How will Chinese brands conquer the world? – The WTO-column

(later also at Chinabiz)

One of the disadvantages of working for foreign media is that sometimes colleagues, sitting at their editorial desks in Amsterdam or New York, have a story idea for China. Since I have some quirky viewpoints on this country and tend to be rather stubborn too, that develops sometimes into heated exchanges.

What Chinese brands are going to conquer the market in Europe, was a question I got this week from Amsterdam. When you think about Chinese consumer brands going abroad you mostly think about Haier, eh Haier, and yes, Haier. In terms of brand names there is not that much more to talk about, I explained.

Brands and branding belong to the bread and butter of the Western business schools, where the new generation of managers learn the latest tricks to conquer markets by building up names, and by adding emotional values to soaps, shampoos, cars and medical devices.

The silent assumption then is that when China is moving upwards in the global market, its companies will start developing global brands too. A large number of Chinese has joined business schools in Europe, Australia and the US to learn all those tricks. But then, in case they do get a job, most of them do not end up at Chinese companies, but mostly join American or European enterprises. Maybe in the long run the Chinese companies have to comply with the bible of brands and branding as it is taught in those business schools, but for the time being they take the backdoor to conquer the European market.

The editor who called me was most likely wearing clothes, bags, watches and shoes with western brand names, western quality, and western prices and made in China. At night she would watch Big Brother on a Philips-TV set, made in China, make her last calls on a Motorola mobile from Tianjin, use an expensive vibrator, made in Wenzhou, and go to bed with her giant teddy bear from Guangdong.

China has already conquered much of Europe, although disguised as expensive Western brand names.

In China itself the combination of price and quality still dominates the sales strategy of almost any consumer product, despite eager PR-firms that try to teach the Chinese their fried air is worth money. Even in products like cosmetics, brand name has a value, as long as it is not too much out of line with pricing strategy of the competition. But for most products, the lowest price guarantees highest sales. Not necessarily the highest profits, we see during the fierce price wars on the Chinese markets. As logistics has improved over the years, physical barriers less and less stop those price wars to restricted areas.

For a Dutch editor it would make sense to expect Chinese brands to start investing in their brands and expand branding also to the global markets. But with some exceptions that is not happening and it might not happen altogether.

The effects of globalization and the success of Wal-Mart suggest even that prices are becoming more important on the American market too. As price pressure on suppliers increases, margins will get thinner and spending on brands and branding might become tougher than ever. In that way China could rewrite the current business bible.

Fons Tuinstra

culture - On Chinese interiors

I would have loved to put up here one of Robert van der Hilst' pictures from Shanghai in the early nineties, like this one. But as you might see: the pictures are mostly so beautiful and complicated, you would lose too much on a stamp-size print.
Yesterday I had drinks in Sasha's and dinner in Yang's kitchen with Robert, joined by Steve Campbell and Li Li who have been helping him out in China. A marvelous book with pictures of Cuban interiors, and a few first prints from his work in China, show what he loves to to: spend two years on Chinese interiors. Main thing missing, as for so many good ideas: a good sponsor. When you have any ideas, please let me know.

media - 'Lost' in the tsunami-assignments

Reporter Carolyn Liu of the Oriental Morning Post briefed me yesterday extensively on her mission into Indonesia, the first-ever into a disaster-area. "Until now we only got holiday-like assignments to the US," she said. She was welcomed back as a hero, since she was the only female reporter among the about 100 Chinese journalists who headed for Indonesia, but still felt that lack of experience and information hindered her work. For her is was the first assignment out of China.
For Chinese media is was the second larger operation abroad after the World Soccer Tournament, and the first into a crisis area. Because of the fast expanding media industry and their increased competition, more Chinese journalists will report about crises, that might be in potentially much more dangerous places than the tsunami-strikken parts of the world. Until recently state news agency Xinhua and CCTV would be the only onese to go abroad and Xinhuao most mostly operate from Chinese embassies.
Carolyn came in the end not further than Medan, the capital of Aceh, and spend a week there. "I was very afraid, because I did not know what was going on," she said. She was not as afraid as a colleague who did not dare to leave Medan airport and spend there 17 hours waiting for a flight back to Jakarta.
Carolyn did not get a local fixer or translator, but joined the Chinese community and was very well taken care off, she said. "Jakarta was so dirty compared to Shanghai and the taxis would always rip you off." That resulted in interesting articles about the wealthy Chinese community in Medan, but that was not really the reason to go to Indonesia. Her photographer got into the tsunami-area itself, but she never left Medan, a combination of fear and feeling lost without good contacts outsite the itself very isoloted Chinese community.
It is certain Chinese journalists will go to more dangerous places in the future, and need to tap into the experiences of other foreign journalists with more experience in working abroad. I have already asked some international organizations of some tips and I certainly think I should help them in setting up a decent training. Any tips are welcome.

