Hong Kong watch producers are now a dominant industry force, with a big stake in the U.S. market. Innovation, education and acquisition have helped them outgrow their image of low-end imitators and challenge established Swiss and Japanese competitors. But there could be trouble ahead

Pssst! Wanna buy a Hong Kong watch? That’s a foolish question. Whether you know it or not, you probably do own one, or at least a watch with parts made in Hong Kong.

In less than 20 years, Hong Kong watchmakers have changed from an enclave making cheap knockoffs into a world-class industry. They produce components and assemble them for well-known labels in Europe and America. They own prestigious Swiss brands. They’re major buyers of Swiss and Japanese movements. And they’re already cultivating two of the next century’s most importantwatch markets: China and the European Economic Community.

Hong Kong supposedly has one unchanging characteristic: that it’s always changing. So, too, is itswatch industry. The following reports depict an industry at a critical stage, facing problems involving design quality, an acute labor shortage, rising costs and the pending return of China’s sovereignty. To survive, the industry must continue to change.

Monkey King to Lion: Two ancient Chinese symbols define Hong Kong’s watch industry.

One is the Monkey King, a delightful storybook character known to every Chinese child. A seemingly comical figure at first, the Monkey King always defeats his opponents with shrewdness, agility and surprising strength.

Like the Monkey King, Hong Kong watchmakers repeatedly confound their critics. Twenty years ago, a handful of small firms made 3 million watches a year in a city a third the size of Long Island, N.Y. At the most recent count, 1,300 companies have 27,000 workers making 438 million watches, clocksand components each year. Operations are in Hong Kong and China.

Today, Hong Kong watchmakers can aspire to the other symbol: the stone lions, seen everywhere from bank entrances to curio shop shelves, the ancient symbols of the supreme power of the Chinese.

If not kings of the watch world, Hong Kong watchmakers vie with the Swiss and the Japanese for the title, and like those imperial lions, they seem to be everywhere.

Since 1978, they’ve been the world’s largest exporter of watches by volume and, since 1987, the second largest (after Japan) in terms of value. Last year, that value increased 24%, to $2.1 billion, up from $1.7 billion in 1987. (Note: All monetary figures in this report are in U.S. dollars, not Hong Kong dollars.)

`International watches’: Hong Kong watchmakers produce custommade components and/or watches for well-known labels in Europe and America, including Armitron, Gitano, Helbros, Jules Jurgensen, Elgin and Waltham. Upscale brands such as Cartier, Longines, Tissot and Omega get at least some of their watch cases from Hong Kong, says Jamson T.N. Wong, chairman of the Federation of Hong Kong Watch Trades & Industries and managing director of the Thong Sia Co.

Indeed, Hong Kong components are part of so many watches that Fred W. Bopp, vice president of international operations for Gruen Marketing, speaks of “an international” watch, combining products of Japan, Hong Kong and Switzerland. “Swiss and Japanese buy cases and watch bracelets in Hong Kong, and dials here, in Taiwan and in Thailand,” says Bopp, also managing director of the firm’s new watch production operation in Hong Kong. “So, more watches have the same contents.”

On its own turf, the watch trade has become one of the lions of Hong Kong’s economy. It’s the third largest industry in the colony (after clothing and electronics) and one of the strongest.

Exports overall have slowed recently, but watches and clocks continue to show what the Hong Kong Trade Development Council calls “robust performance.” Indeed, many major watch firms reported exceptional growth in 1988. Asia Commercial, a big manufacturer of private-label watches, doubled annual profits to $7 million on sales of $136 million, increased quartz analog exports 80% and set up additional production lines to meet demand. Stelux Holdings, an international conglomerate and probably Hong Kong’s best-known watchmaker, reported a record turnover of $78 million and a record net profit of $28 million. Turnover in the watch division specifically grew 31%.

The strong performance is partly due to the continuing flexibility of Hong Kong’s watch trade (most of the 1,300 firms have fewer than 50 workers) and continuing improvement in production and quality control at major firms (about 200 firms with 75% of the trade’s employees).

