The coming rise of Chinese brands
US take heed: China has its sights set on something beyond manufacturing – building Chinese-owned global brands – where the true economic power lies. And though Chinese brands don't currently have a stellar international reputation, history shows they could soon.
As China becomes the world’s manufacturer, talk of bringing back manufacturing jobs from China is ever on American politicians' lips. But are the Chinese as obsessed about keeping those manufacturing jobs as Americans are?Skip to next paragraph
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Not really. China’s government and educated class are more long-term strategically inclined. They have their sights set on something much more substantial, much more important for China’s future, something beyond manufacturing – building Chinese-owned global brands.
On my trips to China, I'm always struck by the sheer speed of change there. The Chinese still make mistakes in transforming their economy, but they can cite real achievements, too. Some of my work as a marketing and branding consultant collecting cultural and product stories took me to remote parts of China. Chatting with locals, I was surprised to learn that even they are acutely aware of numbers such as these: that the full retail price of Apple’s iPhone 4s is more than $600, out of which parts cost around $200, but the Chinese manufacturer gets only $8.
Ordinary Chinese watch these numbers keenly and think they’re unfair. They feel their countrymen are justified in demanding higher wages, even if higher wages fuel inflation.
The rising wage pressure is not restricted to manufacturing. A friend, who is a vice president of a multinational company with annual sales of more than $1 billion, told me the cost of hiring software developers in China has risen so much in the past few years, that he will no longer consider China for any new development centers.
That’s the problem of being cheap: Eventually somebody else will become cheaper. The Chinese know this. They understand that to sustain growth and stability, China has to transform itself into “the world’s brand-owner.” That’s where the bigger profit is, where the true economic power lies. They want that for their country.
You can say, “Yeah, dream on. Who in the West wants to buy a Chinese car?” Not many, for now.
Chinese brands’ lack of global appeal came to light for me when I traveled to China to help a Swiss company become the leading gourmet tea brand in Switzerland.
As I collected branding materials and spoke with the plantation owner in Fujian, it dawned on me that his tea was very good, his factory was clean and high-tech. He also sold his own brand of tea in China. Yet internationally he was not able to break out of the “tea manufacturer” role to move up the value chain.
The irony is that tea (especially green tea and oolong tea) is the quintessential Chinese beverage, and China is the only country currently able to produce, in good quality, all six types of tea: green, black, white, yellow, oolong, and pu'erh. But I can’t think of a single Chinese tea company that has made it in the West.
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A brand is the gut feeling a person has about a product, service, or company. The Chinese realize for now the developed countries are better at branding, at building product desirability and trust. They know they have a lot to learn and do to overcome China’s “provenance” disadvantage, but they are also encouraged by the success of neighbors such as Japan.