The boom in Swiss watch exports to China

There’s a simple reason why just about every watch brand is making a beeline for China, presuming they didn’t already do so years ago, and that is the phenomenal increase in watch sales, in particular that very Swiss speciality of mechanical watches, that has come with the country’s economic boom. After the 43.1% surge recorded in 2008, which hoisted the country up two ranks to seventh place in Swiss watch export markets, and having dodged the impact of global recession better than most in 2009 (-15.2% versus -22.3% for markets overall), China is back with a vengeance.

Growth of 63% in eight months

Between January and August 2010, watch exports to China totalled CHF 650 million (US$ 650 mn). This 63% increase, the biggest among any of the industry’s main export markets, puts China in fourth place behind Hong Kong (CHF 1.88 bn/US$ 1.88 bn), the United States (CHF 998 mn/US$ 998 mn) and France (CHF 698 mn/US$ 698 mn).

China is all the more important for Swiss watch brands given that a large part of exports to Hong Kong, a special administrative region, are then rerouted to China under a more advantageous customs and excise regime. “Greater China” (mainland China, Hong Kong and Taiwan) alone accounted for a quarter of total Swiss watch exports in 2009. This same year, the industry’s two largest groups, Swatch and Richemont, made 29% and 26% respectively of their sales on the Chinese market. By way of comparison, in 2001 China didn’t even register in the top 15 markets for Swiss watch exports, first entering the table in 2003 in 11^th place.

A thriving trade

Time measurement is a well entrenched tradition in China that dates back to the sixteenth century, 1582 to be precise, when Portuguese ambassadors, anxious to smooth over a diplomatic incident, presented the first striking clock as a gift to the Governor of the province of Canton. From that point on, mechanical horology won the heart of the Chinese people and fascinated the Imperial Court. While the first timepieces to reach China originated from countries such as England, France and Germany, the main horological centres of that era, Switzerland steadily forged its reputation in the art of time measurement. The Chinese were receptive to this art, particularly in the nineteenth century when “Chinese” watches – a model of robust, accurate pocket watch that was manufactured in Switzerland specifically for the region’s humid climate – became the object of thriving trade between the two countries.

Trade has continued to forge a bond between Switzerland and China. In August this year, Doris Leuthard, President of the Swiss Confederation, paid an official visit to Beijing where she was received by President Hu Jintao. Following their discussion, Switzerland and China agreed to begin negotiations with a view to a free trade agreement. No European country to date has entered into such an agreement. The joint study undertaken by the two delegations made clear the complementary nature of the two countries’ economies, concluding that opening the two markets together with a reduction in barriers to trade would significantly improve economic cooperation between China and Switzerland, which dates back sixty years. Clearly good news for the Swiss watch industry.