Hong Kong Watch & Clock Fair 2009

More than 700 exhibitors from 17 countries and regions took part in the 28th HKTDC Hong Kong Watch & Clock Fair, which opened on 2 September 2009 and continued through 6 September at the Hong Kong Convention and Exhibition Centre (HKCEC).

Officiating guests at the opening ceremony, for the HKTDC Hong Kong Watch and Clock Fair include included: Wong Yip Kong, Co-Chairman of the Fair Organising Committee; Dr Samson Sun, Permanent Honorary President, The Federation of Hong Kong Watch Trades & Industries Ltd; Stanley Lau, Chairman, HKTDC Watches & Clocks Advisory Committee; Professor KC Chan, Secretary for Financial Services and the Treasury; Fred Lam, Executive Director, HKTDC; Hilton Cheong-Leen, Honorary Life President, Hong Kong Watch Manufacturers Association Ltd; Yip Siu Fan, President, Hong Kong Watch Manufacturers Association Ltd; Louis Tang, Co-Chairman, Fair Organising Committee

At the fair's opening ceremony, Professor K. C. Chan, Secretary for Financial Services and the Treasury, said, "Throughout the years, the watch and clock industry has experienced many great challenges. They have all been overcome by the industry's creativity and resilience." He noted that the Hong Kong Closer Economic Partnership Arrangement (CEPA) with the Chinese mainland and the cross-border trade settlement in renminbi have brought business opportunities in the midst of challenges.

Also speaking at the opening ceremony, John Wong, Co-Chairman of the Fair Organising Committee, "welcomed the buying missions here from all over the world and our first-time participant Turkey – all of you here for the largest watch and clock fair in the world." He added, “A special welcome to the 63 buying missions representing by over 2,400 buyers from 60 countries and regions, and also to our first-time participants Belgium and India – all of you here for the largest watch and clock fair in the Fair organiser the Hong Kong Trade Development Council (HKTDC) this year organised 63 buying missions representing  more than 2,460 buyers from 61 countries and regions. Buyers include: Australia's Rip Curl Pty Ltd; Austria’s Dorotheum GmbH & Co KG; Canada's Cosmoda Corp; France’s Le Manège à Bijoux; Japan's Abiste Corp; Spain’s El Corte Inglés; the United Kingdom’s Time Products (UK) Ltd; and the United States’ Fossil Inc.

The first day of the fair attracted prominent buyers including Clock House Co Ltd of Japan, Fossil Inc of the United States, Louis Vuitton of France, Richemont of Switzerland, Swatch Group China from the Chinese mainland, Time Products Ltd of the United Kingdom and Toywatch of Italy.

This year the HKTDC organised 2,725 buyers to visit the show, consisting of 64 missions representing 1,736 companies from 49 countries and regions. Missions invited include such prominent buying offices as Amita Corporation of Japan, Cartier Horologerie of Switzerland, International Watch Company of UAE, Les Nouveaux Bijoutiers of France, Moscow Time of Russia and the REWE Group from Germany.

Among this year's fair highlights is “Pageant of Eternity,” a new zone devoted to high-end watches, with 260 exhibitors participating.

Excerpts from the Opening Remarks of Professor K. C. Chan, Secretary for Financial Services and the Treasury

“Hong Kong has been a leading exporter of watches and clocks in the world.  As I have learnt from the latest statistics, Hong Kong was the world’s second largest exporter of complete watches and complete clocks in terms of both value and quantity in 2007.  Over half (57%) was re-exports of Mainland origin. The EU (23%), the US (18%) and the Mainland (14%) have been the three major markets of our total exports, and over half (57%) was re-exports of Mainland origin. With its 27-year history, the fair has become a major sourcing hub for the watch and clock industry, offering the widest possible range of choices to buyers, and great opportunities to practitioners in the trade to meet their old friends from all over the world every year,” he said.