Another factor: the weak U.S. dollar (to which Hong Kong currency is pegged) keeps prices competitive. Several firms say that in the past two years, they’ve gotten more orders that would have gone to Switzerland and Japan if those countries’ currencies weren’t so strong.

But much of the growth has been fueled by the steady improvement – in type, quality and value – of Hong Kong watches since 1986.

Going upmarket: The cheap digitals on which Hong Kong built its reputation in the 1970s and early ’80s represent a rapidly shriveling segment of total output. Worldwide exports of digital watches from Hong Kong have dropped 33% since 1985, from 250.6 million to 169.2 million in 1988 (through November, the most recent figures available at press time).

Meanwhile, quartz analog watch exports grew 116%, from 52.7 million to 114.1 million units. Last year’s tally alone was 48% higher than 1987’s.

In the U.S. market – Hong Kong’s largest – digitals dropped 37% from 1986 to 1988, from 93.6 million to 59.4 million. Quartz analog imports grew 83%, from 29.3 million to 53.5 million.

As quartz analog output has grown, so has quality. In the past three years, many manufacturers have moved firmly into better-priced watches ($50 to $200 at retail). Consider Gordon C & Co. Ltd., one of Hong Kong’s fastest-growing upscale firms. The firm produces watches retailing for $100-$500 for its U.S. and European customers and assembles its own movements in Switzerland. Gordon Chow, owner and general manager, plans to start producing his own line of 18k gold watches within two years. A few firms already produce jewel-encrusted timepieces, complete with luxury-level price tags.

The upgrade is due partly to the watchmakers’ remarkable ability to respond quickly – often within a few months or weeks – to changes in consumer demand.

“Hong Kong factories adapt very fast to market fluctuations,” says Jamson T.N. Wong, the watchfederation chairman. “If someone says, `Analog is good,’ almost everyone moves to analogs. If you say `Digitals are good,’ people will move back to digital.”

Sophisticated fashion and multifunction watches are popular now, so they dominate Hong Kong’s output. “In general, people want design-oriented products rather than ordinary, simple ones,” says Roger H.S. Tsui, president of the Hong Kong Watch Manufacturers Association and managing director of Remex Holdings Ltd., which produces more than 12 million quartz analog watches a year.

But much of the improvement in product is spurred by one simple economic fact: Hong Kong watchmakers as a whole can’t afford to stay in the price basement any longer. They remember how price-cutting and cut-throat competition undermined the boom in cheap LCD (liquid crystal display) tissot prc 200 watches in the early 1980s. And they know the same thing can happen with cheap quartz analogs because of a new round of price-cutting and competition from watch industries in Thailand, Malaysia, South Korea and Taiwan.

`High costs’: The biggest goads prodding Hong Kong into a higher-priced market, however, are sharply rising operating costs (last year the inflation rate hit 9%) and an acute labor shortage.

The city is an expensive place to live and work. `Things aren’t very cheap any more,” says Charles A. DuBois, Far East manager of the Swiss Watch Industry Information Center in Hong Kong and a resident since the mid-1970s. “I’m surprised they can still produce cheap watches in such quantity with the high rents [charged now in Hong Kong].”

The cost of imported watch parts has risen steadily in the past couple of years, especially movements (15% to 25% of the cost of a Hong Kong watch), most of which are bought from Japan and Switzerland. The use of better materials (i.e., metals instead of plastic) has added to production costs.

But it is labor costs – about 68% of a Hong Kong firm’s operating costs, excluding purchases of materials and industrial services – that have soared most, due to Hong Kong’s strong economy, rising inflation and labor shortage. In 1987, for example, wages for workers at the Hong Kong plant of watchmaker Seiko Instruments Electronics rose 14%, says the Japan Economic Journal. Today, per capita wages in Hong Kong average $9,600 (U.S.), the highest in Asia.

