong Kong's terrain is hilly to mountainous with steep slopes, less than 25% of the territory's landmass is developed, and about 40% of the remaining land area is reserved as country parks and nature reserves. Most of the territory's development exists on Kowloon peninsula, along the northern edge of Hong Kong Island, and in scattered settlements throughout the New Territories. The highest elevation in the territory is at Tai Mo Shan, 957 meters (3,140 ft) above sea level. Hong Kong's long and irregular coast provides it with many bays, rivers and beaches.

On 18 September 2011, UNESCO listed the Hong Kong National Geopark as part of its Global Geopark Network. Hong Kong Geopark is made up of eight Geo-Areas distributed across the Sai KungVolcanic Rock Region and Northeast New Territories Sedimentary Rock Region.

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P: POLITICAL AND LEGAL ASPECT Hong Kong's legal system is completely independent from the legal system of mainland China. In contrast to mainland China's civil law system, Hong Kong continues to follow the English Common Law tradition established under British rule. The essence of English common law is that it is made by judges sitting in courts, applying legal precedent (stare decisis) to the facts before them. For example, murder is a common law crime rather than one established by an Act of Parliament. Common law can be amended or repealed by Parliament; murder, for example, now carries a mandatory life sentence rather than the death penalty. According to Article 92 of the Basic Law, Hong Kong's courts may refer to decisions rendered by courts of other common law jurisdictions as precedents, and judges from other common law jurisdictions, most commonly England, Canada and Australia, are allowed to sit as non-permanent judges of the Court of Final Appeal.

Structurally, the court system consists of the Court of Final Appeal, the High Court, which is made up of the Court of Appeal and the Court of First Instance, and the District Court, which includes the Family Court. Other adjudicative bodies include the Lands Tribunal,

the Magistrates' Courts, the Juvenile Court, the Coroner's Court, the Labor Tribunal, the Small Claims Tribunal, and the Obscene Articles Tribunal. Justices of the Court of Final Appeal are appointed by Hong Kong's Chief Executive. The Court of Final Appeal has the power of final adjudication with respect to the law of Hong Kong as well as the power of final interpretation over local laws including the power to strike down local ordinances on the grounds of inconsistency with the Basic Law.
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E: ETHICAL CULTURE Hong Kong has a huge foreign population of expatriate business people, though 98% of the population is Chinese. Although Hong Kong Chinese traditions and values have been influenced by the Western presence, they possess many characteristics which are difficult for Westerners to understand this cultural transmission which is called collective programming of the mind by Hofstede. Foreign business must try to grasp the moral values and traditional concepts which shape the Chinese mentality if they want to operate successfully in Hong Kong. Hong Kong Chinese are influenced by the Confucius teachings which emphasize obedience and respect for superiors and parents, duty to family, loyalty to friends, humility, sincerity and courtesy. In modern Hong Kong today, westernization and competing philosophies have diluted Confucianism, but it is still manifested in the behavior of the people. In many Hong Kong business enterprises, the boss is a ruler and a father or guardian to his subordinates. Workers have a duty to obey the boss and work diligently to help company succeed. The boss in return shall make sure that the workers get their basic needs. Age and rank are well respected in Hong Kong. Younger people are expected to show respect to their elders in speech and manner. In return the elder is expected to reward their juniors for work well done.

There is a strong bond among friends in Hong Kong. They establish mutual trust and respect with each other to make each other successful in business. Favors and gifts must constantly be reciprocated. Although Hong Kong people are courteous with their friends, they are rude or uncaring to strangers. No apologies are given and none are expected from strangers. When doing business in Hong Kong, one must remember that Hong Kong people have high face value. Having face means having high status in ones peers and it is a mark of personal dignity. They are acutely sensitive to have and maintain face in all aspects to social and business life. It is advisable not to insult an individual or criticize harshly in front of others. Just as face can be lost, it can also be given by praising someone for good work in front of peers or superiors or by thanking someone for doing a good job. Giving face earns respect and loyalty in Hong Kong. You may consider allowing your opponent to win in a game like golf even if you are a better player in order to save his or her face. This symbolically represents the norm of public behavior in Hong Kong. The person whose face you save will not forget the favor and he will remain indebted to you.
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Chapter: 4 Steepel Analysis Of Jewellery Sector In Hong Kong

32

S- Social Factor Analysis:

