Kung hei fat-choi! Kung hei fat-choi! Kung hei fat-choi!

April 2003

At the beginning of February, the streets, offices and gardens of Hong Kong were bustling with this exclamation that means, more or less in Cantonese, 'that you will have a prosperous year'. It is a traditional greeting that ushers in each new lunar year and is accompanied by a red envelope containing a new banknote of 10, 20, 50 or more dollars, depending on your means and the amount of admiration you have for the recipient of this gesture.

So, now it is official. We have left the year of the horse for the year of the goat. But we will not dwell here on the various other predictions of Chinese Taoist mythology. You can find that elsewhere. And, nothing seems to be new, at least on the surface.

In the watch industry, however, the Chinese New Year is witnessing a small evolution in the domain of retail sales according to a small survey taken at a number of large stores in Hong Kong. For the first time, the turnover realized around February 1, or the Chinese New Year has equalled or even exceeded that of the traditional Christmas and New Year periods. This has taken place in an environment that is no longer what it was during the hand-over of Hong Kong to China in 1997, a period which saw sales' records broken for the industry. Alas, the highs of the 1990s are gone. Today, annual sales are clearly down by 15% to 20% and are seeing new divisions depending on the time of year.

“Before, the Christmas and New Year season represented about 50% of turnover for the entire year. Today, it is only 25%. On the other hand, the Chinese New Year is seeing a veritable boom in sales,” explains a salesperson for luxury brands at Admiralty. This phenomenon can be explained by the influx of clientele coming from mainland China. “These people have a lot of cash and are using it to buy watches costing thousands of Hong Kong dollars!” adds a rather surprised salesman.

A telling sign in the windows of most luxury goods stores is that the prices are displayed in both HK dollars and Chinese RMB. In earlier times, the prices were given in local currency and US dollars. But tourists from the United States have become a rarity with recent fears of terrorism.

In post-Communist China where the New Year corresponds to a long period of holidays called 'golden weeks', hundreds of millions of people travel around the country to visit family and friends. This is the occasion to spend the money they have worked for all year.

Swiss watches are among the favourite items of the Chinese. But, why would they go to Hong Kong to purchase these prized timekeepers? There are three main reasons according to the local representative of the Federation of the Swiss Watch industry. First is the price. China levies import duties of 15% plus a sales tax of 17% on watches. This means that a watch costs about a third more, plus various more or less official commissions, than it does in tax-free Hong Kong. Secondly, it is a matter of trust. There is more confidence in Hong Kong vendors because counterfeiting is less rampant than in China. Thirdly and very importantly, the after-sales service is nearly non-existent in China, while all the grand brands are represented in Hong Kong.

Industry professionals were afraid for a while that turbulence in the foreign exchange markets, which has seen the US dollar sink in relation to the Swiss franc, would cause a problem for Hong Kong purchases since the HK dollar is tied to the American currency. In reality, this has not hurt HK sales, perhaps because merchants have not yet had time to update their prices.

In spite of the economic slowdown that Hong Kong is experiencing, the Chinese New Year period has been very good for the watch trade. Now, be careful as to readjusting those price tags...