By Sacha Cody
Ten years ago, the then Chinese President Hu Jintao announced that China needed to develop its soft power. Progress is not good. The percentage of people around the world who hold a favourable perception of China declined from 48 per cent in 2007 when Hu made his announcement to 40 per cent in 2016.
Even in regions where China invests generously, things have not changed dramatically. Positive sentiment remains stable in most of Latin and Central America, and has dropped slightly across Africa.
China fares much worse in Western nations. Over the same period, favourable perceptions dropped from 42 to 37 per cent in the United States and from 39 to 32 per cent in Western Europe. Only Australia has stable impressions of China: 52 per cent held a favourable view in both 2007 and 2016.
Brands going global
But a new ingredient has recently emerged in China’s quest for soft power — Chinese brands and their global influence. A recent study identified 30 Chinese brands that are ‘going global’ (meaning they derive a significant portion of their revenue and positive sentiment from overseas), including businesses in ‘traditional’ industries such as Lenovo and Huawei as well as newer internet and digital businesses like Alibaba and Elex.
What all these businesses have in common is a global growth strategy built around growing brand awareness and equity rather than one fuelled by acquisitions.
Take Huawei: today, 8 out of 10 people around the world know the name, and the company is ranked third overall in global smart phone sales behind Samsung and Apple. Lionel Messi, one
Critics note that while they might be commercially successful, they are still not ‘brands’ in the sense of articulating their values and reason to exist to the world’s consumers
of the world’s best footballers, is their spokesperson, and they have previously partnered with major Hollywood celebrities.
While perceptions of government alliances dog Huawei’s ability to crack the US market, in many European markets they have an impressive 20 per cent share. This all happened in the last six to seven years — Huawei began selling Huawei-branded smart phones in the early 2010s.
Similarly, Elex, a developer of online and mobile games founded in 2008, reaches over 50 million users in 40 countries. Similar to other internet companies emerging from China, Elex leapfrogs the China market entirely, going straight to overseas markets and accelerating its ability to learn consumer preferences without worrying about ‘how things are done back home’.
This is all quite unprecedented. In the early 2000s, Shelly Lazarus, CEO of the global advertising firm Ogilvy & Mather, commented that ‘China has no brands in any real sense’. Though her comments caused controversy at the time, few could convincingly argue with Lazarus. Even 10 years ago, when Hu Jintao made his announcement, to speak of successfully global Chinese brands, one was limited to a few cases.
Despite this, critics note that while they might be commercially successful, they are still not ‘brands’ in the sense of articulating their values and reason to exist to the world’s consumers. In other words, their soft power is quite weak. This criticism misses two points.
First, building a brand takes time and money. While brands such as Huawei and Elex may not yet have the soft power of Apple or Google, they do have a solid foundation of what marketers call ‘brand positioning’ from which they can grow. For instance, in some European markets consumers look to Chinese companies for disruptive innovation.
Second, critics would do well to consider the risks associated with the alternative business model common amongst global Chinese businesses, which is diversification and acquisition. Anbang Insurance, Fosun International, Dalian Wanda and Rossoneri Sports Investment Management Changxing are but some of the companies to have engaged in highly publicised acquisitions in recent years.
This has led to undue CCP scrutiny — the high-profile deal makers in all of these companies have been detained and investigated in the last few years by a special government unit of the Chinese Communist Party looking at economic crimes.
No immediate solution
Chinese brands ‘going global’ are certainly no immediate solution to China’s soft power gap. China will need to unleash its cultural and political potential if it wants to attain anywhere near the level of soft power the United States has. But if the development trajectory of Chinese brands continues to be fortuitous, there is no reason not to expect Huawei or Alibaba to be part of a future brand of Chinese soft power.
(Sacha Cody is Global Account Director at Kantar, a global research and consulting firm)