China, the People's Republic of Discounting

About a year ago, Chinese shoppers were in full-on conspicuous-consumption mode. Executives routinely spent $12,900 on Rolexes and other high-end watches to give to business contacts and suppliers, much to the delight of Cartier, Financière Richemont, and Swatch Group. Gold bars carved with Chinese characters signifying good luck were also in vogue as gifts.

This year’s economic slowdown has crushed the market for high-end corporate swag and set off a wave of discounting across Chinese retailing. Executives are now choosing watches that cost 40 percent less, says William Li, chief financial officer of Hong Kong jewelry retailer Luk Fook Holdings. Switzerland will likely feel the pain. China’s per capita spending on Swiss timepieces is six times that of the U.S. and double the level of France, according to research by Frankfurt-based investment bank MainFirst Bank.