SINGAPORE - Strict government regulations to ban officials' consumption of luxury items are expected to soften the luxury goods market and change patterns of consumer consumption.
Statistics from the Federation of the Swiss Watch Industry show that Swiss watch exports to the Chinese mainland dropped 27.5 per cent year-on-year in September.
China's demand had been weakening through the year, but September was the worst, followed by another 12.3 per cent fall in October, noted Ren Guoqiang, a partner at Roland Berger Strategy Consultants in China, a consulting firm based in Germany.
Ren said government officials, who used to be the main recipients of luxury watches as gifts, were unsure about the future policy environment.
Several government officials who were noticed by the public to own luxury watches were investigated for corruption in 2012. One was the director of the provincial administration of work safety, who wore a Swiss watch when appearing at the site of a highway accident.
Officials are cautious now about receiving gifts, Ren said.
"It hurts the luxury watch business a lot," since more than 25 per cent of the luxury items sold on the Chinese mainland were used as gifts.
The government has made a new regulation banning government officials from using public funds to buy luxury items. The regulation was made in July and came into effect in October.