In terms of materials, white metal will remain the mainstream, while there has been are mewed interest and demand for colour stone jewellery. Demand for yellow gold is on a rise again, albeit with a fashionable twist. Titanium is gaining popularity for its lightweight, strong nature and non-sensitivity to human body. It is also worth-noting that, inrecent years, consumption of diamond jewellery has increased rapidly, particularly in emerging economies such as China and India where incomes are raising fast andconsumers' purchasing power is strong. Yet, lowerpriced items with more creative use of karat gold and alloys may also become more popular with less affluent customers. The number of younger consumers has increased over the past few years. They are fashionconscious and putting a great stress on the design element. In many cases, they are influenced by the trends in clothing fashion, mainly through magazines, TVs or movies. In Asia, for example, the biggest jewellery buyers are the rising numbers of women entering the workforce, according to De Beers. In terms of product trends, jewellery designs have been increasingly influenced by clothing fashion. Consumers, especially women, are opting for more accessories like jewellery to express their sense of style. While feminine, romantic pieces are expected tobe sought-after in the luxury market, wear ability is getting important in the young girl market, and this reflects in the increasing trend to wear jewellery with jeans in a mix and match fashion. Demand for male jewellery is on a rise, as men are becoming more fashion-conscious. The concept that jewellery is feminine is fading. Men have realized that jewellery can be masculine. They begin to understand that fine jewellery is essential to a complete look, and jewellery is becoming an integrated part of men's dressing. They may buy bracelets, rings and pendant necklaces to suit their looks. They may also wear jewellery such as cufflinks and tiepins to build up a smart look. Yet, articles of men jewellery are still quite limited, and thus the market may be of huge potential. Costume jewellery is making a return. Increasingly, more garment boutiques offer jewellery as accessories complementing their new lines of fashion. Such development would contribute to an
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increased demand for elegant and romantic diamonds, which are expected to top the list of jewellery buyers, while semi-precious stones and coloured crystals targeting at the medium to lower-end segment are likely to sell well. T- Technological Factor: Many manufacturers have applied computer-aided design and rapid prototyping techniques to shorten the time cycle for product development. There are still large-scale jewellery manufacturers who have introduced advanced, precise and automatic machinery to enhance productivity and product varieties. In face of this growing trend, Hong Kong is now actively developing into an international management centre for the development and promotion of jewellery products, while the Pearl River Delta Region will develop into a technical and manufacturing centre. The industry has also benefited from the new opportunities provided by the implementation of CEPA. The new arrangement allows some of the locally manufactured jewellery and imitation jewellery products to be exempt from tariff. Besides, Hong Kong companies can also operate fully-owned wholesale and retailing businesses in the Mainland. Therefore, local jewellery manufacturers have benefited from this new policy and have enjoyed an increase in the market share of the Mainland. This arrangement also helps to attract employers to re-invest their resources in the local jewellery manufacturing industry, and to actively engage themselves in technological innovations and the design of new products to meet the development of the industry. Hence, the industry anticipates increases in the demand for relevant technical staff. E- Environmental Factor: Threats of New entrants is very low because not major competitors in Hong Kong Bargaining power of supplier is high Bargaining power of customer is low Competition in Jewellery industry is lower and not intense

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E- Economic Factor: Economic Risk: Low Hong Kongs economic performances heavily dependent upon that of China, which is its main export market. Longer term risk exists due to the fact that the currency is pegged to the U.S. dollar and is thus subject to changes in U.S. monetary policy. Largely dependent upon external demand conditions, Hong Kongs economy will benefit from a global recovery. Domestic demand remains strong and resilient. Hong Kong is also facing heightened uncertainties regarding the U.S. economy, the Euro zone sovereign debt crisis and a potential slowdown in China. Monetary conditions have remained loose and interest rates low which has led to a rally in asset markets. Financial System Risk: Very Low The main insurance regulatory body in Hong Kong is the Office of the Commissioner of Insurance (OCI). Hong Kong is a global financial centre, due in part to its favourable location for foreign companies doing business with mainland China and other Asian locations; its openness to capital flows; stable society; and effective and transparent legal system. The banking sector is well-capitalized and regulated. Expansionary monetary policy and easy credit contributed to high property prices in Hong Kong. The housing market has since softened due, in part, to tightening. P- Political Factor: In the context of the free market and free enterprise economic framework, the Government strives to provide a business-friendly environment for manufacturing and service industries. This includes the maintenance of macro-economic stability, alow and simple tax regime, provision of an excellent infrastructure, investment in education, training and human resources, and the effective protection of individual and property rights through Hong Kongs sound legal system. To assist Hong Kong enterprises in enhancing their competitiveness in the Mainland, the Government introduced the Dedicated Fund on Branding, Upgrading and Domestic Sales (the BUD Fund) of $1 billion in June2012 to assist Hong Kong enterprises in developing brands, upgrading and restructuring operations, and promoting domestic sales in the Mainland. The BUD