“Our labor isn’t cheap any more, so we have to go for the higher price [watches],” says Samson Sun, permanent honorary president of the Federation of Hong Kong Watch Trades & Industries. “Hong Kong manufacturers overall can’t survive selling watches for $2 or $3 each. We have to go into medium label analog quartz, in the $8-$40 range.”

Labor shortage: Soaring wages have made it difficult for Hong Kong factories to hold onto workers, who often follow the rising wage rate from plant to plant, even if the wage raise is only 20 cents.

Such labor volatility aggravates what most watchmakers, and other manufacturers, say has become Hong Kong’s biggest problem in the past two years: an acute shortage of skilled workers, especially for hands-on jobs such as assembling watches.

The city also must deal with a “brain drain” of professional managers and executives. But it is the shortage of skilled workers – Hong Kong’s official unemployment rate is only 1.9% – which has hit the city’s labor intensive industries, including watches, the hardest.

The annual turnover in employees at Remex, for example, is 40%. “Our personnel department has a very tough job,” says Philip Chan, one of the firm’s directors. “We try everything [to hold onto them, including] incentive plans, cash bonuses, piped-in music [in the work area], recreational activities, a TV in the changing room [where employees put on slippers, white coats and hats before entering to reduce dust in the assembly area], to watch programs at lunch break.”

Like many other watchmakers, Remex employs mainly young women, who are prized for their sharp eyes and nimble fingers. But most are single and leave to have children after they marry.

Even so, Remex’s situation isn’t as bad as that of some other Hong Kong manufacturers. A recent Hong Kong manpower survey of all city industries found some firms with annual turnovers of 100%!

Because of the labor shortage, many Hong Kong watchmakers have been unable to increase their production capacity, says Roger Tsui, president of the watch manufacturers’ association. It has become very hard, for instance, to find skilled makers of watch cases and watch bands. Indeed, the shortage became so acute a year ago that for awhile, many Hong Kong watchmakers simply stopped taking orders they couldn’t fill.

CHINA BECKONS

Rising costs and labor shortages have taken the edge off Hong Kong’s price competitiveness. But Hong Kong manufacturers have a handy remedy that others only dream of: abundant, inexpensive labor at their back door in the 1 billion-plus residents of the People’s Republic of China (PRC). As a result, some industry experts estimate that up to half of Hong Kong’s larger watchmakers, like other Hong Kong manufacturers, have set up factories or moved their operations to the PRC. There they can “take advantage of the more reliable labor situation,” as Nh Chue Meng, chairman of Stelux Holdings, puts it.

Nearby Guandong and Fujian provinces alone boasted 390 watch and clock factories by the end of 1988, according to published reports. Most are located in the PRC’s “free economic zones” in the Pearl River Delta, within 20 miles of Hong Kong. Business there has boomed in the past few years as Hong Kong wages soared and its labor supply dwindled.

Most of the city’s major watchmakers, such as Stelux and Asia Commercial, have major manufacturing operations in the PRC. But sent back to Hong Kong for finishing and assembly. The digitals, especially, are high-quantity, minimum-skill, labor-intensive products well suited to the current level of watchmaking skills of workers in the PRC’s economic zones.

But production of quartz analog watches in the PRC is increasing, as the skill level of the workers there rises. Industry analysts expect further significant increases over the next few years. Asia Commercial, for example, recently opened two new three-story plants, with a total of 180,000 sq. ft., the first of several on a 450,000-sq.-ft. site. The plants will manufacture watch bands and produce up to 5 million quartz analog watches ($10 each, factory cost, over $40 retail).

Industry analysts say China is the key to Hong Kong’s continued price competitiveness in watches and akribos watches review. “With the labor supply, and the cheap overhead we can get from China, I think the Hong Kong watch industry faces an even brighter future than before,” says Jamson N. T. Wong, chairman of the Federation of Hong Kong Trades & Industries.

The shift of more labor-intensive operations to China will continue, but few industry analysts expect all of Hong Kong’s watch trade to move to China.

“The majority of production will remain in Hong Kong. Low-end products will switch to the PRC and Thailand, but quartz analog and the mid-level products will continue to be assembled in Hong Kong,” says Roger Tsui, managing director of Remex Holdings.

