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After yuan’s devaluation Chinese TV considers possibility of diamond investment - 21.08.15

China’s state-owned television has joined a national debate about wealth preservation, following the Chinese central bank’s decision to devalue the yuan by about 2 percent against other currencies. In a recent report it focused its attention on diamonds as an effective way for regular Chinese to defend their asset base.


According to the report, in the international market, the price of diamonds in the standard color ranges have increased by about 160 percent in the past 10 years, but in China, prices of certain diamonds in retail stores have remained almost unchanged.


Since diamond prices are U.S. Dollar denominated the gradual increase of the exchange rate of the yuan against the American currency is partly responsible for the fact that diamond prices in China have increased only slightly in recent years, explained Michael Huang from the Diamond Index Group. But, he added, things have been different in recent several days.


"In the past several days, the Renminbi has depreciated against the U.S. dollar. The fall was around 2 percent a day. In this situation, the domestic prices of diamonds naturally increased. As far as I know, the prices of some diamonds have already increased 5 percent over the several past days," Huang stated.


For clarification, Renminbi (often abbreviated as RMB) is the official term for Chinese currency. The yuan is its most commonly used unit, in the same way as the dollar is the most commonly used unit of American currency.


The question as to whether the latest devaluation of the yuan will instigate a new tendency, or whether it soon will resume its upward trend is critical to the debate.


For several years already, CTV reported, local consumers have been able to buy diamonds from China Gold Group, and then sell them back after a certain number of years. But a two-year investment return on a diamond worth 100 thousand yuan was around 2 percent, which was less than the two-year deposit interest rates at a bank. Whether this changes will greatly depend upon the long-term relationship of the yuan to the U.S. dollar.