“It is estimated that over three-quarters of Hong Kong’s timepiece exports are produced on an OEM (original equipment manufacturer) basis. So, while your watches or clocks may wear US, EU or Japan brand names, they might in fact be made by a Hong Kong company.  Further, an increasing number of Hong Kong companies have developed ODM (original design manufacturer) businesses that these Hong Kong companies own the designs of the products. It has illustrated the originality of not only the watch and clock industry, but also this Asian world city,” he said.

“Like many other industries, due to keen competitions as well as the global economic crisis, the watch and clock industry of Hong Kong is facing un-precedented challenges.  In the first half of 2009, our watches and clocks exports dropped by about 23%. Notwithstanding these challenges, our closer economic cooperation with the Mainland has presented plenty of opportunities for the further development of the watch and clock industry. For example, under Supplement II to CEPA (Mainland and Hong Kong Closer Economic Partnership Arrangement) which took effect from 1 January 2006, all Hong Kong products can be imported into the Mainland at zero tariffs. Since then, watches made in Hong Kong with a Hong Kong brand are no longer required to fulfill the 30% value-added content requirement in order to be eligible for zero tariffs,” he said.

“More recently, with the launch of the cross-border RMB trade settlement pilot programme in July this year, Hong Kong companies and pilot companies in the Mainland can choose to settle trades in RMB.  This gives both trading partners greater flexibility in their operations and minimizes the risk arising from fluctuation of exchange rate. I hope that this pilot programme can soon be expanded so that more companies, including those in the watch and clock industry, can enjoy the benefits,” he said.

“Throughout the years, the watch and clock industry has experienced many great challenges. They have all been overcome by the industry’s creativity and resilience. Indeed, you have turned crises to opportunities, maintaining the leading position of our watch and clock industry in the world. The Watch and Clock Fair 2009 is the best platform to showcase our achievements. May I wish the fair a great success. Thank you!” he said.

Excerpts from the Opening Remarks of John Wong, Co-Chairman of the Fair Organising Committee

In his fair-opening address, Wong noted that Hong Kong had exported about HK$20 billion worth of watches and clocks in the first half of 2009.

“Despite today’s global financial turmoil, the Hong Kong watch and clock industry continues to create quality products, continues to invest in innovative watch design, continues to maintain its enviable international reputation for quick response and competitive pricing,” he said.

“We are delighted to be hosting more than 700 exhibitors from 17 countries and regions. Over the next five days, they’ll showcase a dazzling variety of:  watches and clocks; parts and components; equipment and machinery; and packaging materials. In doing so, they’ll prove, once again, that this fair is the region’s – and the world’s – finest sourcing event,” he said.

“In the first six months of 2009, Hong Kong watch and clock industry exports reached US$2.5 billion.Despite today’s global financial turmoil, the Hong Kong watch and clock industry continues to create quality products, continues to invest in innovative watch design, continues to maintain its enviable international reputation for quick response and competitive pricing. That can only help when the rebound comes. Indeed, there are growing indications that the retail market is bottoming out. That economic recovery is on the way. Certainly, your presence today speaks of the beginnings of a return to confidence. That confidence will be rewarded at this year’s fair. Starting with the state-of-the-art facilities in the newly expanded Hong Kong Convention and Exhibition Centre.  Also new this year is the Pageant of Eternity, the fair’s inaugural theme hall. This fashionable setting is the perfect backdrop for the upscale watches on display,” he added.

“The popular Brand Name Gallery is back. This year, it features 100 original and licensed branded watches, as well as fine fashion labels and designer collections. And, for the first time, Brand Name Gallery will open to the public – on Sunday, the 6th of September. The festive mood will include Lucky Draw sessions for brand watches – open to buyers and visitors only. And mini-parades, with dancing performances,” he said.

“At this year’s Asian Watch Conference, we are pleased to welcome Noel Wong, Managing Director, Asia Pacific, for A. Lange & Söhne. He’ll reveal the latest trends in the China luxury watch market, along with the spending patterns of the mainland’s high-end consumers. For those wanting to tap into the China market, this is the conference for you and will take place on September 5. You’ll also want to know that the Hong Kong International Watch Forum – a fair first will welcome leaders of major watch and clock associations from around the world to the Fair and discuss key issues in timepiece trading for the Chinese and Asian markets. The first evening is all about ‘Broadway Glamour’. That’s the theme of tonight’s networking reception. It’s where you’ll want to be after a long and busy day at the fairground,” he said.