DESIGNS ON QUALITY

Hong Kong’s Director of Industry, K.Y. Yeung, recently told the Hong Kong Watch Manufacturers Association that, “Competitiveness in our major overseas markets is increasingly influenced by…quality and originality of design.”

On quality, watchmakers both within and outside the city’s industry contend that Hong Kong watches are the equal (or very close to it) of Swiss and Japanese watches at comparable price levels. Most of the city’s large firms keep close control over production and employ stringent quality control procedures.

For example, Remex, which produces 12 million watches annually and is one of the city’s few movement manufacturers, has quality control checks on every unit at each stage of production, plus random sample evaluation. Components must meet precise specifications; quartz analog movements, for instance, are rejected if their accuracy varies more than a half second, plus or minus, per day.

In addition, more big firms now use state-of-the-art quality testing equipment (usually from Japan and/or Switzerland) to monitor all specifications, including water-proof testing of assembled watches, reading stuhrling watches review and checking the gold plating of cases.

Automation also plays an increasingly important role. Several big firms have added semi-automated assembly lines to meet growing production demands, and use computer-aided design programs.

(Full scale automation, as found in Japan, is unlikely soon, however. Many Hong Kong watchmakers say that would deprive the labor-intensive industry of its flexibility and ability to provide short-notice custom orders in which the trade specializes.)

Smaller firms are improving the quality of their production, too, with help from the Hong Kong Productivity Council. The HKPC’s metals division provides consultants and laboratory services to help small manufacturers improve surface finishing of watch cases and bands, and to produce tiny parts such as watch hands by metal stamping and photochemical machining. It also provides diagnostic and testing services.

In addition, this year the Hong Kong Vocational Training Council plans to set up a sheet-metal processing training center to train technicians in the fabrication of high precision watch movement parts.

Upgrading design: But the jury is still out on whether Hong Kong can upgrade the reputation and innovation of its watch designs as effectively as it has other aspects of its trade.

A number of individual Hong Kong watch executives are as familiar with the elements of good watch design as any in Neuchatel or Tokyo. C.P. Wong, managing director of Stelux, literally grew up in the Swiss watch trade. Roger Tsui, managing director of Remex, is a graduate of Swiss watchmaking schools.

But overall, Hong Kong has been a follower, not a leader, in watch styling. The digitals on which Hong Kong built its watch industry between 1974 and 1982 didn’t really require any design originality. And for those and other watches, Hong Kong firms made what clients demanded, or copied whatever was successful on the market.

The nadir came in the mid-’80s, when several Swiss watchmakers accused some 50 Hong Kong firms of copyright infringement. Though the defendants said they followed generic fashion trends and most of the cases were dismissed, the incident was sobering for the entire Hong Kong watch industry.

“It alerted us that we should be creating our own styles here instead of copying or imitating them from somewhere else,” says Samson Sun, permanent honorary president of the Federation of Hong Kong Watch Trades & Industries. To date, however, none of Hong Kong’s schools has a program in practical watch design.

Creating designers: So, in the past four years, the Hong Kong watch trade has taken steps to train home-grown designers and to upgrade its design standards and quality.

More companies now send their designers to foreign trade shows to keep them abreast of trends in fashion, watches and jewelry, and to local seminars sponsored by industry associations to upgrade their skills. Several have in-house programs, or underwrite special training overseas. Managers and salespeople are encouraged to provide input and information on styling trends.

The Hong Kong Watch Manufacturers Association now has a short course of its own, and is talking with the Hong Kong Polytechnic School about adding watch design, says Roger Tsui, HKWMA president.

Another step is the annual Hong Kong Watch and Clock Design Competition, started in 1985 to encourage originality and innovation. It is sponsored by the HKWMA, the Hong Kong Federation of Watch Trades & Industries, and the Hong Kong Trade Development Council. Winners receive cash prizes and all-expenses paid trips to the international watch fair in Basel, Switzerland.

