On the afternoon of December 4, a surprising turn of events occurred in the stock market as a company known as Huanghe Xuanfeng experienced a dramatic surge, hitting its daily trading limit after a brief moment of plummetingThis fluctuation coincided with a noticeable increase in its trading volumeDespite the volatility, Huanghe Xuanfeng managed to close at the maximum limit, marking a consecutive rise in its stock price.

The day prior, an announcement from the Ministry of Commerce brought significant revelations: in principle, the export of gallium, germanium, antimony, and dual-use items related to superhard materials to the United States would not be permittedThis decision sent waves through various sectors, highlighting the government's strategic stance on critical materials.

Superhard materials are primarily known to include diamonds and cubic boron nitride, the latter being a newly-developed synthetic material renowned for its exceptional hardness, second only to natural diamond

Analysis from various institutions emphasized that these export restrictions highlight the strategic importance of these materials in the global market.

Huanghe Xuanfeng has previously noted that China has developed its superhard materials industry from humble beginnings to the current position of being the world leader in synthetic diamond and tool productionIn numerous applications across various fields, China has established a dominant role, essentially controlling the global market for superhard materialsNotably, the synthetic diamond produced in China constitutes more than 95% of the global market, while cubic boron nitride accounts for about 70% of the total.

Recognized as a primary player in this industry, Huanghe Xuanfeng stands out not only as a leader but also as the only company that has integrated a full industry chainThe dual-use nature of materials like gallium, germanium, and antimony—often serving both civilian and military purposes—adds a layer of complexity to their regulation, given their strategic implications in modern technology.

Diamond, celebrated as the hardest known material, offers a myriad of exceptional physical and chemical properties, including high hardness, excellent thermal conductivity, and substantial chemical stability

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Beyond traditional uses in grinding and cutting, diamonds are increasingly finding applications in construction, machinery, oil extraction, and geological exploration, as technology advances.

The rise of synthetic diamond is a testament to China's innovation and manufacturing capabilitiesDubbed the "industrial teeth," synthetic diamonds are pivotal in sectors including defense, aerospace, chip manufacturing, automotive production, infrastructure, and oil and gas drillingThey enable precise and ultra-precise machining, making them indispensable tools in optimizing production processes.

Globally, the cultivated diamond supply chain is characterized by a concentration in China, India, and the United StatesBy 2023, China surpassed an astounding 22 million carats in the production of rough cultivated diamonds, capturing over 70% of the global market shareIndia, on the other hand, excels in the processing segment, accounting for about 80% of the global processing market, while the United States emerges as the largest consumer of cultivated diamonds.

Hence, India has become a vital destination for Chinese exports

Recent data indicates that from January to October of this year, China exported a total of 753.04 tons of superhard materials, representing a 15.36% increase compared to the previous yearAmong the exports, India's share constituted 22.32% of the total volume and 13.24% of the value.

On December 3, the Ministry of Commerce reiterated its commitment to national security and international obligations concerning non-proliferation by enforcing stricter regulations on dual-use items exported to the United StatesThis decision entails a refusal of permission for the export of gallium, germanium, antimony, and related superhard materials, alongside enhanced scrutiny on graphite dual-use items bound for America.

Moreover, the ministry underscored that any organizations or individuals from any country or region that violate these regulations—specifically by transferring or providing dual-use items originating from the People's Republic of China to U.S

entities—would be held legally accountable.

Reflecting on the history of synthetic diamonds in China, it was in 1963 that the country's first man-made diamond materialized in ZhengzhouSince then, the province of Henan has emerged as a hub for diamond-related enterprises, housing numerous companies including Huanghe Xuanfeng, alongside others like Yujing Diamond and Sifangda, which have been publicly listed.

However, Huanghe Xuanfeng has faced challenges since 2020, with net profits in profitable years barely surpassing 100 million yuan, while losses in unprofitable years have ranged between 800 million to 1 billion yuanAs recently as the first three quarters of this year alone, the company reported losses exceeding 400 million yuan.

The height of the company's revenue peaked in 2021 with an income of only 2.6 billion yuan, demonstrating the severity of its financial struggles

In the face of adversity, their main product, superhard materials, continues to see a decline in gross profit margins, although it has notably remained above 16.7%.

Export regulation has resulted in a relatively minor impact due to the company's foreign revenue being only 104 million yuan—accounting for a mere 6.6% of total incomeNonetheless, the key issue affecting profitability lies in persistent asset impairment and credit losses observed over recent years, coupled with elevated interest expenses.

For instance, in the first three quarters of this year, the company reported total revenues of 939 million yuan, alongside costs of 842 million yuanWhen factoring in 200 million yuan in interest expenses and another 150 million yuan in management fees, the total operational costs skyrocketed to 1.317 billion yuan, in addition to approximately 100 million yuan in asset and credit impairment.

The culmination of these expenses and impairments has propelled Huanghe Xuanfeng into a staggering operational loss of 439 million yuan for that period