China's graft crackdown hits watches, luxury market

SHANGHAI (AFP) - Luxury watch sales fell in the key Chinese market this year in the face of a crackdown on corruption and extravagance, a global consultancy said.

Watches account for over one fifth of China's domestic luxury market and dropped by 11 per cent to 27 billion yuan (S$4.4 billion) in 2013, Bain & Company said in a report.

China's luxury market has boomed in recent years on the back of its economic rise, but overall sales grew a mere two per cent this year to 116 billion yuan, it said, a shadow of the 30 per cent growth recorded in 2011.

Growth was likely to remain slow in 2014, given China's ongoing anti-corruption campaign, according to the report.

"The highly visible government campaign encouraging frugality and focusing on corruption had a large impact on gifting, which had been one of the major growth engines of the sector," Bain said.

As well as watches, menswear sales also fell, slipping one per cent year-on-year to 12 billion yuan, Bain data showed in the report, released on Tuesday.

China's Communist chief Xi Jinping has taken a hard line against graft since coming to power a little over one year ago, warning that corruption could destroy the party.

He has threatened to stamp down on high-ranking officials, or "tigers", along with low-level "flies" to maintain the purity of the party.

At the same time, he has mounted an austerity drive, with a range of measures including limits on banquets and bans on gift-giving.