Designing for customers: To some extent, the effort is paying off. “The position of designer has become quite important in our industry” in just the past couple of years, says Roger Tsui.

Virtually all major watchmakers now have one or more fulltime designers on staff, usually native Hong Kong residents. Gordon C. & Co., a winner in last year’s design contest with its stainless and gold-plated multi-function moon phase watch, has four. Remex has three. Asia Commercial employs 10 designers and draftsmen.

Smaller firms which can’t afford full-time designers subcontract, and more designers are moonlighting. “Quite a lot of designers are selling their designs to manufacturers,” notes Tsui.

A measure of the extent to which Hong Kong firm have become style conscious is that fewer now wait for clients to come to them. Instead, “more and more watchmakers are creating their own watch designs and promoting them to their customers, who are importers or retailers in other countries,” says Warren W. L. Hui, managing director of Prosperity Watch Co., and chairman of the watch industry advisory committee of the Hong Kong Trade Development Council.

In addition, “More importers are coming to us and saying `Show us what [designs] you have,’ instead of saying `Make this,'” from their designs, he says. At Asia Commercial, a major private label manufacturer whose customers include Armitron, Pierre Cardin, Elgin, Sharp and Waltham, “50% are designed by us and 50% by the importers,” says Wu Sik Lan, deputy general manager. Out of 515 new models produced by Asia Commercial in 1987, for instance, about 300 were original in-house creations.

An ironic measure of the improved originality of Hong Kong designs is that in a few isolated instances their styles “influenced” designs of new watches from Japan and Switzerland.

“It shows Hong Kong designs are being noticed by watch manufacturers of the world. If Hong Kong has a good idea or good design, they don’t mind using it,” says Warren Hui.

Still, Hong Kong watch manufacturers have a way to go, say both industry analysts and spokesmen.

MANY ROADS TO NEW MARKETS

Recently, the Minister of Trade for Singapore urged a conference of southeast Asian countries with growing watch industries to imitate Japan and market their own brands of watches internationally.

That would seem a logical step for Hong Kong watchmakers, considering their position as the world’s largest producer of watches, their global contacts and the recent improvement in the quality and value of their timepieces.

Indeed, the same idea has occurred to some of them. Various watch firms have registered some 700 possible brand names in Government House in Hong Kong. A few larger firms already have brands which they promote in home and foreign markets. These include Asia Commercial’s Accord, Prosperity Watch’s Intima, and Stelux’s Swatch-like Smash.

Yet overall, Hong Kong watchmakers are reluctant to develop and promote their own new brands. Risk is a big reason. “To build up a name, you have to invest a lot in advertising, with no guarantee of success,” explains one privately.

Then too, admit some watchmakers, many people still associate “Hong Kong watches” with cheap knockoffs, an image which can be a detriment to sales. Certainly there’s little desire to build brand business in the U.S. Hong Kong is a major supplier of private label goods in this country and doesn’t want to rock its profitable boat.

“Hong Kong firms have very good and close connections with private brand name owners and importers in the U.S.,” says Jamson T. N. Wong, chairman of the Federation of Hong Kong Watch Trades & Industries. “They’re good customers. Why compete with them?”

So, rather than start new brands from scratch, major Hong Kong watchmakers are expanding their markets in other ways.

Several are taking what one laughingly called “the easy way” – acquiring well-established, usually Swiss, brand names, as a path into upscale markets.

Stelux Holdings is a leader in this. It acquired the Swiss brand Titus & Solvil in the 1970s, two Swiss watch case factories, a dial producer and also, Bulova (which it later sold in 1979). Late last year, it added Universal Geneve to its fold.

Other transactions in the past year include Asia Commercial’s purchase of Juvenia and International’s acquisition of Camry.

They aren’t the only ones with Swiss or other holdings. According to Stelux’s C.P. Wong, as many as 25 major Hong Kong firms may have full or partial ownership of upscale brands. But, he says, many don’t publicize that because of the negative impact it might have on those brands. As Wu Sik Lun, deputy general manager of Asia Commercial Co. Ltd., explains, “many people recognize Switzerland as the number one watchmaker in the world so any watches coming from there have more prestige, while Hong Kong timepieces are still treated as low-end watches.”