Cocktail reception

The first day of the 27th Hong Kong Watch and Clock Fair finished in style with a cocktail reception featuring local model Rosemary and artist Wylie Chiu showcasing the very latest in stylish timepieces.

The toast to the fair was made by Fred Lam, Executive Director of the Hong Kong Trade and Development Council (HKTDC), and was followed by a watch parade featuring a selection of brand name watches being exhibited at the fair along with the winning designs of the 25th Hong Kong Watch and Clock Design Competition.

“We have been visiting this fair for the past seven years and it is very useful for us. The quality of exhibitors is very good and we are always able to find good vendors and original equipment manufacturers” Hiroshi Watanable, Clock House Director of Merchandising said.

Brand Name Gallery Open to Public
Brand Name Gallery returns, showcasing more than 100 watch brands from 13 countries and regions, including: Hong Kong's odm; Italy’s Tonino Lamborghini; Japan’s Angel Heart; Korea’s FOCE; the Netherland's Jacob Jensen; and Switzerland's CYRIL RATEL. As well, a number of new European brands are joining this year, from the UK's Nite to Turkey’s WINZ Club.

For the first time, Brand Name Gallery opened to the public on the fair's final day, 6 September (Sunday). Along with the high-end timepieces on display, visitors were treated to a dance performance and two mini-watch parades. In addition, Ms Hong Kong 2009 Sandy Lau and the contest's first two runners-up, along with the overall champion and youth group champion of Hong Kong 2009, showcased the winning pieces from the Watch & Clock Design Competition. Two lucky draws offered six brand watches as prizes.

26th Hong Kong Watch and Clock Design Competition

Winning and final entries in the 26th Hong Kong Watch and Clock Design Competition were on display in the Hall 1 concourse. “The Hong Kong Watch and Clock Fair is one of the most important purchasing events in the industry,” said Hong Kong Trade Development Council (HKTDC) Assistant Executive Director Raymond Yip. “Each year, the fair attracts buyers from around the world, offering an ideal platform for local companies to show off their capabilities to the global market. Through the fair, winners of the Hong Kong Watch and Clock Design Competition can also demonstrate their fresh design concepts to industry players worldwide,” added  Yip.

More than 200 entries were received, with Hui Wing Tak taking the Open Group award for “Eternity,” a watch design. “The competition stimulates our creativity and allows us to exchange ideas with other designers,” said the designer.

This year’s Student Group champion, Leung Wing Hing, was equally pleased with the experience the competition afforded him. “It gave us a practical opportunity to experience what a professional designer has to encounter, from developing a design concept to making a real product” The Hong Kong Design Institute student won for “Night,” a clock design. Design themes for the competition's two groups were, respectively, “Temptation of Jewellery” and “Black Beauty.”

Hong Kong’s watch and clock industry boasts an excellent reputation, according to the HKTDC’s  Yip. “Our designs and products are well-received among buyers worldwide. But our industry players keep striving to improve creativity and the use of technology. This year’s Hong Kong Watch and Clock Design Competition received many outstanding entries, which only underlines the talent we have to power the industry’s development.”

WINNING ENTRIES

Champion

Title of Design: Eternity
Designer: Hui Wing Tak

This model of watch design inspiration from universe in Milky Way, therefore serves as contrast the star bright ray in the design using the diamond, looks like the sky star light mutually splendor.

The meteor to seem the time fades away so I used a clear conceptual design to use the diamond which the meteor flies in the path rotation. The transparent dial to express the movement the rotation on the image plane in star along with the time rotation, the time also unceasingly elapse.

1st Runner-up

Title of Design: Butterfly & Flowers
Designer: Kwong Wan Hang Henry

The beginning of spring, flowers are in full bloom, butterflies fluttering. Colourful gems like the beauty of flowers. The butterfly appears when turning the cover, and the watch dial shows.

