China's high-end watches defy luxury crackdown

Visitors look at a display of luxury wristwatches manufactured by Audemars Piguet at the Salon International de la Haute Horlogerie (SIHH) watch fair in Geneva, Switzerland.
Gianluca Colla | Bloomberg | Getty Images

A crackdown on gift giving in China has threatened to hurt demand for luxury products, but interest in high-end watches appears to be still thriving, a new report showed.

"The Chinese luxury market is not dead: interest in all luxury watch categories continues to escalate, led by Omega, Cartier and Rolex," according to the latest World Watch Report, which is compiled by market intelligence firm Digital Luxury Group in conjunction with popular search engines like Google and Baidu.

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China's anti-corruption efforts delivered a blow to luxury brands last year, after the state banned advertising which encourages giving luxury gifts to authorities, a custom which has been historically popular in China. In January, French luxury conglomerate LVMH reported that China sales slowed to 5 percent in 2013, down from 10 and 20 percent in previous years.

But according to the widely-followed watch report released Wednesday, interest in luxury watches, which is calculated based on online searches, notched a 59.4 percent year on year rise in 2013.

It found that China represented the largest global share of consumer interest at 23.25 percent, just behind the U.S. at 20.69 percent, and Omega, Cartier and Rolex were the nation's preferred brands.

Appetite for Haute Horlogerie time pieces, which are high-end mechanical watches, saw especially strong growth in interest, with mobile searches for the products jumping 120 percent. Meanwhile, Chinese women accounted for a significant amount of online interest, rising 145.5 percent in 2013 on the previous year.

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Luxury brand predictions for 2014

Erwan Rambourg, head of consumer and retail equity research at HSBC, said he was not surprised by the findings, adding that expected Chinese consumers to continue to be the driving force of the global luxury market despite more bearish sentiment surrounding the economy.

"What you read about the end of the Chinese luxury market is just wrong," he said. "This proves there is a disconnect between fears of a slowdown in China and the reality, which is that the Chinese are still the most relevant group of consumers in the luxury watch market, and will continue to be," he added.

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Rambourg acknowledged that the anti-corruption drive in China had meant demand from premium consumers in China had become more muted as they took a more cautious approach, but said this had only served to exacerbate the trend of Chinese people travelling abroad to make high end purchases.

Chinese consumers prefer to buy luxury watches abroad because they avoid paying VAT, import duty and sales tax, can usually find better service and product variety, said Rambourg. Furthermore, buying a watch in Paris, for example, is deemed more desirable than at buying it at home, he added.

Strong interest from Russia, India

The report, now in its tenth year, found the BRIC countries showed strong growth in terms of online interest. Aside from China, Russia and India registered a 20.4 percent and 12 percent rise in consumer interest, respectively. However, Brazil saw interest in luxury watches fell 2.9 percent.

More established luxury watch markets including Germany, the U.S., and Japan, also saw declines of 9.2 percent, 7.9 percent and 5.5 percent, respectively, in terms of consumer interest.

Overall interest for luxury watches worldwide rose 5.72 percent in 2013.

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— By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie