Should US jewelers lose sleep over Hong Kong?

Columnist Jan Brassem advises retailers and others in the U.S. jewelry business to keep a close eye on the Umbrella Revolution that’s opened in Hong Kong.

Michelle Graff michelle.graff@nationaljeweler.com

Jan Brassem is a senior partner at MainBrace Global Partners, a global jewelry advisory and & firm. You can e-mail him at Jan@MainBraceGlobalPartners.com.“When China wakes, the world will tremble,” said Napoleon more than 200 years ago. But, over the last few weeks the world has felt the tremors and, sooner or later, so will the U.S. jewelry industry.

You might have read about the pro-democracy demonstrations in Hong Kong, the story du jour. If you are a jeweler, you should be paying special attention to what’s happening there.

Hong Kong is the location of arguably the world’s two largest jewelry shows: in March (with 46,000 visitors) and in September (with 3,600 exhibitors). The shows are held in the gorgeous, bird-shaped, Hong Kong Convention and Exhibition Centre.

The city also is home to thousands of jewelry designers whose creations are found in the United States and around the world, and, as such, is a major exporter of finished jewelry. The U.S. Department of Commerce reported that almost $1 billion worth of jewelry was shipped to the U.S. from Hong Kong in 2013.

What’s all the peaceful demonstration and social unrest in Hong Kong about right now? It all started in 1984 when Margaret Thatcher, the British prime minister at that time, negotiated and signed a joint declaration handing Hong Kong, then a British colony, back to China in 1997.

The handover came with the Chinese “promise” to let Hong Kong select its own leader by 2017, among a long list of additional rights and ethos. The promise came under a “one-country, two-system” doctrine. China was to maintain a “hands-off” position in Hong Kong affairs for 50 years.

Chinese President Xi Jinping has taken a hard line and reneged on the promise. Hong Kong, it was announced, can vote for its chief executive but only after candidates are approved (vetted) by the Chinese 1,200-member General Assembly.

Our Hong Kong-based associate with 20 years of jewelry experience in Hong Kong and China, emailed a status report recently that stated, “When the hard-line decision was announced, peaceful demonstrations followed. Tens of thousands of high school and university students along with office workers occupied the major highways leading from the Central Business District to the major shopping area. The demonstrators’ focus is on the government offices.”

Demonstrators in what has been termed the Umbrella Revolution tried breaking into the government building

Banner will be right here …

but were turned away easily. They promised to try again. If they do get in, it is guaranteed that Xi will send in the People’s Liberation Army (PLA). Anyone remember Tiananmen Square?

The thousands of students, of course, blocked traffic (Hong Kong is a small and hilly city with few major roads) and the trolleys are not running. Buses and subways are operating only sporadically. The Umbrella demonstrations have been extremely peaceful. Nevertheless, Xi has cut communications between Hong Kong and China.

Journalists and editors are being beaten and judges, classically independent under British law, are being “persuaded” to be “patriotic” to the Communist line.

The government’s ill-advised use of tear gas and pepper spray on the peaceful protestors was an obvious miscalculation; “like prodding a hornet’s nest with a stick” wrote one newspaper correspondent. In what should be taken as a sign of admitting their mistake, representatives of the police went into the crowds to apologize the next day. After that, tensions cooled somewhat.

Stores now are returning to normal, with little or no damage, a sign of the caring and peaceful marchers. Protesters remain but are trying to help restore traffic order. They have, however, built medical positions every 1,000 yards with water stations in between--they, seemingly, are not about to give up anytime soon.

It appears Hong Kong is experiencing calm before the storm. The storm could be the PLA.

So, how could all this affect the U.S. jeweler? Some facts about doing business in Hong Kong:
-- Seasonal orders, estimated by a Hong Kong trade association, in the neighborhood of $550 million have been placed with Hong Kong companies.
-- Last-minute orders for Christmas delivery could be disrupted.

What should the U.S. jeweler do under these circumstances?
1) Keep in extremely close contact with your suppliers using email, not the phone. Telephones are reportedly being tapped.
2) Immediately contact, via email, the suppliers you’re working with for 2014 Christmas. Ask: Will deliveries be delayed? If so, can orders be shipped via the city of Shenzhen as an alternative?
3) If you own molds or models and are kept with your Hong Kong factories for safe keeping have them shipped, via FedEx, to your office if the situation worsens.
4) If shipment cannot be made in a timely manner for Christmas cancel the orders and request a refund of your deposit.
5) Do not discuss the location of the factory in an email and especially not on the phone.
6) Jewelers planning to visit Hong Kong this year for their 2015 design and merchandise plans should delay their visit until the situation settles down. If it doesn’t, start a search for a replacement country soon. It will be difficult, however, to find a similar location.

Hopefully, this civil unrest will end with a peaceful resolution soon. What a shame if it doesn’t. Please stay tuned.

Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.