business - AIA managers shed tears over lost mainland contracts

Amy Gu reports yet another interesting story over an emotional meeting of Hong Kong managers of the world's largest insurance company AIA, as their Hong Kong branch has lost much business from the mainland because of new regulation that ban Chinese to close insurance contracts outside the country.
The story did not reach me yet in another way
Some lawyers in China were afraid they would lose business when China entered the WTO, but the speed in which China is able to create new barriers, causing enough panic among investors to keep lawyers very busy.

economy - Ebay dishes out 100 m USD in China


Ebay seems to be the next foreign investor to discover that it is very easy to spend money in China, but a bit harder to earn it back. China Net Investor points me at this analysis of the 100 million US dollar the company is going to spend in China in 2005, causing the company to miss its financial targets for an investment they are unlikely to earn back.

"They overpaid for a subpar company in China and now they are going to dump
a huge sum of shareholders money into a Chinese wormhole. They would be
better off dividending that cash to shareholders and pulling out. But Ebay
management has China fever, so it won't happen," says Bill Biship, co-founder of CBS MarketWatch.

Losses were already visable at the end of last year, the Ebay tried to outspend its domestic competitors. A strategy that has been fatal for many other foreign invested companies in other strategies.

Beijing takes tough line on Zhao's death

Beijing seems to have stepped back ten years in history, as it tries to prevent anybody to remember the remembrance of deceased party leader Zhao Ziyang. Even the scissors have been found back to cut out articles in foreign magazines that are distributed in China.

internet - User growth drops dramatically

China has now 94 million internet users and the Chinese media bring this as a great achievement - they find it very hard not to see anything with rosy glasses. But the sad truth is that growth has dropped dramatically. Up to now the number of users would almost double every year and the growth rate of 18 percent is really very low. In the second half of last year, the target was still 100 million users by the end of the year.
Reason might be that in all bigger cities, Beijing, Shanghai, Hong Kong, the percentage of internet users has passed the 50 percent and expanding the network to the rest of the country might be a bigger challenge than expected.

blogging - Tokyo is the key word

Many people have been wondering how to beef up the number of people that would click on their online adds. Surprising enough, it is not a matter of numbers. Getting more people to click on your adds is not going to work. Some countries just pay more for their adds than others. Tokyo and their booming tourism industry might work much better. Forget about the USA, Tokyo is the place to be online.
Damned, I should include here a decent weekly anti-Japanese rant. That would pay my bills much better.

blogging - Note on my RSS-feed

My RSS-feed - a free product of www.freedster.com - has never been working properly, but it lagging behind more and more. Since I did not dare to move my weblog to Movable Type, the 18-step guide scared me off, I decided for a simpeler solution. I have unsubscribed my RSS-feed and subscribed to the Atom feed. Since I use the blogger.com interface, the patron of the Atom-feed Google, takes care it works. My RSS-reader reads atom-feeds as easy as RSS-feed. When you do it: please jump the boat.

"So weak but stubborn as before" - Isaac Mao

Isaac Mao comments on the first official reaction after Zhao Ziyang died and summerizes some of the reactions on the internet. People seem to use mainly the comment sections to express their feelings.

world - Eight Chinese kidnapped in Iraq


China got seriously entangled in the war in Iraq with eight construction workers from Fujian Province being kidnapped. Here the coverage in the China Daily. The demand of the hostage takes for a 'clarification' of China's position in the war sounds pretty vague, as if they suddenly had to find a demand when they discovered they held Chinese hostage.

blogging - More marketing than money

Last night's weblog meetup
Wang Jianshuo has beaten me in reporting on last night's Shanghai webloggers meetup, only the 4th in ourf short history. This time we had no guest, but exchanged our idea on how to make money with weblogs or use them in other ways.
While many exciting ideas came on the table, really making money is not yet a money, although those who are active bloggers see it as an ideal instrument for their own marketing. Next theme will be the power of the internet, or how the internet has an influence on companies, governments and other organizations. Unless we get of course Muzimei as a guest, then we might skip this more boring subject.

