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A receptionist works behind the logo for Baidu.com, a Chinese language search engine, at the company's office in Beijing Thursday, July 28, 2005. (NG HAN GUAN/AP)
A receptionist works behind the logo for Baidu.com, a Chinese language search engine, at the company's office in Beijing Thursday, July 28, 2005. (NG HAN GUAN/AP)

Chinese companies surge on world's top brand list Add to ...

From the plain numbers, one could conclude that China is on the verge of becoming a global brand powerhouse.

Of the 11 new entrants in the BrandZ Top 100 ranking, five are Chinese. With 12 Chinese brands in the Top 100, the country seems far ahead of other large emerging markets such as Brazil, Russia and India. And Chinese companies now dominate the Asia Top 10 with eight entries.

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But Chinese companies have only just started taking their first steps towards building brands, and their road will be a long and hard one, branding experts say.

"The big reality is: these are still Chinese, not global, brands," says Adrian Gonzalez, head of Greater China at Millward Brown, which compiles the ranking. "Most of them are in there because of the scale they have in China."

The majority of the Chinese companies represented in the ranking are state-owned enterprises in businesses that heavily rely on large population numbers such as banking, insurance and telecoms.

Four of this year's five new Chinese entrants meet that profile: Ping An Insurance, Agricultural Bank of China, China Telecom and China Life Insurance.

With a few exceptions, such companies have yet to fully understand what branding means, experts say.

"They [state-owned enterprises]need to think harder about how consumers see them," says Raymond Tao, president of Ogilvy & Mather Advertising in China. "So far, their thinking is still very much focused on how the government sees them, how distributors see them."

China Mobile is seen as the big exception. It is the world's largest mobile operator by subscribers and was also the first Chinese brand to enter the BrandZ Top 100 ranking when it was started in 2006. It agreed to work with Ogilvy to overhaul its sub-brand for young users, an exercise which ended up transforming the entire brand.

Other state enterprises "have tried in terms of service and product, but in terms of communication, the quality is just not there," says Mr. Tao.

Elsewhere, there are some much more promising Chinese brands. Baidu, the country's largest online search engine, saw its brand value grow at the second-fastest pace of all Top 100 companies this year, and Tencent, which operates the world's largest instant messaging service, entered the ranking for the first time.

M.r Gonzalez sees other technology firms as promising candidates. 360Buy, an e-commerce company, Suning, an electronics retailer which is rapidly expanding online, and Lenovo, the world's fourth-largest PC vendor, are promising brands he bets on.

In some sectors where U.S. and European brands are strong, Chinese brands face many more hurdles. "There is much stronger negative sentiment about China in certain respects than there is regarding other Bric markets - if you ask consumers what they associate with Chinese products, they'll tell you that everything cheap is made in China, and they'll think of quality problems," says Mr. Gonzalez.

Therefore analysts believe it will be years before Chinese carmakers, which have expressed growing ambitions to build brands, have a chance to be trusted and recognized abroad.

Similar hurdles exist in the luxury industry. As people develop a growing pride in their economic clout and cultural renaissance and as the domestic consumer market is growing fast, plans for home grown luxury brands abound.

Increasing numbers of fashion companies from south-eastern China, which used to do just contract work for export, have begun calling in advertising and branding consultants as they think about launching their own brands.

One example is StellaLuna, a Shanghai-based shoemaker that set up its own brand in 2006. It markets its 2011 summer collection with association with French femmes fatales.

While the company says it believes China will replace Europe as the global centre of fashion in the 21st century, it also feels the need to cite its founders' credentials as former contract manufacturers for European brands as proof of taste and quality.

"Many people in China have that dream of building a luxury brand, but maybe it'll take another generation," says Mr. Tao.

Things are at an even more embryonic stage when it comes to brand internationalization. "As their domestic market is so big and growing, there is no good reason for them to go global quickly," says Mr. Gonzalez.

Branding experts see the decision by Li Ning, the sports shoe brand, to set up a shop in Paris as a move mainly aimed at Chinese consumers, demonstrating the brand has a certain global standing.

Other brands which have started internationalizing are often still competing on price and distribution networks. SAC, a small Chinese car brand which has been quite successful in Brazil, is an example, as its expansion there has been driven and managed by its local distributor.

The big exception is the white-goods sector. Haier, the company whose chief executive once started out by publicly smashing poor-quality refrigerators with a hammer to demonstrate his commitment to high quality, has built a strong position in several developing markets. In Pakistan and Nigeria, Haier is now a high-end brand, and the company has also seen some success with a new refrigerator model that appealed to young, affluent consumers in Europe.

Experts believe Chinese mobile handset makers might follow in the white goods companies' footprints as the industry has become equally competitive.

Huawei, the telecom network gear maker, which has recently started pushing the expansion of its devices arm, is a closely watched candidate.

 

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