This poetic scenery for the elegant women, can express their personality and beauty.

2nd Runner-up

Title of Design: Flash Eyes
Company: COMING TECHNOLOGIES LIMITED

A blend of Ruby, Diamonds and natural Agate create a precious timepiece which luster at every moment. The whole piece is set with hundreds of diamonds and captures a layer of Agate with floral pattern inside. When opening the Ruby mounted cover, dazzling diamonds on the dial come to the fore! It makes you stand out among the crowd.

Champion

Title of Design: Night
Designer: Leung Wing Hing (Hong Kong Design Institute)

Darkness always provide awestricken, cool and despairing mood; while the night sky creates a mysterious, quiet, and romantic feeling. This is the beauty of “Night”. The ancients also observe stars to measure month, day, and hour. The element of “The Movement of Stars*” is integrated in my work to reconstruct the scene of the observation the stars.

First Runner-up

Title of Design: Hide and Seek
Designer: Yuen Siu Man (HKIVE (Sha Tin))

We all know that the colour black represents a feeling of mystery. But did you ever think deeply why black does not have a shadow itself? I guess because black always hides in different levels of black.

“Hide and Seek” is a Quartz movement watch combined with a LED light. Two black plastic solid tubes are hidden behind the dark grey reflective glass. Push the button on the right side of the watch, for the LED light to project the time out of the reflective glass. Let’s seek it out the many levels of black. Spot it out, do not let it hide!

2nd Runner-up

Title of Design: Black Wheel
Designer: Chu Hoi Ying (Hong Kong Design Institute)

The idea of “Black Wheel” comes from men who devote their lives in the pursuit of speed. By looking at its name, the theme is “Black” and “Wheel”.. Wheels are round. However the case is rectangular. Round here means the circular strap with a specially designed wheel shape on it. And that’s the essence of it! In addition, the unique shape of the watchcase and crown, hour marks and hands is designed to imitate the imagery of a sports car, and thus the Black Wheel creates a unique sense of streamline.

MERIT AWARD

Title of Design: Shadow of Water
Designer: Chan Yuen Yam (Hong Kong Design Institute)
China Beauty .China Heart

Black is an auspicious colour in Chinese culture. Especially in Feng Shui, it represents water which means money. The running water represents making a lot of money. This design uses the waterwheel to represents the time and the running water pushes waterwheel means making money.

Title of Design: Shadow Reminder
Designer: Chiu Tsz Ying (Hong Kong Design Institute (HKDI))

My Idea comes from “shadow Play” which is used light and silhouette to do the puppetry. I applied this principle in my design. This watch is for busy workers. They always forget to eat and relax. Therefore I designed two sets of icons on the dial to remind them it is the time to eat or sleep. The LED light will show these icons are like shadow play. Also different hour has different icon on it, e.g. sleep icon on 10 o’clock. The purpose is reminding them to release the pressure and pay attention to their health. So it called “shadow reminder”.

Title of Design: Inferno 
Designer: Leung Ho Him (Hong Kong Design Institute)

The hour marks will show on the dial. The dial plate make up with multi-layers by different graphic. It is the gradation which reveals the hidden nobility & dignity. Light follows the trajectory which succeeded a corona. When “Inferno” light on, it likes an everlasting star burns it sparkles, it enriches. It passes on hope and passion.

Asian Watch Conference

Noel Wong, Managing Director, Asia Pacific, of A. Lange &Söhne, was the keynote speaker at this year's Asian Watch Conference, 5 September. A well-known watch expert and critic, Wong threw spotlight the latest industry trends in the Chinese mainland,including spending patterns of the mainland's high-end consumers.