Asia Commercial illustrates why large Hong Kong watchmakers are buying established upscale brands and how they will use them. It already is a major producer of private label watches, with an international client list that includes Armitron, Pierre Cardin, Gitano, Quelle, Elgin, Sharp and Waltham. But selling only to importers, who own the brands, and only in low- to medium-price watches has its limits.

So, for the past couple of years, Asia Commercial has “been negotiating for…a number of well-known brand names to enhance its penetration of world markets and achieve a higher margin in sales of its products in these major marketplaces,” said Asia Commercial Chairman Eav Yin in a recent report to stockholders.

It was successful in acquiring Juvenia, a luxury Swiss brand established in 1860, from Ebel, another well-known Swiss firm, for some $3 million late last year.

In addition to expanding its market, acquisition of Juvenia will provide Asia Commercial with needed expertise in designing and producing high-end watches, says Wu Sik Lun, deputy general manager of Asia Commercial Co. Ltd.

Retailing watches: Another way of expanding one’s market is to sell direct to the public, bypassing the importer and wholesaler.

Stelux Holdings has added watch retailing to its assembly and manufacturing operations. In 1985, it cautiously opened its first watch stores in Hong Kong, under the name City Chain.

“It had a staggered start,” recalls Albert Gazeley, executive director of Stelux. “The first year, we weren’t sure whether we should stay in because it upset a lot of our customers. But Mr. [C.P.] Wong [Stelux’s managing director] decided to take the big step, because going direct to the customer was the way to go, to cut out the wholesaler and offer more competitive prices in the market.”

The watchmaker’s retail efforts had “a few lumps and bumps” as it experimented with a variety of retailing, including selling in store corners and under-the-stairs boutiques. When the chain’s sales started to grow quickly, “we reassessed our situation, kept what was working and settled on [using] higher class, better shops, with better styling and more established brands names.”

By late 1988, there were close to 60 stores in Hong Kong, plus eight in Singapore, 12 in Taiwan, and several in Malaysia. The stores’ exteriors are almost all glass windows; their interiors use mirrors and stainless steel, and look bigger than they actually are.

In his annual statement to shareholders, Ng Chue Meng, chairman of Stelux Holdings, reported that City Chain is “setting new sales records month by month and based on this consistent performance, we expect the retail watch division to be an important profit contributor…for the long term future.”

According to another Stelux report, Europe and the U.S. – possibly Hawaii – are “under consideration” as future sites of the watch store chain.

“We’ve had a number of people ask us about franchising in America, so we know we’re onto a good thing. But we’re not in a big rush [to do that] until we have everything here tied down,” says Gazeley.

For the next couple of years, at least, C.P. Wong told JC-K, Stelux will concentrate on building its presence in Europe and Far Eastern countries.

“For the time being we have no plans to enter the U.S. in any significant way, other than in making watch bands for famous watch companies and producing private labels for people there under OEM [original equipment manufacturer] agreements.”

One reason Hong watchmakers may be less anxious to develop new business in the U.S. may be that some of them now consider the European Economic Community (composed of 12 west European nations), southeast Asia and especially China to be more viable markets than the U.S.

“The U.S. market is slowing,” says Philip Chan, a director of Remex. “We think the buying power there is decreasing, and we are looking more to the European markets.”

THE SHADOW OF 1997

A tall, gleaming, blue glass tower has risen above Hong Kong’s skyline in recent months, literally overshadowing Hong Kong’s nearby Government House. It’s the new and imposing home of the Bank of China, operated by the People’s Republic of China (PRC), a symbol of China’s already-large influence in Hong Kong. It is also a constant visual reminder that this “most capitalist city in the free world” – as a western industry analyst calls it – will return to the PRC’s sovereignty in 1997.

