Slower-than-expected growth in China's economy is a major reason for the decline in diamond prices, according to a study.

The fifth annual report on the global diamond industry was prepared by the Belgium-based Antwerp World Diamond Center and the consultancy Bain & Company. It said in the second half of 2014 diamond prices dropped nearly 25 percent and continued into the first half of this year.

"China's decline in GDP growth was the primary factor," Olya Linde, a managing partner in Bain's Moscow office said in an interview.

That slower economic growth also meant that the number of jewelry stores opening in China did not meet expectations, the report said. "That affects supply because new stores require an inventory," noted Linde.

The report also said that a decrease in consumer demand for diamond jewelry, particularly in Greater China (which includes Hong Kong), began in 2014 and led to a drop in demand for polished and rough diamonds in 2015. This led retailers to trim orders and created an industry backlog in the cutting and polishing segment, according to the report.

The result: prices for polished and rough diamonds plunged 12 percent and 23 percent, respectively, since May 2014 and 8 percent and 15 percent, respectively, for the first nine months of 2015.

Linde said the strengthening US dollar also made diamonds more expensive and noted that like other commodity markets such as oil, the dollar is the preferred payment of choice for many participants.

New York jewelry retailer Tiffany & Co declined to comment on the diamond industry report. But Tiffany CEO Frederic Cumenal said in November that the dollar's surge has hurt both its international and domestic businesses, according to CNN Money.

Bain's Linde said retail diamond jewelry sales grew by about 4 percent this year, and she forecast even slower growth for 2016, from zero to 2 percent. She said wedding jewelry accounts for about 30 to 50 percent of yearly sales.

"All holidays are important for the diamond market. In China it's the New Year and in the US it's the Christmas season. Everyone is waiting to see how this holiday season will shake out," Linde said.

The US market has been "robust" the last few years, noted Linde and she expects that to continue in 2016.

In New York's diamond district in midtown Manhattan, David Nektalov, president of Leon Diamond, said he has noticed a decline in Chinese customers. To counter it, he has sought to tap into the rising number of Chinese visiting New York City and hired Chinese sales people and built relationships with local tour guides.

"We still get Chinese customers, but it used to be a lot more," he told China Daily. "The last two years, about 50 percent of our customers were Chinese (tourists). This year, it's about 20 percent."

He said the strong dollar may be the reason.

"Middle-class growth will continue in China and GDP will continue to rise even if it's not in the range of previous years," Linde said. "The big question is where the Chinese will purchase their diamonds. Will they buy domestically or do it when they travel overseas? We will see."

Hezi Jiang contributed to this report.

paulwelitzkin@chinadailyusa.com