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Fund comprises the Enterprise Support Programme and the Organisation Support Programme, providing funding support to individual enterprises and non-profit-distributing organisations respectively. The Hong Kong Productivity Council acts as the Secretariat to assist in implementing the Enterprise Support Programme whereas the Organisation Support Programme is implemented by the TID. Political risk comprises the stability of the government and society, the effectiveness of international diplomatic relationships, the reliability and integrity of the legal system and of the business infrastructure, the efficiency of the government bureaucracy and the appropriateness and effectiveness of the governments economic policies. Political Risk: Very Low Though a Special Administrative Region (SAR) of China, Hong Kongs private sector is supported by an open economy, with flexible labour and product markets and an efficient regulatory regime Mainland China has worked to portray a hands-off attitude in Hong Kong, but can intervene in areas of national importance. Hong Kongs currency is pegged to the US dollar, which creates a complicated situation for monetary policy in Hong Kong, particularly when economic performance diverges from that in Mainland China andthe US. Small government, low taxes and light regulation have made Hong Kong the number two ranked country in the World Banks Ease of Doing Business ranking. Financial the Government has played a significant role in the development of the jewellery industry by providing a favourable business environment and various supporting measures, enabling members of the industry to fully display their abilities, contributing to the expansion and growing maturity of jewellery enterprises in Hong Kong. L- Legislation Factor: CEPA Provisions Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), the mainland has given all products of Hong Kong origin, including jewellery, tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no

36

existing CEPA rules of origin can enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. Non-Hong Kong made jewellery products remain subject to tariff rates of as high as 35% when entering the mainland. The promulgated rules of origin for jewellery to benefit from CEPA's tariff preference are basically similar to the existing rules governing Hong Kong's exports of these products. Generally speaking, for jewellery articles of precious metal, moulding, identified as the principal process for the purpose of delineating their origin, is required to be carried out in Hong Kong. If assembling is required, it must also be done in Hong Kong. For jewellery articles of pearls, precious or semi-precious stones, both moulding and setting have to be done in Hong Kong.

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Chapter: 5 Steeple Analysis Of Indian Jewellery Industry

38

Growth of Jewellery in Indian Market:

Till the early 1990s, the average Indian bought jewellery for investment rather than for adornment. Jewellery forms an integral part of Indian tradition. A legacy passed from one generation to another. The components of jewellery include not only traditional gold but also diamond, platinum accompanied by a variety of precious and semi-precious stones. The gems and jewellery industry in India is likely to reach Rs. 2.13lakh crore by 2015, apex industry body ASSOCHAM said today. Growing at a steady rate of 15 percent the domestic gems and jewellery market is currently poised at Rs. 1.22 lakh crore, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a study titled Current Trends in Indian Gems and Jewellery Sector. ASSOCHAM sought feedback from around 1500 key retailers, manufacturers, wholesalers throughout the country including branded players from all verticals of the industry-gold, diamonds, silver and gemstones. The study was carried out between Mach-June. The growth in the industry is spurred by its rising constant demand as jewellery is considered a trusted store of value in possession and a large number of Indian consumers approve of it as a safe investment option, said majority of industry bigwigs adding that demand is expected to rise further with onset of the annual festive season during August-October. Rising purchasing power, lifestyle changes and overall increasing affordability among Indian middle-class are significant reasons for higher jewellery demand, said ASSOCHAM secretary general D.S.Rawat. Introduction of hallmarking and certifications has transformed the buying preferences as more youngsters can be seen buying jewellery as part of fashion accessory and are even parking their access funds as part of investments in this sector, according to the ASSOCHAM study. Availability of skilled artisans with expertise in jewellery making, designing and diamond cutting, processing at competitive wages is another reason for growth in this sector. Conscious marketing efforts are also a reason for rapid increase in jewellery demand in India. Number of people going online to buy jewellery has been rising. Traditional jewelers in India are realizing the importance of internet in the contemporary world and providing hassle free shopping experience thereby luring customers from higher strata in large numbers.
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There are various online jewellery shops where customers can choose from a wide variety of items and place an order from the luxury of their home and get it delivered at their doorstep, this trend is catching up fast due to increasing internet penetration and availability of top-notch broadband services, said Mr. Rawat. Demand in the sector is flowing from countries like the UAE, the United States, the European Union, Russia, Latin America Hong Kong and China. Growth in gems and jewellery is mainly driven by cut and polished diamonds market but China is emerging as a tough competitor as increasing number of diamond processors from various countries including India are setting up facilities in China considering factors like use of better technology, cheap and disciplined workforce, surge in number of Chinese consumers, points out the ASSOCHAM study.

YESTERDAY Non-branded Silver & Gold jewellery Investment Traditional design Marriage & festival is peak

TODAY Branded Gold & Diamond jewellery Investment + Fashion Fashionable & innovative design Special occasion and gifts

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SOCIO CULTURAL
The socio and cultural plays a huge role in the Jewellery market of India as jewellery is considered to be a tradition from ancestral time and it is a necessity in many of its cultural occasion. It is considered as religious view to wear jewellery at every occasion like marriage, festival etc

TECHNOLOGICAL India has become the leading manufacturer in terms of jewellery because of its advanced technology and according to GPEC there is a rise of 18% to 407.36 lakhs carats for cut and polished diamond.

