I joined this business at the end of 2017. What a time. Everything manufactured came to my table, and all of it sold. Those first six months were beautiful.
I assumed business would always be like this, and I wondered why I had ever done anything else. My father laughed and told me not to get ahead of myself. He was right. The year still went fine, but by the end of 2018 demand had started to drop.
It took me years to understand what I had walked into. I had arrived near the top of the Chinese diamond market.
China was the cash king
Last week I wrote about what expensive money does to our trade. America ran on credit then and runs on credit now, which is why bond yields and interest rates hit diamond purchases there. China was the opposite. China paid cash.
So many transactions were paid up front. Chinese customers would ask for a further discount to pay cash on delivery. It reached the point where the supplier was the one who wanted to give credit, so he could earn a little more on the financing. In America, people will not work with you unless you offer terms.
People had made serious money in China and Hong Kong through the low interest rates of the 2010s, and they spent it. You were happy to earn a low margin because the goods turned so quickly. It truly was a beautiful time.
Then the buyer left
Dealers know what the last few years have been. Ask your colleagues in Hong Kong. It is depressing. From where I sit it felt as if China stopped buying altogether, like a country that wakes up one morning to an embargo on a product.
The numbers are almost as blunt. De Beers has said Chinese demand fell by about half. In 2024, midstream dealers put polished sales to Chinese clients at 20 to 40% of normal. In a single financial year Chow Tai Fook cut its China network by more than 1,100 stores.
The Chinese consumer who still had money to spend moved it into gold.
"Lab-grown killed you guys"
I read the articles. Even my best friends tease me about being in natural diamonds. Lab-grown has killed you guys. I would just buy a lab-grown, it makes more sense. Is the natural diamond industry not finished?
Lab-grown plays its role, and so do interest rates. But I firmly believe the fall of China as a diamond market is the main reason natural diamond prices crashed.
Look at the size of it. America is about half of world diamond jewellery demand. Greater China was the clear number two. Count it at the jewellery counter and the published estimates say up to a fifth. Count it on the trading floor, where Hong Kong took the goods, and it was closer to a third, a figure the trade itself has used.
Either way, it was the market everyone preferred to sell into, because the money came first. Halve a market like that and somewhere between a tenth and a sixth of world demand is gone. No industry absorbs that quietly.
What China actually bought
The average hides the real damage, because China did not buy a little of everything. It bought 1 carat and below, and it bought the nicer goods: D to H colour, SI1 and better.
That market essentially disappeared. Everyone in the trade says 1 carat is non-existent. When we sell one it is a party, and it gives us hope.
America normally bought the lower qualities in those sizes, and that is exactly where lab-grown bites. Show an American customer a lab-grown F VS1 next to a natural K I1 and ask yourself which one he chooses. So the goods China used to take had nowhere to go.
The mines kept mining
When that much cash stops, how does the supply chain react? Not fast enough. You cannot just close a mine, so the rough diamonds kept coming.
Meanwhile the people who had planned their goods for the East had no idea what to do with them. They could not simply set up a new office somewhere and start selling. Most were leveraged, so the only option left was to dump. De Beers estimated that about $1 billion of polished flowed back out of China, net, across 2023 and 2024.
Then, to add to the woes, interest rates went up. That was last week's post. Forced sellers on one side, and on the other the best cash buyer in the world gone.
Why I am watching Beijing
Here is what gives me hope. Last week Beijing announced its biggest stimulus effort since September 2024, led by mortgage subsidies for first-time buyers and more central bank lending support. The Economist called it a big shot in the arm. It is much needed.
I will not oversell it. Markets were underwhelmed, and nothing in the package is aimed at jewellery. But Chinese households keep their wealth in property, and a consumer who feels poorer every year does not buy a diamond. Fix the first and the second has a chance.
Notice also what the bond market says. China's 10-year yields under 1.7% while America's is above 5%. The West has an expensive-money problem. China has a confidence problem, and Beijing has started spending on it.
It also feels like history repeating itself. In 2008 the West was in trouble, and China was the saviour. Beijing answered with a 4 trillion yuan stimulus, and Chinese buyers carried our trade for years afterwards. Today the West is in trouble again, this time through its bond markets.
Will China be the saviour again? Not in the same way. In 2008 China had far less debt and a property boom ahead of it. Today it has heavy debt and a property bust behind it.
But China does not have to save us. It only has to stop falling. For a trade that has lived without its best customer for years, that alone would change the picture.
So when a friend tells me natural diamonds are finished, this is my answer. The diamond did not fail. Our best customer lost his confidence, and customers like that can come back. I remember what it looks like when they do.
Falak Shah is President of YF Diamonds. The Loupe is his view of the diamond and jewelry trade.
Sources — Figures are as of early October 2026.
China's stimulus: The Economist ·
Market reaction and bond yields: Bloomberg via The Edge ·
Mortgage subsidies: Nikkei Asia ·
De Beers on Chinese demand: The Diamond Press ·
Polished outflows and store closures: The Diamond Press ·
Greater China demand share: GJEPC Solitaire ·
America's share: De Beers SEC filing ·
2008 stimulus: NBC News