law - Two Americans might get 15 years for DVD-trade

US-citizens Randolph Guthrie and Cody Trush face each fifteen years of prison after haven been tried at a Shanghai court for trading in illegal DVD's, according to Chinese media. Both were arrested in the summer of last year, causing quite an uproar as Guthrie was a famous socialite in Shanghai.
According to an offline article in the Shanghai Daily, seen by AFP, the two had been running an operation that sold 180,000 DVD's abroad, worth more than seven million Renminbi (840,000 US dollar).
Guthrie claimed he thought his business would be legal since he operated through a Russian based website and would not need any business licenses in China. "When the business became more professional and I had more employees I thought about applying for a license, but didn't have time," Guthrie said according to the report.
Three other defendants, including two Chinese nationals, claimed they did not know the business was illegal.
The trial is still ongoing and has no been funished, AFP quotes a US consular officer as saying.

media - In contrast: the coverage in The Standard

Nothing could be more contrasting than the coverage between Hong Kong and mainland media on the death of Zhao Ziyang. Especially the free-accessible The Standard (in contrast again to the non-linkable SCMP) has dedicated much of todays paper to Zhao. Usefull is this article the dilemma's China's leaders face regarding Zhao's funeral.
An important observation in the tail of the article:

"A new book published in Hong Kong recently appears to support the theory that
Zhao's disgrace was not as deep as it appeared to the outside world. The book,
Political Struggles in the Age of Reform and Opening Up, is written by Yang
Jisheng, a retired senior journalist from Xinhua, who interviewed Zhao three
times over the past 15 years. In one interview, Zhao told the journalist that
after his ouster as party leader, Deng at least three times asked him to come
back to work, but Zhao set two conditions: the June 4 verdict had to be
reversed, and he should be returned to a post with real power. Deng could not
accept the first condition.
"If anything, this suggests that even Deng himself, who drove Zhao into oblivion, did not think Zhao as guilty of unpardonable evil."

Scuffles as Zhao's aide wants to pay respects

Reuters reports that scuffles broke out as Bao Tong, a former aide of Zhao Ziyang, wanted to pay his respects to his former boss. Tong's wife got hurt and is brought to a hospital.
Willy Wo Lap Lam starts to see conspiracies again. That used to be his trademark when still writing for the South China Morning Post, palace revolutions, conspiracies and a collapsing China, often based on rather flimsy evidence, but good enough to fill the backside of many adds.

Zhao's family does not ask for state funeral

The family of former party leader Zhao Ziyang will not ask for a state funeral, but is preparing a hall of mourning at home, Reuters reports. That would be one difficult decision less to take.
Meanwhile, Isaac started to report also on online activities. Meanwhile, reports on traditional media are lacking fully, while the major internet portals only report the official 50 word message on the passing away of 'comrade' Zhao, without mentioning his past record.

media - The Zhao-Wen connection


The BBC not only has a good coverage of the effects of the aftermath of Zhao Ziyang's death, they have also unearth this most intriguing picture of current premier Wen Jiabao standing next to Zhao Ziyang during his dramatic appeal at Tiananmen Square in 1989. Wen was then a close aide of Zhao Ziyang
The BBC-piece also contributes to the discussion about the way China will deal with Zhao's death. "Zhao's funeral is therefore likely to be a low-key affair held under the tightest security, as part of continuing efforts to avoid providing any opportunity for protest."
That would be an old-style reaction, so not unlikely, but would still be deplorable.

Mourning starts at the internet
Zhao in 1989: too little, too late

The death of Zhao Ziyang means the end of an era, an era that has never really being closed. Bellevue told us already in one of his previous comments how emotional the coming days will be for those who still remember the 1980s, the decade of Zhao Ziyang.
But also the younger generation will have to come to terms with their past, and they have started to do so, shows this blogger, in his entry "Great golf course in the sky". (Thanks again Bellevue, proxy is needed in China).
"So, now what?" He wonders. "Which side wins out? Simmering discontent of the populace that the western pundits are gleefully predicting? Or do we count on the contented, well-fed populace who have steadily gotten richer in the years of privatization? Does either side exist?"
For the coming days the eyes will be at Beijing, to see whether a real end to this emotional period will be possible. It might be the last opportunity.

