Hong Kong's merchants sold 6.7 million quarts of French brandy during the past year, an astonishing amount for a city with a population of 6 million, even taking into account the voluminous sales to the territory's booming tourist trade.

From the most elegant restaurants to the smallest noodle shops, Hong Kong's Chinese gulp brandy the way Americans drink beer, spurred in large measure by a popular belief that ba lan di, as it is called here, enhances a man's sexual potency.

Yet, if Hong Kong's influential watch manufacturers have their way, the colony's role as the place with the world's highest brandy consumption per capita, could be in jeopardy.

In retaliation for French restrictions on imports of quartz watches made in Hong Kong, the watchmakers have launched a boycott of French brandy, which accounted for 96 percent of the approximately $81 million of brandy Hong Kong imported in 1981.

Warren Hui, president of the Hong Kong Watch Manufacturers Association, said the boycott "is the only means to draw the real attention of the French government to our grievance."

The boycott began in late August 1982, after the watchmakers became frustrated in their effort to force France to lift quotas on imports of quartz watches.

The French imposition of quotas came at a time when Hong Kong's watch industry--which accounts for nearly 10 percent of the colony's exports--was already in trouble.

Supply had outstripped demand, depressing the average watch price. During the first 10 months of 1982, quartz watch exports--which account for roughly 84 percent of all watches shipped from Hong Kong--grew 44 percent, compared with the same period in 1981. But at the same time, according to the Hong Kong Census and Statistics Department, the value of those exports fell 2 percent, to $464.1 million..

The watchmakers claimed that the French quotas discriminated against Hong Kong and were a violation of rulings by the General Agreement on Tariffs and Trade.

In the meantime, the unhappy watchmakers decided to force the issue with a boycott--a difficult task.

Brandy is hardly a rich man's drink here. The shelves of the tiny late-night stores that sell candy, cigarettes and other sundries are stacked high with bottles of cognac. Ads on TV and at movies trumpet the virtues of the spirit.

Apart from the belief that it enhances a man's sexual potency, brandy's mystique has been fueled by several other legends.

According to one popular folk tale, Chinese interest in brandy was sparked by the British naval presence in Shanghai in the late 1800s. While the average British sailor was seen swilling rum, the officers were seen sipping cognac. The status-conscious Chinese concluded that if officers imbibed it, brandy must be an elite drink and therefore better, said Russell Kelly, deputy managing director of Martell Far East Trading Ltd.

Another explanation comes from the traditional Chinese theory that loosely divides all elements into "yin and yang," or feminine and masculine or cold and hot. This view holds that a person should consume the appropriate food or beverage to achieve a harmonious balance of all the elements in his or her body.

Brandy has been seen as a "hot" substance, much like a tonic, which the Chinese consider to be good for the health. In contrast, whiskey is viewed as a "cooling" drink. (It should be noted that the terms hot and cold here do not refer to the actual physical properties but to ideas taken from traditional Taoist beliefs.)

"At the bottom of all this," noted Kelly, "is prestige. People here are price conscious, and brandy is considerably more expensive that whiskey or wine. By ordering it, you are honoring your guests."

In an effort to persuade people to switch to other beverages, the watchmakers have flooded most of the watch factories with posters proclaiming "No French Cognac," and have brought their case to public attention through frequent statements in the mass media.

Hui claimed that sales of French brandy were down 30 percent, while whiskey sales were up slightly. But he conceded that it was too early to determine the boycott's real impact.

Both leading cognac importers in the market, Remy Martin and Martell, said sales have dropped slightly in recent months. But they attributed the decline primarily to the world recession.

Government figures do show that in October 1982, after the boycott began, the value of French brandy imports fell to $4.4 million, a drop of approximately 44 percent from September's $7.9 million.