Made in China global brand held back by regime

BEIJING — 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 of 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.

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 Topshop garments. And that reputation as a global manufacturing hub is one of the problems, nurturing a perception that China is synonymous with cheap, low-quality goods.

But this is changing, as China’s leaders force that economic shift from export-based growth to consumer spending. According to the state-run China Daily newspaper, the country spent £105 billion (S$207 billion) on research and development last year so Chinese brands can compete with foreign rivals in a burgeoning domestic market.

But analysts say China’s quest to deliver a global brand may face insurmountable obstacles such as a rigid corporate culture and a top-down approach to innovation.

“There’s a conflict of interest that China has — one which supports as well as deters innovation — and that is central government control,” said Mr Bill Dodson, the Shanghai-based author of China Fast Forward: The Technologies, Green Industries and Innovations Driving the Mainland’s Future. “China says okay, we’re going to identify 20 companies to go out and become global brand champions ... 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.”

Among China’s biggest hopes for a global breakthrough is carmaker Chery, founded in 1997. The company has established joint ventures with a number of foreign brands, including Jaguar Land Rover, but sceptics say Chinese brands like Chery will never surpass foreign rivals unless they can embrace fundamental principles of innovation — open communication and risk-taking.

“We get these endless things from the government saying there should be more innovation and brand-building,” said Mr Paul French, Chief China Market Strategist at market research firm Mintel. “The problem is that no one really wants to invest in innovative design. It’s very market-led. So if reports come to the stores that red shirts are selling, they’ll tell their in-house designers to design more red shirts.”

Chinese companies are trying to buck that trend. For instance, Huawei, the world’s largest telecoms equipment maker, headquartered in Shenzhen, has more than 140,000 employees, nearly half of whom work in research and development. The company applied for 54,000 patents last year, 14,000 of them outside China.

However, Chinese technology upstarts will struggle to make inroads into Western markets, judging by Huawei’s sometimes faltering progress, because of the political problems they face. Huawei has been barred from operating in the United States because of security concerns and its United Kingdom operations are the subject of a review by Britain’s National Security Adviser Kim Darroch.

“In terms of China’s consumer Internet, more than any cultural factors, the biggest barrier would be the regulations and protectionism surrounding the Internet,” said Mr Kai Lukoff, co-founder of TechRice, a blog about China’s tech sector. “You have this Iron Curtain 2.0 that separates the Internet culture in China from that of the rest of the world. So … when Chinese companies go abroad, they feel woefully out of place.” THE GUARDIAN