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Tuesday, October 11, 2016, 23:06

New strategies will help HK’s watch industry recover

By Eddy Li

Some people think that the world’s largest event for timepieces is Baselworld held in Switzerland, which exhibits watches, clocks and jewelry. But when we are talking about watches and clocks only, the largest annual event actually is the HKTDC Hong Kong Watch and Clock Fair. The fair showcases only timepiece-related goods, including branded and complete watches, clocks, machinery and equipment, packaging, parts and components.

New strategies will help HK’s watch industry recover Hong Kong’s watch and clock industry has been playing quite a significant role internationally. According to the latest available statistics, in terms of value in 2014 Hong Kong was not only the world’s largest importer of complete watches, it was also the second-largest exporter of complete watches and complete clocks. Since 2008, Hong Kong has kept the title of the world’s largest luxury-watch market. But the latest statistics published by the Federation of the Swiss Watch Industry indicate that Hong Kong has just lost this title to the US. Indeed the city’s total Swiss watch imports have been falling by 33 percent year-on-year to below 175 million Swiss francs ($178.2 million), lower than that of the US (178.5 million Swiss francs).

This is not the only worrying sign for Hong Kong’s watch industry. Other figures are also worrying: From 2010 to 2014, the industry’s annual export value growth has gradually shrunk from more than HK$10 billion to HK$2-3 billion. Last year, for the first time in many years, the industry even reported negative export growth, with the total export value falling from HK$80.32 billion in 2014 to HK$76.72 billion in 2015.

These disappointing figures reflect the difficulties the watch industry is facing. The reasons for the current difficult situation are complicated. Traditionally, Hong Kong’s watch and clock industry depends highly on the European and American orders. But recent years have witnessed an economic downturn in those markets.

Moreover, appreciation of the Hong Kong dollar along with the US dollar due to its peg to the latter has led to weaker competitiveness for Hong Kong exports. Meanwhile, while the mainland market is growing, the anti-corruption measures implemented by the central government have had a negative impact on Hong Kong’s retail business.

Under these circumstances, what can the industry do to deal with the difficulties it now faces?

The first solution is to go “smart”. As smartphones are changing our lifestyle, smart watches are also getting more and more attention from consumers. Multi-functionality is a huge selling point to watch buyers nowadays, and manufacturers should attach more importance to this feature. The industry should also keep an eye on the development of the Belt and Road strategy. The new policy initiative involves 65 countries, with a total population of 4.4 billion, or 61 percent of the world’s population, and an aggregate GDP of $21 trillion, or 29 percent of the world’s GDP. With such a large market, the business opportunities will be numerous.

In April, I led a group to visit three Central Asian countries (Kazakhstan, Uzbekistan and Kyrgyzstan), which are along the Silk Road Economic Belt connecting China and Europe. After an on-the-spot visit, I believe that there is a wealth of business opportunities for Hong Kong companies there. Resources are abundant in Central Asia; costs and salaries are relatively low (with salaries at $200-400 per month); the investment threshold is lower than elsewhere. Meanwhile, the standard of living there is below the global average; consumption power is still limited, with consumers preferring practical products over high-end ones.

In conclusion, whereas large enterprises might not be interested in this market, there are many opportunities for small and medium-sized enterprises. If Hong Kong enterprises set up their factories in Kazakhstan or Kyrgyzstan, their products can be sold not only in the local market but also in Russia, Armenia, and Belarus. This is due to the custom preferential policy granted by the five-nation Eurasian Economic Union (EAEU). This provides a market of more than 170 million in population.

Hong Kong watches are regarded as exquisite, novel and creative in the eyes of consumers. This reputation is widely known around the world and has attracted many buyers with good taste. Backed by this reputation, Hong Kong watchmakers should be able to maximize their advantages. They don’t have to compete with mainland private companies in the low-end watches market; and there is no need for them to fight for the top-grade watches market either. Hong Kong watchmakers should stick to the middle-ranged market, which will be greatly expanded by the Belt and Road Initiative as it progresses.

The author is the president of the Chinese Manufacturers’ Association of Hong Kong.

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