THE visit of a high-level delegation from the Israel Diamond Institute to China appears to be a milestone in the rapidly developing relationship between the Chinese and Israeli diamond industries.

With market demand in China growing swiftly following tax cuts on diamond imports, it is predicted that China will be the world's biggest consumer market for diamonds in five to 10 years.

Among the cities the delegation visited, a major seminar and reception was held in Shanghai on June 21, under the auspices of the Israeli Consul-General, Ilan Maor, and the Shanghai Diamond Exchange. During the seminar, the Israeli delegation expressed a special interest in the Shanghai diamond market. Some 22 Israeli diamond companies and several local manufacturers took part in the seminar to discuss the scope and size of the potential market for diamonds in Shanghai.

Possessing the world's most advanced diamond processing technologies and a supply of the best polished diamonds, Israel plays an leading role in the world diamond market and it sees China as a crucial emerging market.

Mutual benefits can be achieved from the formation of significant co-operative business ventures between the two countries. A substantial number of Israel-based companies are already engaged in joint ventures with diamond companies in China.

Ilan Samuel, the consultant of the Shanghai Diamond Exchange, said that local diamond manufacturing will focus on small to medium diamonds (0.2-0.5 carat), which tend to be the preferred purchase of most local diamond consumers. In addition, concerns about the colour and clarity of the diamonds were also of major interest to Israeli diamond producers and exporters.

Statistics show that the highest demand in Shanghai is for polished diamonds, and the city's total diamond consumption reached 3 billion yuan (US$240 million) last year.

A significant growth of Israel's diamond trade with China has occurred since 2002, when Israel's polished diamond exports to China tripled to US$80.8 million, and rose to US$90.8 million in 2003. Israel's net polished diamond exports to China in the first quarter of this year stood at US$29.6 million, a rise of 4.2 per cent over last year.

"The potential for Chinese diamond consumption will be much more than the US$80.8 million of last year," said Schnizter.

Many Israeli companies are members of the Shanghai Diamond Exchange, which was recently invited to join the World Federation Diamond Bourse and it will soon become China's first diamond exchange in the WFDB.

Schnizter said that the joining of the Shanghai Diamond Exchange to the WFDB would provide China with a strategic partnership on a world scale and enable it to follow the latest market trends.

The Israeli diamond delegation also visited Guangzhou where the IDI hosted an Israel Diamond Pavilion at the China International Gold, Jewellery and Gem Fair, with 10 leading Israeli companies exhibiting.

"We anticipate an era of enhanced business ties between Israeli and Chinese companies," said Simcha Lustig, IDI chairman. "I believe that by combining the inherent advantages of each side, we can achieve enormous mutual benefits."

The Israel Diamond Exchange was founded in 1947 and Israeli diamond polishing factories have progressed to become the most advanced in the world. Approximately half of the world's gem quality diamonds come out of Israel and can be found on a substantial proportion of the most beautiful diamond jewellery sold worldwide.