Wide development of Technology in Diamond Industry

ECONOMIC: Due to the global economic recession, Indias gems and jewellery export and import also got affected it. The dynamic change in the exchange rates of pounds and INR affects the domestic as well as international market .It affected the GDP of Indian economy and thus lessens the consumer expenditure too affecting the sales. The Indian jewellery market is large and consist of unbranded where branded jewellery accounts only for less than 2% per year and 300,000 consists of unorganized one. The dominant players in the field of jewellery manufacturing are Italy, Hong Kong, China, Thailand, and United States. Leading player in the Indian jewellery is Gili part of the Gitanjali Gems Limited and Tansihq, Reliance Jewel, Joyalukkas.

A number of issues relating to gold policy are reviewed by the Reserve Bank of India from time to time. In 1978, in the context of gold auctions, there were consultations by the Reserve Bank of India and the issues posed related to measures to reduce the demand for gold, the stance on import of gold and related matters. It is interesting to recall the principal suggestions considered at that time to get a flavor of our mind-set at that time.

To reduce the demand for gold suggestions made were (a) Fixation of quantitative ceiling on holdings per family/per individual;
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(b) Reduction of the gold content of jewellery to say 14 cts. purity; (c) Creation of alternative assets with attractive yields and the introduction of gold bond scheme/gold securities; (d) Imposition of a tax on the jewellery component of wealth at a higher rate; and (e) Administrative measures including very strong and quickly effective penal measures for tax evasion where such evasion exceeds a specified penal limit. As regards import of gold, five options were considered (a) Import of gold as a feasible socio-economic policy measure; (b) Import of gold on a limited scale to meet specific purposes; (c) Import of gold as a last resort; (d) Import of gold as a necessary evil; and (e) No import of gold.

ENVIRONMENT: Our position in the global gold economy in terms of broad magnitudes can be highlighted with a few facts. First, the total gold stock in India is estimated at 9,016 tones as against the world Stock of 128800 tons in 1994 giving a share of 7.0% to India this should be Viewed against our share in land area at 2.4 per cent, in population at 16.4 per cent and in GDP at 1.2% Mining and production of gold in India is negligible, now placed around 2 tones as against a total world production of about 2,272 tone s in 1995. During 1990-95, our share in global gold demand is placed at about 402 Tones (16.4 per cent) a year, including imports into India this should be viewed against our share of 0.6 per cent in world trade. On the other hand, India exported about 23 Tons in 1995 accounting for a negligible part of world trade though there was a brief period of illegal exports in the early 'seventies and substantial legal exports in the pre-independence era.

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POLITICAL The Indian Government has taken up measures to lower import duty of platinum and gems. Colored stones are exempted from tax. There are plans of Indian Government to establish Diamond Bourses. Bullion imports and exports were banned under the Foreign Exchange Regulation Act, 1947. Control over gold production was assumed by the Mysore Government in November 1956. The official gold stocks of the RBI were revalued in the same year. The proportional reserve system was replaced by the minimum reserve system, for purposes of note issue. In a major effort to mobilize the vast gold reserves in the country, an issue of 15-year

Gold Bonds at 6.5 per cent was made in November 1962. The bonds were issued in exchange for gold, gold coin, and gold ornaments. Subscriptions to these bonds totaled 16.30 Tones. The issue of gold bonds was accompanied by exhortations to the public to refrain from buying gold and to surrender their holdings to the Government. The RBI advised commercial banks to consider recalling loans made against the security of gold. Forward trading in gold was banned in November 1962.

A second attempt to garner gold was made in March, 1965 when a new series of 7 per cent Gold Bonds 1980 was issued. Opportunity was given to holders of unaccounted money to convert them into these bonds. The quantity raised was 6.1 Tones. A third series of gold bonds designated as National Defense Gold Bonds, 1980 at 6.5 per cent was issued in October 1965. Unlike the earlier two issues, which were repayable in Rupees (the value of gold being calculated at international prices) these bonds were redeemable in gold of standard purity at maturity. The quantity raised was 13.7 Tones. Strict gold control remained in force till November 1966, when the rules were amended, lifting the ban on the manufacture of ornaments of more than 14 carat purity. The amendments also placed ceilings on individual holdings and extended control over refineries and dealers. In September 1968, the Gold (Control) Act 1968 was passed establishing the scheme of gold control on a permanent statutory footing. Except for some minor modifications incorporated in the Act in 1969, 1972 and 1973, the structure of the Act did not undergo any change.

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Chapter: 6 Comparisons Between India and Hong Kong

44

POINT OF DIFFERENTIATION RELIGION :

INDIA

HONG KONG

Hinduism is the leading religion Theravada Buddhism is the official followed by population in India religion of Cambodia, 95% of the along with vast difference in population of Cambodia is

religious diversity followed by following Buddhism. people in various parts of India.

