China cracked down on bribes ... and the Swiss watch industry is collapsing

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swiss watch

REUTERS/Arnd Wiegmann

Models stand in front of the exhibition stands of Jacob&Co at Baselworld watch fair in Basel.

Swiss watch exports have taken a battering in Hong Kong and mainland China since the government cracked down on gift-giving in a drive to reduce corruption.

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New research from UBS shows that the luxury industry has come a long way from the time where it enjoyed double-digit annual growth figures.

It has since been hit hard by China's anti-corruption crackdown - which has focused on gift-giving among important officials - as well as a variety of other factors, including the rise of wearable technology.

Here's a chart showing the growth in Swiss watch exports to Hong Kong:

China

FHS / UBS

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And for China:

Hong Kong

FHS / UBS

As the charts show, the value of Swiss watch exports to the country increased by more than 100% between 2010 and 2011, but started to decrease dramatically after the Chinese government's curb on excess and gift-giving by officials.

The report states that "the industry has already seen a significant negative volume decline driven by the government's clampdown on gifting and extravagance."

The industry is not expecting a recovery anytime soon, either. The report states (emphasis ours):

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"We recently met three Hong Kong / China watch retailers: Hengdeli, Oriental, and Emperor Watch & Jewellery. All three companies commented that current trading remains tough, and there is not expected to be any significant recovery this year.

"Destocking continues as retailers reduce replenishment rates on weaker brands and adjust inventory price mix. More store closures are also ahead."

The report highlights another major worry for the high-end watch industry, too: the Apple watch. Here's UBS:

"Our analysis suggests that the Apple Watch / wearables are a tangible threat."

"57% of people surveyed unlikely to purchase an Apple watch, although this is an improvement on the 62% in our last survey in September / October 2015.

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But it is possible, the report added, that "the second-generation Apple Watch can improve consumer perceptions further." The new Apple Watch is rumoured to be released next month, so the luxury watch sector has something else to start worrying about.

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