China climbs the branding ladder
Six years ago only two Chinese companies made the world's top 100 by brand value in the initial rankings compiled by a London consultancy. This year's list includes 12, with China Mobile breaking into the top 10 at No 9. Given the growth of the mainland economy, the expansion of domestic markets and protection from competition, this is not surprising. The dozen mainland firms accounted for 11 per cent, or US$259 billion, of the total value of the world's top 100 brands, which takes into account future earnings. The safest prediction about next year's list is that these numbers will grow.
Of greater significance to the mainland, however, would be global brand recognition reflecting cost, quality and reliability. Brand value and brand recognition do not necessarily go hand in hand. Indeed, the Chinese representation in the top 100 by value is dominated by companies that provide services to those that make and market brands, rather than produce things that are household names. Five are banks, two are insurance companies, two are telecommunications providers and another the mainland's biggest oil firm. Nonetheless, the consultant noted that the growing presence of mainland companies in the top 100 reflected the transformation of China from a centre for low-cost production to a nation capable of product innovation and marketing originality. Examples of the potential of mainland companies to be found in the list were internet firms - Baidu, leading Chinese-language search provider and Asia's fastest-growing brand at No 29, and Tencent Holdings' QQ social network at No 52. Both have expanded domestic market share with innovation and clever marketing. The consultant said aggressive mainland entrepreneurs had also helped extend the country's brand power to audiences in other markets, even if they were yet to make the top 100 by brand value.
The rise of China brands in the rankings is a refreshing change from a string of scandals about defective products and contaminated foods that has tainted the made-in-China label at home and abroad. Hopefully it signals a step towards China's aim to emulate Japan and South Korea by developing brands recognised globally for quality and affordability. It cannot be done overnight. Japan transformed its brand image only by embracing a management philosophy of company-wide quality control involving all employees from top to bottom.
It is an encouraging sign that an economy that has relied on ever-cheaper, margin-cutting low-end manufacturing for export may be moving up the chain to higher value-added goods that result in better paid, more fulfilling jobs. This will be good for workers, consumers and the economy. It has to happen if China is to achieve the goal of breeding 30 to 50 state firms as national champions identified with global brands.