What will happen if Hong Kong breaks the agreement and becomes "Sinicized"? The future of Hong Kong, the city of clocks

Watch Journalist Yasuhito Shibuya's Useful Watch Industry Chat

Until 2019, Hong Kong, the "watch kingdom," had long reigned supreme in the world in terms of Swiss watch exports. However, in recent years, as China's political control has strengthened, Hong Kong's position in the watch industry has been shaken. Hong Kong has also played a major role as an international financial center. Will the economic dominance that was the foundation of this industry be maintained as political ties with China are expected to become even stronger in the future? And how will Hong Kong's future in the watch industry change?

Hong Kong was the world's largest clock city

　Hong Kong is a special place for Swiss watches. Many watch brands have established offices there as their most important base in Asia, and the Federation of the Swiss Watch Industry (FH) has consistently ranked in the top three for annual Swiss watch exports since before 2000. Furthermore, around 2010, when the luxury watch boom took off in China, Hong Kong's importance as a gateway for Chinese exports and for procuring watch parts within China skyrocketed, further expanding the value of Swiss watch exports to Hong Kong. Until 2019, it held the number one spot in the world. In 2019, the combined value of Swiss watch exports to the Chinese market accounted for 21.5% of total exports, exceeding 20%. Along with the United States, Hong Kong is undoubtedly one of the most important markets for the Swiss watch industry in the world.

　From 2013 to 2015, "WATCHES & WONDERS HONG KONG" was held at the New World Centre in Hong Kong as a new, participatory format and international version of SIHH (commonly known as the Geneva Salon), one of Switzerland's two major watch fairs. This event demonstrated the importance of the Hong Kong market in the watch industry. "WATCHES & WONDERS GENEVA," which originates from Geneva, Switzerland, and has already been decided to be held digitally in 2021, following last year's event in 2020, has inherited this name.

Hong Kong's watch market continues to shrink

　However, Hong Kong's presence in the watch industry has declined dramatically over the past three years since 2018. Statistics for December 2020 have not yet been released by the FH, so the comparison is based on the period from January to November. According to the FH, Hong Kong ranks third in terms of Swiss watch exports by country/region, after China and the United States. In 2020, the value of Swiss watch exports to Hong Kong was down 45% compared to 2018, meaning the market has been cut in half.

　In 2015, Hong Kong's recession and declining presence were major issues for the watch industry. China's watch market, which had been expanding rapidly since around 2000, suddenly contracted due to the Xi Jinping administration's anti-corruption campaign and China's economic downturn. The pro-democracy movement known as the "Umbrella Movement" in 2014 likely also played a role. "WATCHES & WONDERS HONG KONG" was held for the last time in 2015. Even before the event, there were rumors that Jean-Claude Biver, then head of Tag Heuer, was considering closing the brand's Hong Kong boutique. Even during the event, rumors were already circulating that the event would not be held in 2016. However, by 2018, the economy appeared to be recovering.

Will political turmoil bring an end to the "watch kingdom"?

　However, Hong Kong's decline in presence continues. The reason for this, of course, lies in the explosive rise of the Hong Kong pro-democracy movement, which began with the introduction of the "Extradition Bill" by the Xi Jinping administration in 2019, and the political turmoil that followed its crackdown. Although the "Extradition Bill" was withdrawn after large-scale demonstrations by Hong Kong citizens, the Xi Jinping administration's tightening of control over Hong Kong since May 2020, seemingly taking advantage of the COVID-5 crisis, has brought "Hong Kong's freedom" to a tragic state.

　On June 30, 2020, the National Security Law (Hong Kong National Security Law) came into force in Hong Kong, allowing the Chinese government and the Hong Kong government to arrest and detain anyone they deem to be engaging in anti-government activities, with penalties of up to life imprisonment. This law completely negates the "one country, two systems" principle that was supposed to be guaranteed until 2047, thus completely denying Hong Kong's democratic freedoms. What's more, this National Security Law also applies to foreigners. This means that if foreigners are labeled by Chinese authorities as "anti-China," they can be arrested, detained, and put on trial. Even more shockingly, this law applies not only to Hong Kong, but also to actions taken overseas.

　Immediately after the law came into effect, the movement of emigration in Hong Kong accelerated. Economic magazines and websites were flooded with feature articles saying, "If you're moving your office from Hong Kong, go to Singapore." However, despite the law's enactment, there were no immediate large-scale arrests of pro-democracy activists, and in a survey conducted by a well-known economic media outlet at the end of October 2020, many respondents said they were not considering relocating their offices, creating an atmosphere that "Hong Kong will continue as usual in terms of the economy."

　However, on January 6, 2021, Hong Kong's situation became even more tragic. Approximately 50 democratic activists and politicians, including one American lawyer, were arrested one after another on suspicion of "attempting to overthrow" the Hong Kong Special Administrative Region government. The National Security Law was finally imposed, and it is safe to say that Hong Kong has effectively become completely "Sinicized."

What about each watch brand?

　If the crackdown remains political, meaning no economic restrictions are imposed, Hong Kong's role as a gateway to China will remain, making it worthwhile to keep offices there. But for now, there are no guarantees. Hong Kong's status as an international financial center is also under threat. The number of tourists visiting Hong Kong from outside mainland China will also likely drop sharply. With this in mind, is it worth continuing to have boutiques and offices in Hong Kong? Hong Kong-based companies are being forced to decide whether to relocate or not.

　In any case, in 2021, Hong Kong's status as the "watch kingdom of Asia" will likely decline, not improve. Now that it has become politically "Sinicized," the possibility of Hong Kong becoming a complete part of China economically has also increased dramatically. Mainland China has already surpassed Hong Kong to become the No. 1 exporter of Swiss watches. Statistically, there is no longer any need to separate the markets into "China" and "Hong Kong."

　On January 14, Hong Kong authorities reportedly began blocking access to websites they deemed anti-government, at the request of internet service providers. This means that freedom of internet access is also gone.

　How will the global watch industry conglomerates, led by Switzerland, and other watch brands respond to the current situation in Hong Kong? Hong Kong is not just a market for the Swiss watch industry. It is a special place that is heavily involved in everything from product planning to production systems. But will that position remain as it is?

　It all depends on the future situation in Hong Kong and how each brand responds.

Shibuya Yasuhito/Shibuya Yasuhito

As an editor of a product information magazine, he began covering Geneva and Basel in 1995. As an editor and writer, he has been there 25 times since then. He is currently planning, covering, editing, and writing about not only smartwatches but also all kinds of things and events other than watches.