Opinion China diamond arrests: Why you shouldn’t be surprised

"Well,hardest substance found in nature,it cuts glass,suggests marriage... I suppose it replaced the dog as the girl's best friend."

January 14, 2010 04:42 PM IST First published on: Jan 14, 2010 at 04:42 PM IST

“Well,hardest substance found in nature,it cuts glass,suggests marriage… I suppose it replaced the dog as the girl’s best friend.”

These words were spoken by James Bond in the 1971 film Diamonds are Forever. With 21 Indians among 33 foreigners arrested in Shenzhen,China on charges of smuggling diamonds,there are conspiracy theories suggesting links with the arrest of 3 Chinese engineers in Chhattisgarh after the Balco tower collapsed. This is improbable and implausible.

The Indians in Shenzen were arrested before the Chinese in Chhattisgarh — and the Chinese probe into diamond-smuggling began in October 2009.

There has been an increase in rough diamond demand and prices in China,with imported rough diamonds being used for processing and polishing. However,there is a wedge between rough diamond prices in China and Hong Kong,thanks to import duties,VAT and consumer taxes in the former. Therefore,if there is arbitrage and smuggling of diamonds from Hong Kong to China,that shouldn’t be surprising. There are guesstimates that 80% of diamonds in China are smuggled in.

We will give you $2,000/ct,size: 3cts-8cts per piece. Total quantity,1,000cts-2,000cts. Delivery to Hong Kong where you can pass through custom with more than 1,000cts to Shenzhen,China,free of tax and duty (5% duty on rough diamonds by China gov.); or we can help you pass through china custom from Hong Kong.

A Google search on diamond traders in China threw this up,and several more. The suggestion of bribery through Customs is fairly explicit and one also knows it is rare in China for business to be completely de-linked from government connections. It shouldn’t be surprising that diamond traders from Surat should be involved in the diamond industry in both China and Hong Kong,especially after the trade was hit by the global recession. Given this,the involvement and arrest of Surat-based Indians as carriers is plausible,and there is no reason to read Indo-Chinese friction into everything.

That penalties (if proved) in China can be stiff is also par for the course. What is unclear is why the Chinese government (even if at the local level) complicity towards smuggling turned adverse,especially because China has offered incentives to build a diamond industry there. But then,this is about diamonds and a non-James Bond quote from the same film says,Curious… how everyone who touches those diamonds seems to die.

For all one knows,there are several such gangs and inter-gang rivalry led to the tip-off.