Wed, Sep 04, 2013 - Page 9 News List

China’s quest to make global brands held back by rigid state

Selling Chinese-label goods at home is one thing, but to shed the stigma the ‘Made in China’ label has abroad and gain global recognition, the country must rediscover the arts of creativity and risk-taking

By Jonathan Kaiman  /  The Observer, BEIJING

Illustration: Mountain People

China is the world’s second-largest economy, but it has yet to develop the breakthrough global brand that will consolidate its status as a true commercial superpower. The names Chery, Xiaomi and Baidu are synonymous with cars, mobile phones and Internet search in China, but they do not resonate abroad in the way that Ford, Samsung and Google straddle the globe. Likewise, there is no Chinese equivalent of Sony, Boeing or Coca-Cola, despite the ambition of Beijing’s political hierarchy to convert the nation of 1.3 billion people into a consumption-driven juggernaut.

That lack of a worldwide champion means that “Made in China” lacks prestige as a label, despite the country’s importance as the world’s factory floor, making everything from iPads to clothes sold in the West. It is that reputation as a global manufacturing hub is one of the problems, nurturing a perception that China is synonymous with cheap, low-quality goods. Newspaper headlines in the West declaim stories about China’s toxic baby milk, lead-contaminated toys and fake pharmaceuticals.

However, this is changing as China’s leaders force that economic shift from export-based growth to consumer spending. They are pumping money into research and development so that Chinese brands can compete with foreign rivals in a burgeoning domestic market. Furthermore, many of these companies have taken that baton and are running toward foreign markets with the hope that global success will result. Much of the push comes in the form of state subsidies. According to the state-run China Daily newspaper, the country spent £105 billion (US$163.4 billion) on research and development last year.

Big names

Comac

Established in 2008, the state-owned aircraft designer aspires to build its own planes, providing a domestic alternative to Boeing and Airbus.

Baidu

China’s leading search engine. It has so far failed to gain a foothold in foreign markets, primarily because its search results carry the imprint of government censorship.

Lenovo

One of the world’s biggest technology companies, with sales in 160 countries. Products range from laptops to smartphones to servers. It acquired IBM’s PC division in 2005.

Feiyue

Footwear brand similar to Converse that started in the 1920s making martial arts shoes. It was overhauled in 2005 and has a niche market in Europe.

WeChat

Similar to WhatsApp, this app has become one of the world’s most-used social networks.


Several Chinese companies have delivered high-quality products abroad, mainly through combining with other international conglomerates. For example, computer maker Lenovo bought IBM’s PC division in 2005 and five years later, Geely Automobile bought Volvo from Ford. Yet analysts say China’s quest to deliver a global brand, while fueled by an abundance of cash and ambition, may face insurmountable obstacles such as a rigid corporate culture and a top-down approach to innovation. The draconian education system encourages rote memorization over creativity, while its political system discourages risk-taking and going against the grain.

“There’s a conflict of interest that China has — one which supports as well as deters innovation — and that is central government control,” said Bill Dodson, author of China Fast Forward: The Technologies, Green Industries and Innovations Driving the Mainland’s Future.

“China says: ‘OK. We’re going to identify 20 companies to go out and become global brand champions, and we’re going to give them whatever money and resources they need to do that.’ But if the companies become too big for their britches, or snap back at central government, or become too autonomous, there’s a reining in,” he added.

Analysts point to Japan and South Korea’s success in developing global brands as evidence that China could soon follow. Before the 1980s, Japan’s manufacturing base endured the same derision as China’s, but that was before brands such as Sony, Nissan, Toyota and Honda established themselves globally.

South Korea’s capital, Seoul, was once reliant on foreign aid to overcome the devastation of the Korean War. It is now one of the world’s most technologically advanced urban centers. Samsung, founded more than 70 years ago as a trading company, is now one of South Korea’s two most successful conglomerates. Its subsidiaries deal in everything from theme parks to life insurance. Taken as a whole, it produces one-fifth of the country’s global exports. South Korea’s other global superpower, Hyundai, was founded in 1947 as a construction firm and began exporting cars to the US in the 1980s. This month, it unveiled a £31,000 concept car, the HCD-14 Genesis, which it hopes will take on the world’s top brands.

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