LANGUAGE :

In India HINDI is the national In Hong Kong Chinese and English language and as there is diversity are the official languages. But, in the people of India variety of English is widely used within the language is being spoken by the Governmentand also by the legal, people like Marathi, Bangle, professional and business sectors. Tamil, Punjab. At present Hindi and English is being used

primarily for all the purposes in India.

EDUCATIONAL LEVEL

According to the 2011 survey The 2011 Hong Kong census holds the National Literacy Rate estimated that 93.5% of the

to be around 74.07%, Female population was literate (96.9% of literacy was of 65% whereas the men and 86.9% of women). Male male literacy was 82%.Within youth age (1524 years) have a the Indian states, Kerala has literacy rate of 89% compared to

shown the highest literacy rates 86% for females. of 93% whereas Bihar averaged 63.8% literacy. HUMAN DEVLOPMENT INDEX PER CAPITAL INCOME(ANNUAL) 136th out of 186 13 Out of 186

3876$

$51946

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TECHNOLOGY FACTOR
PARTICULARS INDIA HONG KONG

India has added 69 million Internet Hong Kong is having too less as INTERNET USERS users during 2008-2011 and now has compare to India but most of people 121 million Internet users in Hong Kong are sing internet

DEVELOPMENT Export of Precious Jewellery has Export of Precious Jewellery has been increased by 101% in 2012 been increased by 14% in 2012

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ENVIRONMENTAL:
POINT OF DIFFERENCE KEY RELATED ENVIRONMENT ACTS Key actors in Cambodia related to Environmental regulatory is in India TO environment, natural resources and represented at the central level by the climate change are: Sub-Decree on Ministry of Environment and Forests Solid Waste Management (1999), (MoEF) and the Central Pollution Sub-Decree on Water Pollution Board Control (CPCB), and at the Control (1999), Sub-Decree on Air state level by State departments of Pollution and Noise Disturbance environment and forests, and State Control (2000), The Ministry of Pollution Control Boards (SPCBs). Environment (MoE) and its The main environmental management include: Impact (i) an HONG KONG INDIA

Cambodia Climate Change Office instruments (CCCO); Ministry of Agriculture, Environmental

Assessment

Forestry and Fisheries (MAFF), (EIA) system to regulate the sitting Ministry of Water Resources and and approval of large projects; (ii) Meteorology (MOWRAM), and Forestry Clearances that require the Ministry of Industry, Mines and project proponent to deposit the Energy (MIME). The National compensatory afforestation payment Climate Change Committee and (iii) the Consent to Establish

(NCCC) is a cross-ministerial (CTE) and Consent to Operate (CTO) policy making body to address that regulate the establishment and climate Cambodia. change issues in operation of facilities at the State

Commune

councils level. Other instruments include taxes, zoning, and information

have authority to protect the fees,

environment and natural resources disclosure and polluter liability. within their commune boundaries, although management decisions on forestry issues are excluded from their mandate unless granted
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specific authority from the RGC. POSITIVE IMPACTS JEWELLERY RELATED ENVIRONMENT Increased OF Contributions, Direct Financial Contributions to Government

Contributions

to Revenues, Increased Direct Financial

Government Revenues, Improved Contributions, Raising Environmental TO Environmental Management and Awareness, Improved Environmental Planning, Raising Environmental Management and Planning. Awareness.

NEGATIVE IMPACTS JEWELLERY RELATED ENVIRONMENT

De-forestation, Over exploitation Water resources, Local resources, OF of Cambodias aquatic resources, Land degradation, Air and Noise Siltation, Indiscriminate use of Pollution, Solid waste and littering, TO pesticides, Waste, Environmental Sewage problems along the Mekong River.

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DEMOGRAPHIC FACTOR:
FACTORS AGE STRUCTURE INDIA 0-14 years 29.3%(187,386,162 Males, 165,345,284 Females) 15-24years 18.2%(116,019,042 Males,103,660,354 Females) 25-54years 40.2%(249,017,538 Males 235,042,251 Females) 55-64years 6.8%(41,035,270 Males, 40,449,880 Females) 65-and above years 5.6%(31,892,823 Males,35,225,003females) MEDIAN AGE Total 26.5 Years Male -25.9 Years Female 27.2 Years POPULATION GROWTH RATE BIRTH RATE DEATH RATE NET-MIGRATION RATE URBANIZATION 20.6 births/1,000 population 7.43 deaths/1000 population -0.05 migrant(s)/1,000 population Urban Population 30% of total population Rate of urbanization 2.4% annually Urban population: 100% of total population rate of urbanization: 0.9% annual rate of change 7.54 births/1,000 population 7.23 deaths/1,000 population 3.9 migrant(s)/1,000 population 1.312% Total 43.9 years Male 43.3 years Female 44.4 years 0.12% HONG KONG 0-14 years-11.4% (male 427,250/female 390,856) 15-24 years-11% (male 406,114/female 380,304) 25-54 years- 49.2% (male 1,650,509/female 1,867,907) 55-64 years- 14.5% (male 516,493/female 517,958) 65 years and over- 13.9% (male 467,199/female 528,929) (2012 est.)

