Chinese Branding and Perception
This is a collection of random thoughts about the Perception of China through Chinese Brands from both inside and outside of China.
First, China as a final destination. This is about business opportunities, or maybe it isn’t. If you had less than 30% of your foreign exchange students and over seas professionals returning home, would that be a good thing or a bad thing? For China, 30% the highest number they’ve had since they started letting people out in the 80’s. And it’s only this high because of predictions that more will be coming back due to the current recession. (All numbers are from a Straits Times paper article last Sunday, that I couldn’t find online. Sorry).
My question then, is this: If capitalism is irresponsible (Mr. Hu’s words) and the US/EU is the Great Satan (Islamic and communist propaganda) and the Chinese economy and culture are the end all beat all of life thus far on earth (general attitude in China), why are an overwhelming majority of Chinese who leave NOT coming back? Even my wife, who is Chinese, plans on “ending up” in the US, not China eventually.
I know, you’re thinking, “What a loaded question!” But I’m really curious as to the answers. Remember, I left the US and live in China, albeit temporarily (10 years and counting…). I think that the better business opportunities (for me) are here, not back home. So really, what’s the draw of the West for educated Chinese?
Another, less loaded question about Chinese power abroad.
There has been a lot of news lately about the Chinese increasing ability to project power abroad, both militarily and socially. And while the military question doesn’t really even need to be asked until China can transport a significant number of people/equipment farther away than an adjoining country or permanently scare the US patrol boats off the coast of Hainan, the social question is, I think relevant. Or can they actually do something about North Korea (which only even exists because of China)?
How many people in (pick your home country) can name 10 Chinese brands and know where to buy them? (To be fair, I doubt I could name 10 English, 10 French or brands either. But I’m not thinking that any of these countries are going to become world military or social leaders (again) either.) Ten Japanese or Korean brands, no problem. Maybe even 10 German brands. 1 Canadian brand? Nope.
When I was last in the US in March, I decided to see what Chinese brands I could find in Salt Lake City Utah. Nothing scientific, just a conscious decision to make notes in my phone as I shopped and was out in public for two weeks. This is what my ‘research’ turned up: Lenovo (barely), Haier, LG, and Tsingtao Beer–yes, even in Utah. (I am also aware of COSCO and Changhong, TCL and Galanz in much of the electronics and white goods that I saw.) That’s it. Any one else not living in SEA seeing any more?
From a good Businessworld online article:
“The World Bank says that more than 30,000 Chinese firms have invested more than $35 billion in over 50 countries, and China’s top five domestic brands are already worth more than $15 billion. Fiona Gilmore, the editor of Brand Warriors, predicts that in ten years at least one of the world’s top 10 brands will be Chinese.
Most of this growth has been focused in South-east Asia, but Chinese firms are increasingly penetrating the highly valuable and highly competitive US market.
The message seems clear – Chinese companies are determined to become global players. Indeed, China’s leaders say they aim to have 10 Chinese companies in the Fortune 500 list of the world’s largest firms by 2010.”
So the perspective questions here are these:
First, is this ability to sell volume but not successfully create brand awareness good for China? Does moving tons and tons of goods with a reputation for bad quality in the world market help any brand from China? What’s the general opinion of anything “made in China” in or out of China?
Second, I’m of the opinion that China would rather have the “face” that comes of having recognizable Chinese brands than the profit that comes from successful businesses. The govt funding for these few big players would confirm that, in my mind at least. Is this a sustainable business model—will these unprofitable brand names be around in 20 years?
So then third, which of these companies could be “successful” or at least recognizable without direct government ownership/financing (which is not the same as tax breaks that all major brands get from their home countries)? And then doesn’t imply that companies from China really are “made in China” and deserve the bad rap?
And fourth, which of these companies are leaders in R&D or innovation in their fields? The implication being, can sales of follow on products alone sustain high international rankings or recognition?
I read in a report from the Shanghai auto show last month that while there are quite a few Chinese auto makers striking out into foreign markets there are two steep mountains to overcome before any of them see any success. The first being “the made in China” brand name.
SIDE NOTE: The fallout from the melamine milk fiasco last year is affecting even auto sales abroad. Do you realize what a big deal that is?! Did the California pistachio recall affect your perception of Dodge this last month. No. Of course it didn’t’. Will pig flu make you think twice about buying Mexican avocados? No. But in China—everything is China. This is the unintended consequence of tying everything back to history and nationalism. Everyone and every brand in China all rise and fall together. Well, not everyone, but you know what I mean.
And the second being the inability of Chinese auto manufactures to attract top talent and the subsequent inability to lead out, innovate and be creative. The lack of international level talent is really limiting the Chinese at home and in the US and the EU markets. Like the China market forcing foreign brands to adapt, Chinese brads must adapt to the various world markets they enter into—but without R&D, they just can’t (unless they can copy what’s already been done).
