Sales of luxury Swiss watches dropped by 10% last year following a crackdown on corruption in China.
The Federation of the Swiss Watch Industry said 2016 watch exports fell by more than 2bn Swiss francs (£1.6bn) to SFr19.4bn 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. It was the worst year for the Swiss watch industry since 2009, when sales declined by 22% due to the global financial crisis.
The federation said sales in Hong Kong and China have fallen by 25% and 22% respectively 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”.
Philippe Pegoraro, the federation’s lead economist, said the sales decline was most severe among the most expensive watches, which are often worth much more than their weight in gold and are less conspicuous to transport. “[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.
The most expensive timepieces in the world include a $4m (£3.2m) watch by Patek Phillipe called Platinum World Time, while at the more modest end of the luxury scale, a Blancpain Leman, made with white gold, will set you back £9,750.
The role of expensive watches in Chinese corruption was highlighted in 2012 when Yang Dacai, a junior government official, was photographed smiling at the scene of a deadly bus crash. Incensed bloggers reacted by highlighting Dacai’s ownership of 11 luxury watches collectively worth more than $100,000, earning him the moniker “Brother Wristwatch”. He was later sentenced to 14 years in prison for corruption.
Very expensive watches have been seen on the wrists of prominent Russian officials, the Nigerian president’s wife and Abu Bakr al-Baghdadi, the Islamic State leader. Fifa was also dragged into a watch controversy when it emerged that the Brazilian FA had given 48 Parmigiani watches worth $25,000 each as gifts to Fifa executives and the heads of the 32 football associations that qualified for the 2014 World Cup. The watches have since been donated to charity.
Before Xi’s crackdown, Swiss watch exports to China had increased by 370% between 2005 and 2012, peaking at SFr1.6bn a year.
The Chinese president has recently vowed 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”.
Karine Szegedi, head of the watch industry group at Deloitte, said the vast majority of luxury watches sold across the world are bought by 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. “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 the cost of Swiss watches “easily goes up to the hundred thousands” and “there is no limit really if you want nice jewellery with complicated movements”.
But she warned that sales have been sharply declining for years and would “probably never reach the values they had peaked at in Hong Kong”.
“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.”
Pegoraro said the drop in sales had forced several of Switzerland’s most famous watchmakers to issue profit warnings and cut about 3,000 jobs over the past two years. Richemont, which makes Cartier, Vacheron Constantin and Piaget watches, has shed about 200 jobs.
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