Like that gleaming blue tower, the 1997 return looms over the thoughts of Hong Kong’s residents, as well as its business activities. “The shadow of 1997 covers everything,” says a leading Hong Kong watchmaker privately.

Publicly, businesspeople and government officials downplay concern. But June’s brutal massacre and crackdown by the PRC on students and workers calling for democratic reforms only increased the anxiety of Hong Kong businesses and residents about how a hard-line Chinese government could handle their city. The Hong Kong stock market plunged 40% between May and early June, exit visa requests rose sharply, and hundreds of thousands demonstrated in Hong Kong. Many of them called for renegotiation of the 1997 treaty.

“Let’s be frank,” a government official told JC-K. “Two-thirds of Hong Kong’s 5.6 million people are refugees [from China] who are all-too-familiar with what happens when things go wrong in the [PRC]. There is trepidation. It’s foolish to say people aren’t concerned how things will work out after 1997.”

Such suspicion is understandable, says Tony Miller, assistant director of the Hong Kong Department of Trade.

“The official relationship [between China and Hong Kong] has changed so fast that some people have trouble accepting that we now have a normal situation. Twenty years ago, there were bombs and riots [when Mao’s Cultural Revolution zealots stormed into Hong Kong]. Ten years ago, the situation was still extremely abnormal. High PRC officials coming through Hong Kong did so as quietly as possible, and we pretended they weren’t here.

“These days, though, when a senior PRC official comes through town, he goes to Government House for tea and talks with government ministers! It’s all quite natural.”

Brain drain: Many in Hong Kong aren’t so sure, and aren’t waiting to see what happens. There already is a serious “brain drain.” That’s what Hong Kong residents call the growing flow of professionals leaving the city for other countries since Great Britain agreed in 1985 to return Hong Kong to China. More than 45,000 people now leave annually – so many, in fact, that Emigrant, a new magazine just for them, has appeared on Hong Kong news stands.

Canada, Australia and New Zealand are popular destinations. They offer quick entry based on education, occupation, work experience, fluency in English and/or for “business immigrants,” those with sound business plans and sizable investment funds. The U.S., by contrast, uses quotas and requires family ties or skills in a scarce occupation.

City officials downplay the brain drain. They note that Hong Kong has a history of immigration (as South China’s transit point for refugees); that only half of those leaving are adults, and that many aren’t business or management professionals.

Even so, in a city which already has an acute labor shortage, loss of many managers and top-level personnel is serious. In one major watch corporation alone, 80% of the 60-plus executive officers have emigrated to Canada, Australia or the U.S. Many watch manufacturers who “want to expand and need management people find there aren’t enough to fill the vacancies,” says Roger Tsui, president of the Hong Kong Watch Manufacturers Association.

Returns: That’s the bad news. The good news is that the brain drain isn’t as damaging, yet, as it seems. The government is creating education programs and building a third university to train home-grown technicians and business professionals. Also, many migrating managers and execs return alone to their Hong Kong firms after they’ve settled their families in free, stable countries elsewhere and gotten second passports. “Getting residents’ rights or a second passport is insurance against the future [after 1997],” one watch company exec told JC-K.)

Meanwhile, in true Hong Kong style, many watchmakers are using this mini-diaspora to create new markets and foreign sales networks, and to get closer to sources of technical developments and fashion trends, says Jamson T. N. Wong, chairman the Federation of Hong Kong Watch Trades & Industries.

Formerly, “Hong Kong watchmakers were concentrated in Hong Kong. They didn’t move out [or] have offices overseas. Now, because of 1997, they have to emigrate somewhere. Wherever they go – the U.S., Canada, Australia and Europe – they set up offices, become marketing people and start networks of salesmen to prepare for after 1997,” he says.

In addition, frequent trips to and contacts with overseas offices and relatives keep them well informed on fashion trends and technological developments.

“Wherever something develops, Hong Kong people are there – family, wife, employee, someone – and they call immediately and say, `Someone here is doing something you should know about.

It’s in the newspaper,'” says Wong. All this “makes the Hong Kong watch industry more efficient in understanding and selling to the world market.”

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