China is to cut import duties on Swiss watches by 60 percent over the next 10 years under a free-trade agreement which should help reinvigorate Swiss watchmakers' sales in a key market.
Swatch Group and Richemont are grappling with slowing demand for luxury timepieces in mainland China due to a crackdown on expensive gifts for favours and slowing economic growth.
Exports of Swiss watches to mainland China, their third biggest market, grew just 0.6 percent in 2012, down from almost 49 percent growth in 2011.
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Under the first free trade pact China will sign with a country in continental Europe, the Asian country will allow 84 percent of Swiss exports to be duty-free, Assistant Minister of Commerce Yu Jianhua told a press conference on Monday.
"In the first year, we will cut import duties on (Swiss watches) by 18 percent and then by around 5 percent annually in the following years," Yu said. "They will be cut by 60 percent in 10 years."
The agreement, which should be signed when Switzerland's Economy Minister Johann Schneider-Ammann visits China in mid-July, will bring retail prices of Swiss watches in China down, but it is difficult to say by how much exactly, Yu said.
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Vontobel analyst Rene Weber said Swiss watches in China were subject to an import tax of 11 percent and a luxury tax of 20 percent on watches costing more than 1,500 Swiss francs ($1,600). There is also a value-added tax.