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MAJOR CITY POPULATION

NEW DELHI (capital) 21.72 million; Mumbai 19.695 million; Kolkata 15.294 million; Chennai 7.416 million; Bangalore 7.079 million Total 67.14 Yrs Male 66.08Yrs Female 68.33Yrs

Kow loon 2.18 Million Victoria 0.92 Million

LIFE ANTICIPATION

Total 63.04Yrs Male 60.66Yrs Female 65.53 yrs 48.6 million

NO. OF TOURISTS

62, 95,000 Tourists visited India which had grown by more than 6%.

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POLITICAL FACTOR
FACTORS POLITICAL PARTIES INDIA 1. U.P.A(United progressive alliances 2. B.J.P(BhartiyaJanta party) GOVERNMENTAL POLICIES In India for every sector of the economy policies are well-framed and timely modified by the government) INTERNATIONAL RELATIONS Countries with which international relation exists : 1. U.S.A 2. U.K 3. Pakistan 4. Russia 5. China 6. Australia Countries with which international relation exists : 1.U.S.A 2.U.K 3. China 4. Russia Major membership (International Org.) 1. World trade organization Major membership (International Org.) 1. World trade organization 2. International monetary funds 3. East-Asian Summit 4. Asian development bank 5. World bank 6. BRICS 7. SAARC 8. G-20 9. IBSA Dialogue firm 10. BIMSTEC 2. International monetary funds 3. East-Asian Summit 4. Asian development bank 5. World bank 6. Asia-Pacific Economic Cooperation 7. Pacific Economic Cooperation Council 8. United Nations Economic and Social Commission for Asia and the Pacific 9. United Nations Conference
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HONG KONG 1.

11. U.N.Security council 12. G-4 nations

on Trade and Development. 10. Organization for

Economic Cooperation and Development

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Legal Factor
FACTOR CONSUMER PROTECTION INDIA In India Consumer Protection Act of 1986 is the law governing consumer Protection. Under this law, Separate Consumer tribunals have been set up throughout India in each and every district in which a consumer [complaint can be filed by both the consumer of a goods as well as of the services] can file his complaint on a simple paper without paying any court fees and his complaint will be decided by the Presiding Officer of the District Level. Appeal could be filed to the State Consumer Disputes Redressal Commissions and after that to the National Consumer Disputes Redressal Commission (NCDRC). The procedures in these tribunals are relatively less formal and more people friendly and they also take less time to decide upon a consumer disputewhen compared to the years long time taken by the traditional Indian Judiciary. In recent years, many effective judgment have been passed by some state and National Consumer Forums. CEPA: Closer Economic Partnership Agreement HONG KONG HKTDC: Hong Kong trade development Council

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JEWELLERY INDUSTRY LAWS

Certification of Gems and Jewellery is CEPA Provisions Mendatory

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Chapter: 7 Recent Trends Between India And Hong Kong in jewellery

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Gems and Jewelry (with special reference to Diamond exports) Industry and trade overview Gems and jewelry has been an important industry for the Indian economy. It is one of the fastest growing industries and a leading earner of foreign exchange for India. The gems and jewelry sector covers a wide range of items which include diamonds, precious and semi-precious stones, in addition to gold, silver, studded and costume jewelry. The gems and jewelry industry in India is mostly concentrated in the unorganized sector and employs around 2 million workers. An important feature of this industry is that it contributes a large share to Indias total exports as well as to the countrys imports (averaging over 9 percent of total imports since 1997). The main component of Indias gems and jewelry export is cut and polished diamonds. Rough and uncut diamonds are imported and processed in India and finally exported in the form of diamond jewelry for final consumption. It is this feature that makes the industry highly import-intensive in nature. The importance of this industry for Indian exports is evident. Its contribution to Indian exports has steadily grown since 1975 and is responsible for nearly 15 percent of Indias total exports since 1986. As a commodity, it has the (single) highest share in Indian merchandise exports and is therefore, one of the most significant industries for India. The diamond segment contributes a major share of nearly 70 percent of the total (gems and jewelry) export and thus the remainder of the analysis focuses on the performance of Indian diamond exports. However, the latters share has declined since 2008, in part, due to the economic meltdown which reduced the import demand from USA and other trading partners of India.