Wong presented his thoughts on “Get to know more about the China luxury market: Trends and spending patterns of Mainland high-end consumers”. He said that Mainland China is the most promising market for luxury products. According to the PRC Ministry of Commerce, Mainland China is currently – the 3rd largest market for luxury products – 18% of the total global turnover; and in 5 years – the biggest market – 23% of the total global turnover. By 2015, the luxury industry in Asia will worth US$239.6 billion  US$200.7 billion coming from Greater China: USD166.9 billion (80%) from Mainland China; USD17 billion from Hong Kong; USD16.8 billion from Taiwan (~ Research by MasterCard Worldwide and ESSEC Business School in France).

Wong also spoke about the Business growth of luxury groups in Asia: Richemont: +14% (for the first quarter of 2009); Gucci Group: +25% (for the first quarter of 2009); LVMH: +4% (for the first six months of 2009); Hermes: +32.7% (for the first six months of 2009)

Wong highlighted the Purchasing power of Mainland customers: In Mainland China, there are: 18,000 billionaires; 440,000 millionaires; 2.5 billion people with strong purchasing power.

Wong said that watches are popular luxury items in China and a symbol of power and social status. Referring to history, he said watches and clocks were imported from Europe as early as the Ming Dynasty.

They were regarded as precious toys that could only be enjoyed by the royal family and aristocrats. During the realm of Emperor Kangxi of the Qing Dynasty, China became the biggest importer of watches and clocks.

Today, Wong said that watches are a manifestation of one’s tastes and knowledge; not only a signature of a luxurious lifestyle but a revelation of taste and culture; and a watch can be a delicate, or even complicated, machine. Purchasing a watch implies purchasing the story, history, craftsmanship, theory and technology behind the little gadgets, which helps to enhance the inner fulfillment of human desire. He said that watches are today a symbol of wealth and power. Wearing an expensive watch is definitely a good way to show off, whereas big houses and boats are comparably less convenient in serving the purpose. Wong also highlighted the spending pattern of Mainland customers and marketing strategies.

Speaking about trends, Wong said: Yellow gold case with leather straps and diamonds are always welcome. Rose gold are getting popular. Years ago, white gold watches were never too successful as they look too much like steel ones. Customers are now more receptive to more subtle designs. Mainland customers prefer the classic look with hour, minute and second hands. Calendar is preferred. People, except regular buyers, are less keen on chronographs, tourbillons or other complications; Pair watches; and Limited edition watches. They also love design with Chinese themes such as the 12 zodiac signs, panda, Chairman Mao, etc. Wong urged watch makers and marketers to treasure your customers.

This year’s fair also featured the first International Watch Forum. Representatives of world watch associations from France, Hong Kong, India, Korea, Switzerland, Ukraine and the United Kingdom discussed the latest developments in the global watch industry.

Spotlight on the
Hong Kong Watch & Clock Industries

Overview

*    The mainland granted all Hong Kong products tariff-free treatment under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III), which took effect from 1 January 2006. In terms of the CEPA origin requirement, watches made in Hong Kong with a Hong Kong brand are no longer required to fulfill the 30% value-added content requirement in order to be eligible for zero tariff.

*    According to the latest available statistics, Hong Kong was the world's second largest exporter of complete watches and complete clocks in terms of both value and quantity in 2006.

*    Hong Kong's watches and clocks exports registered a 11% growth in 2008. The EU and the US were the largest markets, together accounted for 40% of the total exports. While sales to the EU rose by 7%, exports to the US also increased by 5% throughout 2008.

Industry Features *.

                                                          
* Industry statistics cover activities in Hong Kong only.

 Hong Kong is a leading exporter of watches and clocks in the world. According to the latest available statistics, Hong Kong was the world’s second largest exporter of complete watches and complete clocks in terms of both value and quantity in 2006.

The largest export item is battery-powered wrist watches, accounting for over 60% of the total exports. Wrist watches exports range from analogue to digital watches, metal to plastic watches, fashion to classic watches, standard to jewellery watches, and novelty to sport watches. Hong Kong also exports a variety of parts and components of watches and clocks, such as assembled movements, cases, watch straps, dials and parts for watch cases and brands. Complete clocks, including alarm clocks, wall clocks and traveller clocks, share a smaller portion of total exports.