economy - Stock markets at lowest point in six years

In de past years I have mainly ignored the sad news from the stock exchanges in China. While traders and other interest groups see every little upward jump as the first sign of an unavoidable upswing of the stock markets, I stick to my own predicting. The markets have not reached their bottom, it can go much, much lower, and it will.
Bloomberg reports today that the stock markets have reached its lowest point in six years. No news, I would say, although records like this are perhaps worthwhile to report.

media - Chinabiz is working on a remake


Business analysis provider Chinabiz is working on a revamp of its website, that should allow a much higher degree of interaction with its currently 25,000 readers. Linking to relevant articles, products in the book store, a revamp of it headlines service and an expansion of its columnists are expected to be ready after Springfestival.
A whole set of RSS-feeds for articles, products and headlines according to a wide set of industries will make it possible for readers to subscribe to a variation of updates that is at this stage not available.
Launch will be shortly after Springfestival, but since we have done this before, we are not going to give you any date.

Zhao Ziyang's death confirmed

Zhao in 2002

The China Daily and other Chinese media confirmed this morning that China's former president Zhao Ziyang (85) has passed away. Zhao has stayed under house arrest since he was replaced as secretary general of the communist party by Jiang Zemin in 1989. Zhao was also premier till 1987.
Zhao got the sympathy of demonstrating students and the world as he went to Tiananmen Square in 1989 to express his sympathy with the students in a hunger strike and appealed to them to halt their protest. His appeal was unsuccessfull and conservative forces in the government used his appearance to replace him.

More links on Zhao Ziyang
Wikipedia
AP
Google News
Reuters
Rebecca MacKinnon
CBC
The New York Times
Bloomberg
Nothing at the People's Daily yet
Financial Times
Time Asia
Washington Post

Update:
At least now the People's Daily mentions Zhao has passed away. In the smallest possible article. Guess there are behind closed doors some delicate discussions going on.

Are your employees returning in February? – the WTO column

(Later also at Chinabiz)

Shanghai - The first trains with migrant workers have left the rail ways stations to go home, to celebrate the annual Spring festival at home, causing the traditional logistical mayhem. More than ever, employers who see their workers leave, have to ask themselves a rather unsettling question: Will they come back in February?
It seems at first sight an odd question as three million graduates are struggling to find their first job in a labor market in the big cities that seemed to have for decades one thing in abundance: cheap labor. At two ends of the labor market those graduates are pretty useless, as more experienced managers and in the sweatshops for teddy bears. Those two markets face unprecedented challenges.

Last year saw for the first time a threatening shortage of migrant workers, especially in the southern parts of China. Factories, living on very tin margins, could not deal with the fast growing demand because they were short of labor. High living costs in Guangdong and improved returns on agricultural products made millions of migrant workers decide to stay home. Early signs indicate this tendency will gain more momentum this year. Life at the country side has started to improve after a decade of relative stagnation compared to the cities. A bumper harvest in 2004 and stimulating measures of the central government helped this turnaround. The abolishment of agricultural taxes in most provinces this year will encourage that positive trend.
On top of that, the threat of inflation is building up as also an ongoing poll of Chinabiz shows. That might increase living costs for migrant workers even more while most companies seem not able or even unwilling in raise salaries.

At the top-end of the labor market similar trends are visible. Traditionally China already had a shortage of experienced managers, one of the leftovers of the Cultural Revolution when education was disrupted for almost a decade. While every year the level of experience of Chinese managers goes up, that has not matched the current speed of economic development. Hongkongnese and Taiwanese have profited from this gap in managerial talent, not in the last place financially. Meanwhile, the labor market has improved for Chinese managers, but they often did not see a similar financial compensation, causing much irritation. That caused tensions, also because sometimes the Hongkongnese and Taiwanese managers did not live up to the high expectations, adding to the already existing unease.
For experienced Chinese managers it has become easier to swap jobs and increasingly they do. A larger US company saw last year in one week time 30 percent of its pool of carefully trained senior managers leave for the competition. The reason: they got new Japanese management.
Those sentiments often go along with a rather ugly racist or racist-like attitude – since Hongkongnese and Taiwanese belong to the same Han-race. But deep under those sentiments there are also justified reasons for the resentment. The glass ceiling in the career path, the difference in payment for non-Mainland managers, the lack of opportunities to develop a real international career.
Sometimes these complaints are over the hill, sometimes they are really justified, despite the rhetoric of especially foreign enterprises. Whether those complaints by Chinese managers are real or perceived, it makes sense to address them.

Fons Tuinstra