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25.00% Share In total exports(%) 20.00% 15.00% 10.00% 5.00% 0.00%

Gems and Jewelry share (%) in Indias total exports

Major producers of diamonds in the world are Southern Africa, Canada, Australia and Russia. Around 10 percent of the worlds total diamonds belong to the gemstones category, which are processed and set in diamond jewelry. A unique feature of diamonds is that, unlike gold, silver or platinum, they do not have an internationally set standard price. The price is determined based of physical attributes (such as cut, color, clarity and carat (weight)). Like other forms of (valuable) jewelry, diamonds are a luxury item and consequently have a highly elastic demand in the market. In this industry, India has a comparative advantage in labour-intensive activities like gem cutting and polishing. Therefore, Indian companies operate at a beneficial level in the value chain where they import rough diamonds, which are processed and exported for final consumption as diamond jewelry. The Indian Gems and Jewelry industry plays an important role 25 in the value chain as it contributes 60 percent to the value share and 85 percent to the volume share. Major exporters of Diamonds and their share in world exports (%)
2000 2005 2009 Exporting country market share Exporting country market share Exporting country market share Belgium 25.9% Belgium 18.7% India 20.1% Israel 19.3% Israel 18.5% Israel 14.0% India 13.4% India 13.9% Belgium 13.4% UK 13.1% UK 10.7% USA 12.1% USA 8.5% USA 10.0% Hong Kong 9.8% Botswana 4.6% Hong Kong 5.2% UAE 9.3% Hong Kong 3.8% Botswana 3.8% UK 6.7% South Africa 3.5% UAE 3.6% Botswana 2.6% Switzerland 1.9% South Africa 3.1% Canada 2.1% China 1.1% Singapore 2.0% China 1.8% 57

Reveals the change in market share since 2000. It is seen that Indias market share remained unchanged and well below Israel and Belgiums share between 2000 and 2005. In 2009, however, Indias share rose considerably above that of Belgium and Israel, which could partly be due to the stronger impact of the sub-prime crisis of 2008 on the demand for large sized diamonds, which resulted in a decline in market share for Israel and Belgium.

Indian exports of gems and jewelry (including diamonds) have performed well in the US market. The annual growth in Indias gems and jewelry exports to the US has more often been higher than its competitors. Main World Importers of Diamonds
2000 2005 2009 Importing Country Market share Importing Country Market share Importing Country Market share USA 22.8% USA 18.7% India 16.8% Belgium 14.1% India 11.8% USA 14.5% UK 10.7% Belgium 11.2% Hong Kong 10.2% India 8.2% UK 8.4% UAE 10.1% Israel 7.5% Hong Kong 7.7% Belgium 6.3% Hong Kong 6.3% Israel 6.9% UK 5.9% Switzerland 4.7% UAE 6.1% Switzerland 4.2% Japan 4.7% Switzerland 3.4% Germany 3.5% Italy 3.4% Japan 3.4% Israel 3.2% Germany 2.6% Germany 2.5% Australia 2.7%

Reveals that India is clearly the key partner for Hong Kongs diamonds imports and over 44 percent of all diamond imports have been sourced by Hong Kong since 2000. India also has a dominant position in gems and jewelry exports, which account for over 44 percent of Hong Kongs total imports for the sector.

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Market share of main trading partners in Hong Kongs Diamonds and Gems and Jewelry Market share in Diamond Imports Belgium 11.3% 12.3% 13.5% 14.0% Israel 16.7% 15.7% 15.3% 11.9% India 47.5% 44.1% 44.6% 47.6% Market share in Gems and Jewelry Imports Belgium Israel India 10.2% 15.0% 43.4% 11.4% 14.5% 41.1% 12.5% 14.2% 41.8% 13.2% 11.2% 45.1%

2000 2005 2007 2009

Other than the US and Hong Kong, Indian gems and jewelry are also exported to China. Chinese imports of cut and polished diamonds have increased by 87 percent between 2000 and 2009 and India is the largest exporter to this market with a share of 2 percent. A few Indian companies have also planned to begin retailing operations in collaboration with manufacturing units in China. India is also the leading exporter to EU countries, though EU imports of gems and jewelry from India have fluctuated over the years. Competitiveness of Gems and Jewelry exports The RCA for Indias gems and jewelry exports has remained considerably above unity indicating that this is a competitive export item for India. This can be attributed partially to Indias growing exports of large-sized diamonds to markets such as the US. Additionally, introduction of the Diamond Dollar Account and Green card for exporters of polished diamonds have facilitated trade competitiveness. RCA for Indias Gems and Jewelry exports (to the World)
25.000 20.000 15.000
RCA

10.000 5.000 0.000 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

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A comparison of Indias RCA with its competitors suggests that Israel and Belgiums exports are more competitive in the US market, as they contribute a larger share to US imports of gems and jewelry. However, in the case of gems and jewelry exports to Hong Kong, India is more competitive than Israel or Belgium, owing to the fact that over 40 percent of Hong Kongs gems and jewelry imports are sourced from India.