Hong Kong has established strong ancillary and supporting industries for its watches and clocks manufacturing. Local watch assemblers are well served with a variety of high quality watch cases, dials, watch straps, hands, button cell batteries, crowns, electronic parts and other accessories. However, the industry relies heavily on imported watch and clock movements, and core components such as quartz, crystals and integrated circuits. Major sources of imports include Switzerland, the Chinese mainland and Japan.

Hong Kong’s watches and clocks companies largely rely on OEM and ODM business. Because order quantity for each model is usually small, making it difficult for scale economy through automation, manufacture of complete watches and clocks remains fairly labour-intensive in Hong Kong.

In view of severe competition, especially in the low-end segment, an increasing number of manufacturers have relocated the labour intensive processes to the Chinese mainland to reduce costs. But a number of manufacturers still maintain their production bases for higher value products in Hong Kong. Meanwhile, as buyers are increasingly quality conscious, more and more watches manufacturers have acquired the ISO 9000 certification to strengthen their quality management systems. The Hong Kong Watch Manufacturers Associations Ltd. has also strengthened the industry’s intellectual property rights by running a “Watch & Clock Design Depository Centre”, where members can store their product designs there and the centre will provide a third-party certification services for the copyright.

^ Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

* Insignificant

Hong Kong's watches and clocks exports registered a 11% growth in 2008.

Exports of complete watches increased by 12%; straps increased by 12%; parts and components also surged by 12%. However, exports of complete clocks dropped by 6%.

Hong Kong exports to the EU, which is the largest market, increased by 7% in 2008. Among which sales to Germany and the UK, the major EU markets, edged up by 11% and 8% respectively. As regards Switzerland, another major European markets outside the EU, surged by 16% in the year. Hong Kong's exports to Switzerland comprised mainly parts and components.

In the meantime, Hong Kong’s watches and clocks exports to other markets also recorded a significant growth. Exports to the US raised by 5%; the Chinese mainland rose by 13%; and Japan increased by 12%. The majority of exports to the mainland were being parts and components for outward processing production.

Performance of Hong Kong's Exports of Watches and Clocks ^

Sales Channels

It is estimated that over three-quarters of Hong Kong’s timepiece exports are produced on an OEM basis. Major OEM customers include importers and distributors in the US, the EU and Japan. A small number of manufacturers have OEM arrangements directly with chain stores and fashion labels, which require unique designs to complement with their brand image.

With respect to ODM products that Hong Kong companies own the designs, though the sales channels are similar, they are especially preferred by smaller distributors, who are constrained by their financial strength in investment in design and tooling. Some low-priced products may also be sold to large companies directly as premium items for promotional campaigns. Market-wise, sales to the Chinese mainland, SouthEast Asian countries and other emerging economies are usually on ODM arrangement.

There are a number of Hong Kong companies selling timepieces with their own brands. There are also some few examples that Hong Kong companies have acquired Swiss brand names or their Swiss counterparts as a means to extend marketing and distribution network, and/or to gain access to better technology and designs. In addition, some Hong Kong companies have begun specialty counter business in major cities in the Chinese mainland via co-operation arrangements with department stores and shopping malls, aiming at promoting their own-brand products there.

The Basel Watch, Clock and Jewellery Fair held in Switzerland is an important event for Hong Kong companies to promote their timepiece business. The Hong Kong International Watch & Clock Fair, organised by the Hong Kong Trade Development Council (HKTDC), is another major event for companies to exhibit their products to overseas buyers. Business missions organised by the HKTDC to the Chinese mainland, Russia, Poland, UAE, etc., also provide opportunities for Hong Kong companies to establish connections with buyers in emerging markets.

Industry Trends

Hong Kong’s watches and clocks industry has become a significant player in the global timepiece market, alongside reputable suppliers like Switzerland and Japan. However, competition in the marketplace has intensified. For instance, timepiece exports from certain Asian countries like South Korea and Singapore grew robustly in recent years. But the intensified competition has not had a marked impact on Hong Kong’s timepiece exports, as watches and clocks are not major exports of these Asian countries. This is also due in part to Hong Kong manufacturers’ efforts to increase their competitiveness by moving up-market, improving quality, enhancing design and production capability, practicing quick response, etc., further backed up by sophisticated supporting industries locally and across the boundary.

