China's graft crackdown hits watches and luxury

SHANGHAI, China - Luxury watch sales fell in the key Chinese market this year in the face of a crackdown on corruption and extravagance, a global consultancy said.

Watches account for over one fifth of China's domestic luxury market and dropped by 11 percent to 27 billion yuan ($4.5 billion) in 2013, Bain & Company said in a report.

China's luxury market has boomed in recent years on the back of its economic rise, but overall sales grew a mere two percent this year to 116 billion yuan, it said, a shadow of the 30 percent growth recorded in 2011.

Growth was likely to remain slow in 2014 given China's ongoing anti-corruption campaign, according to the report.

"The highly visible government campaign encouraging frugality and focusing on corruption had a large impact on gifting, which had been one of the major growth engines of the sector," Bain said.

As well as watches, menswear sales also fell, slipping one percent year-on-year to 12 billion yuan, Bain data showed in the report, released Tuesday.

China's Communist chief Xi Jinping has taken a hard line against graft since coming to power a little over one year ago, warning that corruption could destroy the party.

He has threatened to stamp down on high-ranking officials, or "tigers", along with low-level "flies" to maintain the purity of the party.

At the same time he has mounted an austerity drive, with a range of measures including limits on banquets and bans on gift-giving.