For more on these very questions (I read this after I wrote the post), see this great interview Tom Doctoroff gave. Interestingly, the Businessworld article and the Doctoroff interview and 4 other articles under the Google search “Chinese brands in the US” are blocked in SZ (at least they’re blocked in my house, my office and Starbucks).
But, then again, if you question China’s ability to project its might abroad, there is this: “We have become a province of China.”
A couple of final shots at why there are not more Chinese brads despite the size/influence of the Chinese economy. First, the Chinese economy is not as big as the US or Japan so for me to compare them is a bit unfair to begin with. There really shouldn’t be as many. Second, while there may not be a large number of identifiable Chinese brands because there are so many unidentifiable ones. Let me explain. China is so huge and there are so many regional players and so many factories outsourcing labor for “technically” foreign brands that they just keep the entire visible Chinese presence in the world market repressed. Third, the idea of independent brands is still in its infancy in China. As noted above, even the current Chinese world players are heavily invested in by the Beijing govt. Capitalism in China, as we see it now, is at most 30 years old this year. They haven’t had the time to build yet.
But capitalism in the US is 200 years old and Washington DC now heavily invests in autos, banks, insurance and many other global US brands, so who knows?!
Scott,
Thanks for the comments. A couple of questions for you. First, why can’t China control NK? NK exists today because of what China did and continues to allow (out of fear of millions of refugees?). If China applied as much pressure to NK as they do to Taiwan–or invade it (like they did to VN) then couldn’t they make real changes? Sure they could. They won’t, not they can’t.
Second, quality education and civil society are relative–hence my original questions–do Chinese really want their kids in public American schools for either educational or social reasons? Without the money to go to a very good private school, I’d rather have my kid in at least some years of Chinese rote memorization.
Third, I’m still not buying the idea that if the govt supports a bunch of (financial) losers there is long term value in it. I realize that the “value” I’m looking at and what is used to justify in China may be completely different. But in cars, for example, doesn’t face, profit, band all hinge on the quality of the cars or the power of the design? So where does losing money and not getting pub at the same time rank on the value scale? It’s not like Hai’er or Lenovo or even Tsingdao Beer are profitable out side of China (or in China). So we’re not saying no public face but good money. I’m saying these companies are China’s ONLY public face AND they lose money.
David;
You’ve got a great blog.
North Korea is dependent on China for a lot but it is not a client state, North Korea’s foreign policy and attitude is distinct and separate from China, and as evidenced again and again North Korea does not truckle to any outside power other than to advance itself. You give the examples of China applying pressure to Taiwan and Vietnam, both instances in which Chinese pressure accomplished nothing but a border war in Vietnam and the election of Chen Shuibian in Taiwan, hardly successes. North Korea is true to the national character to the extreme: stubborn and fearful of factions.
Yes, Chinese want their kids in US schools for the same reasons Koreans want their kids in US schools and pay beaucoup bucks and immigration maneuvering to do so. Your decision to where to send your child for a few years of rote memorization is your own and does not reflect the attitudes of Chinese or Korean parents who generally hate the educational system unless their child somehow manages the very top percentile and is so ensured of a spot in the top several universities. Note I do not entirely dismiss rote memorization, but at best it is an adjunct to an education which transmits the cultural heritage and enables a student to collate, analyze and express – in short, teaches them how to think rationally and express those thoughts; memorization should not pass as an excuse for an education .
You use cars as an example of possible government-funded losers and I counter with airlines, heavy industries and power consortiums, all three of which can be argued as strategic and essential to a nation’s economic independence and projection of soft power (I’ve finally used that word! perhaps inappropriately). Yes, the brands you quoted are China’s only face and are losing money – for now, but the future of very large and multinational corporations seems to be moving towards SOE’s and away from private bank or shareholder funded companies. Also, as recent events prove, there is very little advantage to a nation’s well-being and a lot of probable harm in short term profitability at the expense of the long term, a fact that seems to escape managers beholden to the quarterly results.
I 90 percent agree with you and I 10 percent think you are speaking too generally and that you are a bit behind the times. I would have 99 percent agreed with you six months ago, but in that time, my firm has picked up a number of Chinese clients, two of whom I have learned (from many sources) have very strong names within their industry. So yes, beyond Lenovo and Haier there isn’t much out there in the way of big time consumer goods, but there are definitely Chinese companies building up brand reputations in their niches and I think that has to count for something.
early days on most of your points … doesn’t take into account change and its pace …
just one example, many indians migrated to usa, and are returning as things change …
and china will certainly have global brands, west is sort of ignorant still
Scott, sorry your first response didn’t post. I’ll try to post it again.
