Policy shifts to hit luxury goods

The stronger franc will cut sales in China of two well-known symbols of luxury from Switzerland - watches and chocolates, analysts say.

The Swiss National Bank surprised the world on Thursday by announcing the abandonment of its minimum exchange rate policy, which kept the euro from falling below 1.2 Swiss francs.

The SNB said in a statement that the policy, introduced in 2011, "protected the Swiss economy from serious harm" but was no longer justified because the franc had fallen sharply against the dollar due to the recent depreciation of the euro.

That decision, experts said, may be hurting international business ventures, including tourism and trade between China and Switzerland, but luxury exports to China will be hit the hardest.

"Clearly, Swiss timepiece and chocolate producers will feel the pinch in Asian markets after the announcement, which will add 10 percent to the items' cost", said Lu Jinyong, professor at the Beijing-based University of International Business and Economics.

Demand for luxury commodities has fallen sharply in the past few years as wealthy Chinese rein in spending amid a national anti-graft campaign. But the SNB's announcement "poured salt into the wound, affecting exports of everything made in Switzerland, ranging from luxury watches and jewelry to precision apparatus", Lu said. But China's tourism to Switzerland will not be affected, analysts said.

They also said there would be no impact on Chinese attendees such as entrepreneurs and officials at the World Economic Forum held in Davos, even though it will cost more.

The announcement came just one week ahead of Swiss Davos, and Chinese businessmen said nothing would stop them attending the world's highest-level forum.

Yan Xin, a senior manager at the public affairs department of Ctrip, China's leading online travel agency, said that China's tourism in the country is unlikely to be affected because Switzerland is not a popular travel destination for the China's nouveau rich.

Yan said Switzerland is not among the top 10 destinations for Chinese for the upcoming Spring Festival .

Contact the writers at lvchang@chinadaily.com.cn and wangwen@chinadaily.com.cn

(China Daily USA 01/19/2015 page16)