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    Hong Kong, China Markets Keep Swiss Watch Industry "Ticking"...In More Ways Than One

    With demand remaining relatively stagnant in traditional markets like North America and Europe, China has become a prime driver of the Swiss luxury watch industry. But despite all appearances, this watch trade isn't a one-way street.
    Jing DailyAuthor
      Published   in Hard Luxury

    Hong Kong Is World's Top Individual Importer Of Swiss Watches#

    The Hong Kong and mainland China markets have consistently been some of the most lucrative for Swiss watchmakers, with Hong Kong becoming the world's top individual market (with turnover of some $2 million in the first eight months of this year alone) and China moving into the top three national markets -- behind only the U.S. and France -- in the same time period. Following years of solid growth and sales figures in both Hong Kong and China, executives and retailers are rightfully bullish. Last month, the CEO of the LVMH-owned watchmaker Hublot said that his company predicts "30 years of growth" in China, with "no limit during [his] lifetime," and during the ongoing Golden Week holiday, Hong Kong retailers have been inundated with mainland buyers.

    With demand remaining relatively stagnant in traditional markets like North America and Europe, China has become a prime driver of the Swiss luxury watch industry. But despite all appearances, this watch trade isn't a one-way street. As Britain's Independent points out today, not only do China sales keep Swiss watchmakers "ticking" profit-wise, but these watchmakers increasingly depend on China and Hong Kong for components that keep the watches themselves ticking.

    From the Independent:

    They may well be "Swiss made'' but US$2.05 billion (1.5 billion euros) worth of watches and related components were imported to Switzerland last year - and 26 percent of those materials came from Hong Kong and China.



    "To a great extent Hong Kong and China are what keeps the entire Swiss watch industry ticking, both as retail markets and component suppliers,'' CLSA consumer analyst Aaron Fischer told the South China Morning Post.



    To counteract any bad press about the trend - and to ensure the "Swiss made'' legend remains - the Swiss government is considering legislation that will require local content to account for between 60 to 80 percent of the watch's value, including the cost of components, research and design. The law is designed to also protect other iconic Swiss exports such as cheese and chocolate.

    This story is interesting in more ways than one. First, it brings up the issue of what entails "Made in ____" in the global luxury market. We've seen similar controversy in Italy in recent months, with the New York Times reporting on the phenomenon of Chinese factory owners setting up shop in Italy then churning out products that are lower-priced and lower-quality, yet are still "Made in Italy." This has caused growing tension in the Italian textile and fashion industries. This begs the question: could the same thing happen in Switzerland? The aforementioned Independent article mentioned that home-grown Chinese watchmakers have for years looked for ways to move up the value chain, with one, China Haidan Holding, working with a Swiss company to develop its "CodeX" luxury brand for the Swiss market. But at the same time, if Haidian Holding were able to develop a foothold in the Swiss market, there's no real reason they couldn't manufacture their own watches in Switzerland to sell back to the China market, complete with the "Swiss Made" label.

    Second, and somewhat interrelated to the last point, this story is interesting because it brings up the question of when we'll see a true high-end Chinese watch company. Arguably China's first luxury watchmaker, Shanghai Watch (a favorite of Mao-era figures like Premier Zhou En'lai) has made moves to establish itself as a global luxury brand in recent years, but at the moment it's mainly relying on the patriotism of older, wealthier buyers to drive sales of newer models or China's fu gu (retro) enthusiasts, who shop for vintage models on Taobao.

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