China needs to break the barriers to innovation

PUBLISHED : Thursday, 18 April, 2013, 12:00am
UPDATED : Thursday, 18 April, 2013, 3:18am


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China's companies are taking to the world in leaps and bounds, as evidenced by overseas direct investment of US$77 billion last year, up 12.6 per cent on 2011. Another record seems certain this year, with US$18.4 billion having already been spent to the end of February. But despite firms extending their reach with purchases and products, global Chinese brand recognition remains low. Part of that has to do with insufficient international experience and marketing, but much is also about a lack of innovation and creativity.

Not a single Chinese firm made it onto the respected consultancy Interbrand's last list of the world's top 100 brands. Only 6 per cent of 1,500 Americans surveyed online by the New York consultancy HDTS were able to name a Chinese firm. This was even though almost 50 per cent of products in a typical office or home in the US are made in China. The names that most showed up among the few who knew were Lenovo, the world's second-biggest maker of computers, Baidu, China's equivalent of Google, and Huawei, the global leader in the manufacture of telecommunications equipment.

There should be no mystery as to why the vast majority of Chinese firms and brands remain all but faceless. The favoured overseas investment strategy is to make acquisitions of other companies, taking over their market share and brand recognition. HDTS pointed out that most venturing out under their own name in many cases failed to dedicate enough resources to gain visibility; it is why Li Ning, China's equivalent of Nike, failed in its first attempt to break into the US market.

Lenovo, one of the few to build a global image, has been helped by acquiring foreign firms, the highest-profile being IBM's personal computer business in 2005. Its organisational structure, head offices in China, France and the US, and marketing focus on 18- to 34-year-olds gives direction and an international outlook. But an understanding of how to compete in foreign markets is only part of the problem; companies also need to fight a system that does not encourage innovation.

Much work still needs to be done to ensure intellectual property rights are respected. There is no interest in innovation in a commercial environment where copying is still king. But creating new and exciting products is also unlikely when the government is so insistent on censorship and preventing free expression. Until authorities see the error of their ways, Chinese brands will continue to have a low international profile.