【Shanghai, Ch】Oral History of Factor Market Opening | Lin Qiang: The Process of Policy Adjustment and Breakthrough Was Extremely Difficult

For me, I started participating in the Shanghai Diamond Exchange project in 1997. To this day, my colleagues and I have persevered in this industry for many years, contributing the best years of our lives. Seeing the industry enter a virtuous cycle of development through our efforts is deeply gratifying and meaningful.

My studies and work have both been closely related to international trade and jewelry. After graduating from the University of International Business and Economics in 1987, I was assigned to the Jewelry Department of the China National Arts & Crafts Import & Export Corporation (hereinafter referred to as China Arts & Crafts), a subsidiary directly under the former Ministry of Foreign Trade and Economic Cooperation (MOFTEC). I was primarily responsible for gold and jadeite business. At that time, there were no more than 20 categories of Class I import and export commodities under state monopoly, including petroleum and grain. Among them, two of the most special commodities—pearls and diamonds—were managed by my department.

I remember in the spring of 1997, I learned at the General Office of the State Council (hereinafter referred to as the State Council Office) that Shanghai planned to establish a diamond trading center. I immediately told the colleagues at the State Council Office that China Arts & Crafts should be involved in this matter. At that time, diamonds, as a Class I import and export commodity, were monopolized by MOFTEC. Conducting diamond trade required a business license, which was issued by China Arts & Crafts. I was then the Deputy Director of the General Manager’s Office at China Arts & Crafts. As soon as I heard about this, I knew we had to be involved. Sure enough, by the summer of 1997, my unit assigned me to participate in the diamond exchange project.

During the process of pursuing the diamond exchange project, the Shanghai side needed to frequently travel to Beijing to report and communicate with the State Council Office, MOFTEC, and other relevant ministries. This presented a problem: all communications with Beijing institutions required corresponding levels of authority. Issuing documents to MOFTEC required the Shanghai Municipal Government, and the process for documents to the State Council was even more cumbersome. To improve efficiency, the Shanghai side adopted the method of having Mayor Xu Kuangdi write letters to Vice Premier Zhu Rongji to shorten communication channels. Our situation at China Arts & Crafts was different. Being directly under MOFTEC, reporting upwards was considered an internal ministry request. As the Deputy Director of the Office, I could directly submit relevant materials to the ministry’s leadership. Therefore, after the Shanghai side connected with us, they found many tasks became much easier to handle.

On October 27, 2000, the Shanghai Diamond Exchange was officially established. After its establishment, the first problem we needed to solve was to promote breakthroughs in diamond taxation and management policies. Through the joint efforts of the State Council Office, various central ministries, the Shanghai Municipal Government, and other parties, the state conducted two crucial tax policy adjustments in 2002 and 2006, truly aligning China’s diamond tax policy with international standards.

Looking back now, the process of policy adjustment and breakthrough was extremely difficult.

First, developing the diamond trade involved a continuous process of emancipating the mind and unifying understanding. At the time, some department leaders felt that as a proletarian state, we did not need to develop a luxury goods industry. Later, through continuous study, investigation, and communication, the relevant functional departments gradually unified their thinking, clarifying that establishing the diamond exchange was to standardize China’s diamond industry and was an important measure for China to integrate with the world. Through years of national development, there is no longer bias against the diamond industry, which is a significant progress we have achieved.

Second, the ministry-city cooperation process was one of continuous cultural collision, exchange, and unification. Shanghai’s诉求 was to standardize the domestic diamond industry order, establish a professional team to undertake this work, and consistently advance the project. However, when communicating with Beijing, someone was needed to present Shanghai’s诉求 and goals in a way acceptable to the relevant central ministries, so they could understand and accept them. This process required a foundation of smooth communication and an understanding of the communication barriers that cultural differences between the two places might bring.

Third, there was a continuous磨合 process between China’s actual conditions and international rules and experience. In researching and determining issues such as the nature, operational model, and management methods of the diamond exchange, because there were no precedents to follow, it was necessary to absorb and借鉴 international experience. However, how to combine international practices with China’s actual conditions? This involved adjustments to China’s diamond tax policy, reforms to the diamond trade management system, innovations in customs supervision methods for diamonds, and breakthroughs in foreign exchange management and tax collection, among others. From any perspective, achieving breakthroughs was very difficult. The establishment of the Shanghai Diamond Exchange not only formed a unified, standardized, and orderly international diamond trading platform but, more importantly, involved many policy and institutional reforms, innovations, and breakthroughs in the process of China integrating into the world.

Fourth, building a community with a shared future for mankind requires us first to achieve connectivity. We established the Shanghai Diamond Exchange to connect domestic and international diamond markets, enabling the interconnection of various production factors. It was not only about aligning tax policies and management systems with international standards but also about engaging in international communication and exchange in customs, culture, and ideology.

Over the past 20 years, the Shanghai Diamond Exchange has always adhered to the principle of being international and inclusive, never excluding any party, and has established a certain level of credibility. Perhaps from an economic and financial perspective, the scale and volume of the Shanghai Diamond Exchange are not enormous, but we are the convergence point of interests and destinies in the international diamond industry, the most internationalized collective, playing a very significant role and influence in this industry. In this context, an internationalized platform like ours, which has been developing healthily for 20 years, will undoubtedly become a hub and bridge integrating the global diamond industry chain and value chain in the future. Our country needs many such platforms and should strengthen support for them. They are the best windows for the world to understand China.