Branded in China

When walking through a store, considering what item to purchase, it’s natural to consider where an item was made as an indicator of its quality.

When looking for a high-quality electronic device, many people want to buy a product made in Japan. If looking for a finely-tailored suit, those same people might look for suits made in Italy. But when looking for high-quality brands, few people would look for goods manufactured in China.

There is an current and well-established link between Chinese goods and inferior quality. Further complicating the problem for China is the lack of international Chinese brands – many exported Chinese goods are manufactured for international companies or under nameless labels. As the economic crisis hammers away relentlessly at world economies, China is suffering particularly for their lack of strong international brands.

What is the problem? First, according to Business Week’s Brian Bremner, China suffers greatly from capacity overhang. Not only does this harm the profitability of Chinese brands, but it means that Chinese firms don’t have the extra money to spend on the large-scale marketing campaigns that are necessary for companies to experience large-scale international growth. Think about it – how often do you see advertisements for Chinese brands?

Another problem is the general perception of the quality of Chinese goods. In a recent survey, consulting firm Interbrand found that 69 per cent of respondents looked unfavourably that the label “Made in China”.

Recent recalls of toxic toys and drying machines that pose a risk of electrocution have done nothing to help the global perception of Chinese brands. Additionally, the huge amounts of small ‘throwaway’ goods manufactured in China, such as plastic tokens or amusement park prizes, have further cemented most peoples’ view that Chinese products are of low quality.

Still, it would be misleading to say that there are no international Chinese brands, or that China is doing nothing to solve this problem.

There are several Chinese brands that have attained international recognition and respect. Chief among these brands are Lenovo (the manufacturer of IBM ThinkPads), and Haier, the maker of air conditioners and refrigerators, among other household goods. Both of those brands are sold side-by-side with other brands in foreign markets, and have garnered positive reviews from critics and consumers alike.

Other brands, like telecom firm Huawei and automaker Chery, are not yet widely known internationally but are making aggressive pushes to build their brands. Huawei has landed major American firms as customers, and Chery has partnered with Chrysler, and is expanding automobile sales throughout South and North America.

Additionally, the Chinese government has recognized the problem with their international brands and is acting aggressively – perhaps too aggressively – to come to the aid of Chinese brands.

Last week, the Wall Street Journal reported that the Chinese government was aggressively targeting foreign luxury goods such as Dolce & Gabbana and Versace, claiming that they did not meet China’s quality standards. Speculation abounded that the clampdown was a government effort to begin to reduce China’s dependency on foreign brands, and perhaps create a space for Chinese firms to develop their own brands.

What can Chinese firms do to improve their international appeal? The first and most obvious step will be increased marketing efforts on an international scale. Chinese firms must directly address the traditional conceptions of Chinese products as low quality and disposable, and present an image of sophistication and reliability. If advertised in the same manner as other foreign goods, there is really no reason that quality Chinese goods can develop international followings.

This will be expensive, but for large firms such as Huawei or Chery, it is doable. Most specifically, the Toyota brand crisis has opened a door for Chinese automakers to build up their international reputation. If this is done effectively and expeditiously, the road will be paved for other Chinese brands to follow.

In another sign of good news for Chinese brands, there is a growing international appetite for uniquely Chinese goods. Brands such as Silk Soymilk and PF Chang’s Bistro excel in foreign markets, and demonstrate that consumers in foreign markets are willing to purchase items which align with Chinese tastes, which could also pave the way for increased penetration of Chinese brands into foreign markets.

According to former Asian gaming executive Wayne Hao, China is already well on its way to creating fully developed international brands. “China has already moved up the value chain from pure low-skill manufacturing to strong domestic brands”, said Mr Hao, “and the next level will be more and more Chinese international brands.”

With an increased marketing push, quality control, and capitalization on opportunity, “Made in China” could become a positive thing.

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