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FTA has little impact on Swiss watch price in China

(People's Daily Online)

09:48, May 29, 2013

(File Photo/Xinhua)

China will cut import duties by 60 percent on Swiss watches in the next decade, according to a free trade agreement with Switzerland which is expected to be signed in July. But the price of Swill watches are unlikely to see substantial drop in Chinese mainland, analyst said.

The agreement will remove tariffs on 99.7 percent of goods from China and 84.2 percent from Switzerland, disclosed by Yu Jianhua, Chinese assistant minister of commerce, during a news briefing on Monday. Value-added tax and consumption tax are out of the agreement’s coverage, said Yu. He hinted a minor effect on luxury Swiss watches by saying that the price is decided by market.

In China, Swiss watches are deeded as luxury goods which are imposed heavy taxes. For example, a watch worth more than 10,000 yuan (about 1,663 U.S. dollars) has to pay 20 percent of consumption tax. Plus 17 percent of value-added tax and 15 to 20 percent of import duty, the tag price of the watch will be at least 50 percent higher than its import price.

Chinese mainland is the world’s third biggest market for Swiss watches with annual sales of 1.65 billion Swiss francs (nearly 1.69 billion U.S. dollars) in 2012. Bienne-based Federation of the Swiss Watch Industry said in a previous report that the exports to China were 26 percent down year on year in first quarter of 2013.

Kang Weikai, an industry insider, told People’s Daily Online that the free trade agreement will win more attention for the watch industry and market. The pace of duty reduction agreed by two countries in fact will be slow and the biggest beneficiary may be the low-end watch makers who don’t need to pay consumption tax.

Industry watchers say that the stark price disparity between home and overseas lures growing Chinese to buy up-market goods outside China.

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