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EXECUTIVE SUMMARY
This project is on Jewellery Industry in Hong Kong.As a part of our MBA Curriculum, we have prepared a Global Country Report on Hong Kong. Where we have searched for various business opportunities after deep understanding and doing analysis of various factor affecting jewellery business in Hong Kong . Hong Kong is strategically located at the mouth of the Pearl River Delta in Southern China. It is within a few hours' flight from all major cities in East and Southeast Asia, including Beijing, Shanghai, Tokyo, Seoul and Singapore. Hong Kong has been beset by a lack of suitable building land. The New Territories, largely mountain country, contained limited areas of flat land around the older settlements and their development was largely hindered by the Kowloon foothills and by lack of major public utility services Hong Kong is often described as a city where East meets West. This is reflected in all aspects of the culture, but especially in its shopping, nightlife, and dining. A popular destination for shoppers from around the world, Hong Kong has everything to offer from the latest European fashion to traditional Chinese wares. The city's cosmopolitan flavor can also be seen in the wide variety of cuisines available. While different varieties of Chinese selections, especially seafood, are most popular, there also many European, American, Japanese, Korean, and other restaurants. Hong Kong enjoys a high degree of religious freedom. The majority of Hong Kong's population practices ancestor worship due to the strong Confucian influence. Hong Kong's religious beliefs are tied to the region's early role as a fishing community. Tin Hau, the protector of seafarers, has been honored with several temples throughout Hong Kong for at least 300 years. Hong Kongers, especially elder generations, go to Taoist or Buddhist temples to appease the deities and, usually, to ask for compassion or good fortune. Hong Kong is a place of kaleidoscopic variety. Hong Kong people enjoy the freedom of religion under the Basic Law. Then there are as many types of international cuisines as are the number of the ethnic groups in Hong Kong. A founding member of the World Trade Organization (WTO), Hong Kong is firmly committed to free and open trade. There is no barrier on trade. Hong Kong does not charge tariff on importation or exportation of goods. Import and export licensing is also kept to a minimum. Hong Kong enjoys a robust and stable financial regime, exemplifying the vitality and dynamism of an open and free economy that has the prowess of prospering in an ever-changing global
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political economy. In particular, the Hong Kong dollar, which is 100% backed by US dollars, has demonstrated remarkable stability since the introduction of the linked exchange rate system in the early 1980's. Hong Kong is one of the most densely populated areas in the world with an overall density of some 6,300 people per square kilometer. Hong Kong is a major international financial centre and a leading world trading entity. Hong Kong is amongst the freest economies in the world and is home to some of the region's most important corporate headquarters. In 2012, Hong Kong topped the World Economic Forum's Financial Development Index. In GDP (PPP terms) it stands as the worlds 36th-largest economy. Hong Kongs economic integration with mainland China developed through the 1980s with the establishment of Chinas first Special Economic Zone in Shenzhen, just across the border, transforming a fishing village into a gleaming metropolis of over 10 million people. The financial services sector is expected to grow further, boosted by Chinas efforts to broaden the international use of the Renminbi. Australian service providers are actively engaged in banking, transport and logistics, employment consultancies, engineering, construction, aviation, architecture, accountancy, legal services, insurance, tourism and retailing. Following the global financial crisis, export-dependent Hong Kong was particularly affected by the slowdown in China and the decrease in demand from key re-exports markets in the United States and Europe, resulting in negative 2.5 per cent growth in 2009. Hong Kong's climate is subtropical and prone to monsoons. It is cool and dry in the wintertime, and is hot and rainy from spring through summer. It is warm, sunny, and dry in autumn. Hong Kong occasionally has typhoons. The body of water between Hong Kong Island and Kowloon Peninsula is Victoria Harbour, one of the deepest maritime ports in the world. Hong Kong's Trade Policy Hong Kong is a free port which thrives on free trade. Its open door policy has enabled it to become one of the world's largest trading economies and an international financial and commercial centre serving the Asia-Pacific region and the Mainland of China. The free trade policy means Hong Kong maintains no barriers on trade. Thus, Hong Kong does not charge tariff on importation or exportation of goods. Import and export licensing is also kept to a minimum. Licensing is only imposed when there is a genuine need to fulfill obligations
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undertaken by Hong Kong to our trading partners, or to meet public health, safety or internal security needs. Generally speaking, Hong Kongs jewellery business is quite good and the standards are comparable to some major European and Asian cities. Both private and public systems are available.

OBJECTIVE
The STEEPLED Analysis Of Jewellery in HONG KONG Includes the following factors: Social, Technological, Economical, Environmental, Political, Legal, Ethical, Demographic. The STEEPLED Analysis Of Jewellery in INDIA Includes the following factors: Social, Technological, Economical, Environmental, Political, Legal, Ethical, Demographic. The COMPARISON between India and Hong Kong in Jewellery sector. Environmental analysis between India and Hong kong in business trends. Finding opportunity in jewellery sector in Hong Kong. Finding opportunity in jewellery sector in India.

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