The biggest challenge for Hong Kong will increasingly come from local Chinese companies. The Chinese mainland has a long history of making low- to medium-range timepieces, particularly analogue watches and low- to medium-priced clocks. Mainland companies are taking advantage of the supporting industries established in the mainland to enhance their competitiveness, thus posing an increasing threat to Hong Kong companies.

Against this background, an increasing number of Hong Kong companies have put emphasis on the development of ODM businesses. Along this direction, manufacturers have paid more attention to patent issues, in order to protect their intellectual property rights with respect to cosmetic design. Technologies such as computer-aided design (CAD) have been applied to improve the design of complete watches and clocks, dial faces, watch cases and related components, while reducing time and costs involved. Applications such as the use of 3-dimension computer aided industrial design (CAID) and rapid prototyping also facilitate Hong Kong companies to enhance their design capabilities. Some companies have also invested in the research and development of movements to reduce their reliance on imports and overcome the constraints of standard movements to product design.

Besides, Hong Kong’s watches and clocks manufacturers have increased investment in modern production technology to enhance quality and productivity. They have continued to develop better technologies in die-casting, mould making, plastic manufacturing, metal stamping, surface finishing and plating, etc. For example, metal injection moulding (MIM), which is especially suitable for production of stainless steel cases, bands and buckles of complex shapes, has been applied to enhance production capability for sophisticated designs.

Thanks to the growing popularity of information technology, getting on-line on the Internet has become a viable option for marketing watches and clocks. Indeed, there are a growing number of timepiece retailers and dealers setting up web pages not only for promotion and cataloguing, but also on-line sales. This is facilitated by the fact that timepiece sales in general do not involve much technical detail and bulky delivery, making them suitable for sales in the cyber world. For example, some Hong Kong watches and clocks manufacturers opined that they got email orders from some Eastern Europe countries, such as Russia. In all like-lihood, overseas buyers will continue to demand more and more from their suppliers in terms of quick response and delivery. This means that Hong Kong exporters will increasingly be required to handle more orders of smaller quantities, along with shorter delivery lead times.

CEPA Provisions

Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met.

The CEPA origin criteria for watches include either:

(1) Assembly of component parts and accessories into watch. The principal processes are assembling watch movement into the watch body, assembling of component parts and accessories (watch buckle, watch band, dial and battery, etc.) into watch, testing, time adjustment and quality control, and to fulfill the value-added content requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong.

or

(2) Assembly of component parts and accessories into watch. The principal processes are assembling watch movement into the watch body, assembling of component parts and accessories (watch buckle, watch band, dial and battery, etc.) into watch, testing, time adjustment and quality control and the exterior design of the watch should be carried out in Hong Kong. The watch should belong to a “Hong Kong brand” jointly determined by Hong Kong and the Mainland authorities. There should be clear Hong Kong origin marking (e.g. “Manufactured in Hong Kong”, “Made in Hong Kong” or “Hong Kong”, etc.) on the shell of the “Hong Kong brand” watch.

Notably, certain watches made in Hong Kong with a Hong Kong brand, by fulfilling the CEPA origin rules, are no longer required to fulfill the 30% value-added content requirement in order to be eligible for zero tariff. Detailed information, as well as the origin rules for clocks and other timepiece items, are available from the following hyperlink:

http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2008.pdf

General Trade Measures Affecting Exports of Watches and Clocks

In another development, the Chinese mainland has removed its quota restrictions on watch imports since 1 January 2003, on the back of its WTO accession commitment.