Dan, I agree that there are probably thousands of industry specific Chinese brand leaders as there are from any of the EU countries and the US. The point wasn’t that in each industry there isn’t a significant Chinese presence, I know there is. The point is that China is the #3 economy in the world but they are no where near #3 in terms of leading brands.
Further, the idea that “made in China” taints rather than supports a brand, even within China (or maybe especially within China) says that there is much to be done before successful individual industry players become household names in the US.
I don’t buy brand because of where the “home office” is. I realize that means nothing anymore. But obviously many (most? some?) people do since melamine hurt car sales. How did it affect other industries?
Scott, what Chinese airlines, heavy industries and power consortiums are world leaders? I really don’t know. I know that the China airlines (not including HK) are in the red–as are most national carriers. But again, you’re right, profit isn’t the point.
And the concept of acceptable levels of government ownership, I’ll admit, has been RADICALLY changed in the last year, not for the better either, I don’t think. But that doesn’t mean that just because a country is self sufficient in, say oil, that it has an ability to export either soft or hard power. When the recession is nothing more than a fun memory (3-5 years from now) will we be as cavalier about the socialist/capitalist balance. By then it’ll be too late.
Have you ever driven a BYD car? I did just to test it out. It’s far worse than any Hyundai. BYD is getting a lot of press right now, but is any one in the US/EU going to buy it? A couple of reasons that Hyundai was successful so quickly was 1. decades of success (govt sponsored, I know) at home. 2. design centers in Western countries. 3. a 100,000 mile/10 year guarantee that made taking the risk of buying one worth it. Remember, even with rock bottom prices, no on bought Hyundai in the US until that program came out and showed people they could save money and have security at the same time. BYD has none of these things going for it. Yes it moves cars in China, but the quality is so poor that it’s almost comparing apples to oranges. No foreign presence, no original design, no successful marketing campaign–hell even their logo is a BMW rip off.
NO DOUBT the Chinese brand rush is coming. I just am wondering how much of the current system and brands will still be in tact when it arrives.
Dave, what you say about the Chinese auto is true now but, do you not remember the earliest years when the Hyundai was criticized among other things as being held together with epoxy? When consumer ownership of a Hyndai did not go much beyond the ports of import? Now there is a huge gap in the US auto industry waiting to be addressed, just as when the mid-70′s oil crisis initiated demand for a new class of auto, and my money won’t be on a GM-Fiat fix.
Cheap knock-offs are the trademark of Chinese products now but my main point remains an open challenge to rebuttal: yes, of course the Chinese can make a world-class, quality product and in time that quality product can and most probably will become an international brand, especially when Chinese businessmen opt to enlist overseas talent. There is the example of Japan, Korea, Taiwan and Hong Kong as historical precedents, first producing cheap goods then graduating to dominate certain industries by reason of a developed, local infrastructure of materials sourcing, manufacture and supply; there is the historical precedent of Chinese porcelains which was the most important trade item during the Song, Yuan and early Ming dynasties (no, I’m not stretching for examples); there is the very fact that mainland Chinese are in the main an intelligent and industrious people under relatively good governance, and highly opportunistic to boot, ready and willing to invest human capital and money to make a buck. I compare those qualities against the stodgy gate-keepers in charge at most US corporations and I weep.
Interesting article. I definitely think that the “Made in China” brand has a negative impact on Chinese brands in general. However, to continue the Japan comparison, I believe Japanese quality wasn’t considered very good until the 1970s. Early on they were known for low quality knock-offs before they had a surge of exports. Of course, there is a difference between ” low-quality” and “poison toothpaste” but China and Japan got their economic reforms as a result of very different, albeit tragic, world events.
Couldn’t agree more about Chinese car quality, a Chinese friend has a Chery that rides horribly.
http://www.google.com/hostednews/ap/article/ALeqM5j1FZRNA_nf7XY7YePH-Od-tdunFAD98DSKOO0
So, does this help or hurt the big unprofitable SOE’s that run the heavy industry, logistics and power industries?
“(O)fficials acknowledge such (elite government-owned) companies are so far much less competitive than their private counterparts elsewhere” but this acknowledgment doesn’t explain wny the private sector is so much more competitive, and until a professional, experienced management responsible for return on investment is in control the state-owned enterprises will continue to be large, unprofitable leeches under the control of political administrators. Understand that most (all?) of these political administrators have never done something so simple as buy a car with their own money or made house payments, not even managed a household budget. Throwing private money into these SOE’s without attendant management responsibility and authority won’t change much, except the government’s risk and losses will now be spread among more shareholders, which is hardly a recipe for economic stimulation nor will it raise competitiveness.