As official crackdown on bribery makes it the worst year for the luxury industry since 2009, Swiss watch federation reports huge drop in exports to China to the tune of 10 % last year.
As the Chinese bought far fewer luxury watches, which have been used to grease the wheels of politics and commerce in the world’s second-largest economy, 2016 watch exports fell by more than 2bn Swiss francs (£1.6bn) to SFr19.4bn, the Federation of the Swiss Watch Industry said. Since 2009, when sales declined by 22% due to the global financial crisis, 2016 was the worst year for the Swiss watch industry.
In the four years since the Chinese president, Xi Jinping, announced a campaign against rampant corruption that he said threatened to “doom the party and the state”, sales in Hong Kong and China have fallen by 25% and 22% respectively, the federation said.
The most expensive watches, which are often worth much more than their weight in gold and are less conspicuous to transport, are the worst hit in the sale decline, said Philippe Pegoraro, the federation’s lead economist. “[Exports] in the highest segment, watches that sell for more than SFr10,000, have more than halved, and these account for more than two-thirds of sales by value,” he said.
While at the modest end of the luxury scale, a Blancpain Leman, made with white gold, will set you back £9,750, the most expensive timepiece in the world include a $4m (£3.2m) watch by Patek Phillipe called Platinum World Time.
In 2012 when Yang Dacai, a junior government official, was photographed smiling at the scene of a deadly bus crash, and this was the time when the role of expensive watches in Chinese corruption got highlighted. Earning him the moniker “Brother Wristwatch”, incensed bloggers reacted by highlighting Dacai’s ownership of 11 luxury watches collectively worth more than $100,000. He was later sentenced to 14 years in prison for corruption.
Prominent Russian officials, the Nigerian president’s wife and Abu Bakr al-Baghdadi, the Islamic State leader have been seen donning very expensive watches. Fifa executives and the heads of the 32 football associations that qualified for the 2014 World Cup were gifted 58 Parmigiani watches worth $25,000 each as gifts by the Brazilian FA and this was the time that Fifa was also dragged into a watch controversy. Since then, the watches have been donated to charity.
Between 2005 and 2012, peaking at SFr1.6bn a year, Swiss watch exports to China had increased by 370%, before Xi’s crackdown.
Vows to “maintain our zero-tolerance attitude towards corruption and look into every case involving corruption, leaving no place to hide for corrupt officials within the party” have been recently made by The Chinese president.
Chinese people on the mainland, in Hong Kong or during holidays to Switzerland, France or the US, where they are more confident in the watches’ authenticity, are the major buyers of the vast majority of luxury watches sold across the world, said Karine Szegedi, head of the watch industry group at Deloitte. “It is quite common that they would buy two or three watches in half an hour,” she said of Chinese people’s shopping trips to Geneva or Lucerne.
Szegedi said that “there is no limit really if you want nice jewellery with complicated movements” and the cost of Swiss watches “easily goes up to the hundred thousands”.
Sales would “probably never reach the values they had peaked at in Hong Kong” and have been sharply declining for years, she warned.
“Watches were very popular for gift giving,” she said. “But following the [anti-corruption] crackdown, it has decreased sharply and they are now rarely seen in public.”
(Adapted from The Guardian)