China’s love affair with glitzy Swiss timepieces is ending, as President Xi Jinping’s campaign against corruption makes targets of wearers.
The CHART OF THE DAY shows Chinese imports of Swiss-made watches tumbled 24 percent in the first quarter from a year earlier for a third straight decline, while shipments to Hong Kong sank 9.3 percent, according to trade data from Switzerland. The lower panel compares shares of Hengdeli Holdings Ltd. and Emperor Watch & Jewellery Ltd., the biggest watch retailers traded in Hong Kong, versus the Hang Seng Index, Swatch Group AG and Cie. Financiere Richemont SA, the owner of the Cartier brand.
Hermes International SCA reported a drop in first-quarter watch sales due to a slowdown in China, while LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, said Chinese retailers have been buying fewer watches than expected. Communist Party official Yang Dacai was fired last year after photos posted online showed him wearing 11 luxury watches at different times, earning him the nickname “Brother Watch,” according to Xinhua News Agency.
“The corruption crackdown campaign is having a big effect on luxury watch sales,” said James Roy, senior analyst with China Market Research Group in Shanghai. “High-end watches are very common gifts and they are items that are quite conspicuous and associated as a sign of corruption.”
Hengdeli is more vulnerable to weaker demand for luxury watches than global companies such as Swatch or Richemont, which have seen their shares rise, Roy said. Hong Kong, the world’s biggest importer of Swiss watches, is a popular buying center among mainland Chinese because of tax exemptions and a weaker currency. Greater China bought more than a quarter of Swiss-made timepieces by value last year, according to the trade-group data.
President Xi, who took over as party secretary in November, has forced officials to cut down on lavish receptions as well as banned the use of military number plates on top-end car brands including Porsche, as he seeks to shield the party from accusations of corruption. Large-restaurant and catering sales fell for the first time in more than three decades in the first two months of the year, official data showed, while prices for Moutai liquor slumped, according to HSBC Holdings Plc.