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Hard Road to World Domination for Chinese Firms

Oct. 14, 2013
"The China reputation for companies is too much overshadowed by reputation of government."

BEIJING - In the global contest for business, Chinese brands struggle to rival big Western and Japanese names, but some are now looking to reinvent their identities to overcome image and political hurdles.

The world's second largest economy does not have a single one of the world's top 100 brands, as compiled by marketing consultancy Interbrand.

And according to a survey by HD Trade Services, 94% of Americans are unable to name a single Chinese brand, with a third saying they would not buy one they knew to be Chinese.

"Brand China has many problems -- transparency, ethical practices, treatment of employees, the quality of the products," Richard Edelman, head of public relations giant Edelman told a World Economic Forum meeting in Dalian.

"And unfortunately the China reputation for companies is too much overshadowed by reputation of government."

Chinese phone security company NQ Mobile dealt with the problem by effectively presenting itself as an American firm.

It created an entirely new headquarters in the Lone Star state, listed on Wall Street, has an American co-CEO brought over from U.S. banking giant Citigroup, and its English website proclaims: "Made in Dallas, Texas".

Henry Lin, the group's founder, told AFP: "All our employees in the U.S. are American people... the consumer will feel it's a U.S. company.

"We divided the global market in two parts, developing countries, for which the headquarters is Beijing... and developed countries, with a headquarters in Dallas.

"If you can be successful in the U.S., you would be successful in western Europe, Japan, Australia."

Others are simply buying foreign firms, as decades of inward investment into China begins to move in the other direction.

Last month a $7.1 billion takeover by Shuanghui International was agreed by shareholders of U.S. pork giant Smithfield Foods (IW 500/90), the biggest ever Chinese acquisition of a U.S. company.

Chinese car manufacturer Geely bought out Sweden's Volvo, while its rival Chery created a new brand, Qoros, in partnership with an Israeli group.

Most symbolically, electronics group Lenovo (IW 1000/134) took over the PC arm of venerable U.S. computer firm IBM in 2005, and went on to become the world's biggest PC maker.

'Corporate Suicide'

But others prefer to stick with their own name, such as the world's top fridge maker Haier, or telecoms giant Huawei -- which has been described as one of the world's most controversial companies.

It generates 67% of its sales from outside China and last year was listed among the top five companies in the world for numbers of patents.

But despite marketing its flagship smartphone as the world's slimmest, it struggles to compete with South Korea's Samsung and Apple (IW 500/4) of the U.S. -- and faces accusations that it could be a spy agency masquerading as a commercial enterprise.

The U.S. Congress last year ordered Huawei be excluded from public contracts, and Australia has banned the firm from providing its broadband networks.

Huawei's vice president Scott Sykes told AFP such moves were down to protectionism and fear of China.

"We've been in business for 26 years, we operate in 140 countries... and there has never been a security issue of any kind, in all that time and all these places," he said.

"We were accused of the potential for doing that, but nobody has ever proved that.

"Our motivation is commercial, if we ever do anything on the behalf of the Chinese government that would be corporate suicide. We'll lose 70% of our revenues; it would be foolish."

He prefers to stress Huawei's research and development spending, and points out that many of the West's biggest companies themselves have their products assembled in vast factories in China.

"The difference is that our headquarters is in China... this is about trade protectionism, it's about fear and lack of trust of China."

Sykes, an American hired in 2011, is not the only foreigner recruited by Chinese firms to a high-profile role.

In September, electronics company Xiaomi hired Hugo Barra, a former Google vice-president in charge of its Android operating system, to help it develop.

When Apple founder Steve Jobs died, many Chinese media outlets pointed out that despite the occasional figure such as Alibaba's Jack Ma, the emergence of such a major entrepreneur in China was unlikely because of an educational system that discourages creativity and risk taking.

But for James McGregor, China president of the U.S. strategy group APCO Worldwide, it is the domination of the state sector that stifles innovation the most.

"China's private sector can innovate," he said, pointing to WeChat, a messaging app for smartphones made by Chinese Internet giant Tencent.

With 400 million users, only 100 million of them in China, WeChat is the fifth most downloaded app in the world according to GlobalWebIndex -- even ahead of Twitter.

But it too has had its hitches.

Early this year, several media outlets said Tencent had for a time imposed worldwide censorship on certain words considered "sensitive" in China -- a charge denied by the company.

Nonetheless McGregor said: "It's a Chinese product, it's very efficient, it's getting worldwide because it's a brilliant product."

Copyright Agence France-Presse, 2013, Julien Girault, AFP

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