On the other hand, Hong Kong’s present origin rule stipulates that the origin of watches and clocks should be determined by the origin of movements. This is to align Hong Kong's practice with those of the major producing countries and markets, including the US, Japan and Switzerland. However, there have been discussions in the Committee on Rules of Origin of the WTO in a bid to reach a consensus on harmonisation of the rule of origin. Positions of representatives from different countries, in general, can be divided into two camps:

*    the view originally put forward by Hong Kong that manufacture of the movement represents the last substantial process in the production of watches and clocks; and

*    the view that the final assembly of the movement into its case and the subsequent finishing and checking processes should be the activities that confer origin.

These two positions clearly reflect the commercial interests of the countries manufacturing movements against those manufacturing completed watches and clocks from imported movements.

Separately, the US Customs requires that watches must be marked with the country of origin. But the rule stipulating watch straps/bands affixed to watches must be separately marked to indicate their country of origin has been removed, on condition that the straps/bands are assembled into complete watches at the same place as watch assembly.

In the EU, there is a Directive on the control of the use of nickel in objects intended to be in contact with the skin, including watches, for health reasons, and another Directive prohibiting the trading of textile products, including textile watch straps, containing prohibited azo dyestuffs.

There are also Directives for environmental protection in relation to sales of watches and clocks in the market, including restrictions on batteries and accumulators that contain mercury, as well as the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented since 13 August 2005, and the Directive on Restriction of Hazardous Substances (ROHS) that came into effect on 1 July 2006.

Product Trends

*    Growing Fashion Consciousness

As noted, timepieces have emerged into a fashion item. In the US, consumers continue to buy inexpensive fashion watches with different designs to match their casual dressing. In Europe, although consumers are relatively more formal, they tend to buy watches with fashionable designs to cater for their formal as well as casual dressing for different occasions. As a result, accuracy and reliability are not by themselves sufficient to satisfy consumers. Design concepts and styling, along with reasonable prices, are far more important in tapping demand. Some of the successful timepiece companies and even boutiques are leveraging on this development, making wristwatches a fashion -statement, which is especially appealing to youngsters. This has also become an important means for the timepiece industry to stimulate purchases, especially in mature markets like the US and the EU, in which the new generation is more willing to spend on technology products, such as computers and mobile phones, rather than conventional timepieces.

In line with this development, fashion timepieces with simple designs have become the mainstream. Different materials have been widely used for casing and housing, as well as wristbands. Apart from leather and metal, plastics and wooden materials with different finishing and colours are used in combination to cater for different styles. As for metal watches, there is a growing demand for stainless steel watches requiring no electroplating in the EU, where nickel is restricted. Amid growing health consciousness and the promotional campaigns of major sport-related companies, digital sports watches, as well as “sporty-look” watches, are among the star performers.

*    Product Features

Cross-industry utilisation of electronic devices has enabled timepiece manufacturers to incorporate additional features to watches and clocks. Timepieces with functions like voice announcement, EL flashing and illumination, electronic compass, calendar, chronograph, incoming call alert for mobile phone and even global positioning system have been well received. Some companies have added game functions to their watches, so that the wearers could communicate and play interactive games with others wearing the same models nearby. Some other companies also introduce watches capable of connecting with computers and the Internet for data transmission and game playing.

As for other technology models, fad products such as digital watches carrying functions of digital cameras and mobile phones are not expected to become the mainstream in the near future, due mainly to their high prices. But there are a number of companies looking at the market potential of the digital watches with MP3 players, which could be used for voice recording and data storage at the same time. In addition, radio-controlled watches and clocks have started to grow steadily, thanks to the availability of necessary components at affordable costs. Pioneer markets include the US, Germany, the UK and Japan, where radio stations have been in operation to emit time signals for time adjustment, while the mainland has also built its stations.

Regarding clocks, models with novelty designs and special themes like cartoons and graphics would continue to enjoy steady demand. In addition, multi-functional alarm clocks and traveller clocks are gaining in popularity. Those with fancy designs and made of different materials, in particular, are increasingly targeted at the premium market, or marketed as give-away items for promotional purposes. Enhanced functions, such as digital diary, calculator, currency converter, thermometer and AM/FM radio, are incorporated into certain models in order to increase the value-added.

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