Foreign brands can't afford to ignore naming and shaming

Chong yang mei wai, or 'worship things foreign', is a Chinese idiom long used to describe mainlanders who have blind faith in anything foreign, from food to clothing to cars.

Mainlanders are deeply attached to foreign products - consumer-related or industrial - not only because of their brands, international flavour and cutting-edge design but, more important, their supposedly consistent high quality.

Naturally, they are willing to pay much more for foreign products than the domestically made ones, even though many of those products, whether their tags are domestic or foreign, are made on the mainland.

That explains why the recent spate of state media reports naming and shaming international brands for inferior products or allegedly misleading consumers over possible price rises have made interesting reading.

Last month, the government-sponsored Beijing Consumers Association singled out several imported brands, including Zara, Hush Puppies, Marlboro Classics and Hong Kong's G2000, for failing to meet quality standards on their apparel.

Last week, the National Development and Reform Commission fined Unilever 2 million yuan (HK$2.38 million) for only suggesting it might raise detergent and soap prices, accusing the Anglo-Dutch consumer-goods conglomerate of causing panic buying and distorting the market order.

This has, of course, triggered debates, both in the traditional media and online, with strong nationalistic comments taking the upper hand.

'Don't allow foreign brands to cheat you out of money,' screamed the headline of a story that appeared in People's Daily last month, focusing its wrath on the mainland vendor of Zara. An accompanying short commentary urged mainlanders to buy the Chinese brands.

After more than two weeks of obfuscating, the mainland vendor of Zara announced last week that it would offer unconditional refunds for the two products named in the official report.

The authorities' increasingly bold actions in naming and shaming foreign brands have come at an interesting juncture for foreign companies doing business on the mainland. On the one hand, multinationals are investing heavily to tap the rising demand from the country's middle class, and on the other hand, those companies, North American and European ones in particular, also complain bitterly and more openly that they are frequently shut out of some industries.

For the moment, most of the foreign brands singled out by the authorities have appeared to take the negative publicity in stride and believe it will blow over soon. They are probably right for now, but they are deceiving themselves if they fail to be proactive in dealing with the negative fallout.

That is because such publicity, coupled with rising nationalistic sentiment, could gradually erode the reputation of the international brands as a whole in a fast-changing consumer and business environment.

Broadly speaking, the official attitude towards foreign investment has also shifted significantly. It was hard to imagine even 10 years ago that any major foreign brand would have been targeted for negative reasons on the mainland, as attracting foreign investment was a top priority for both the central government and local officials.

Now with the mainland's economy the second-largest in the world and its foreign-exchange reserves surpassing US$3 trillion, officials can afford to be more selective and assertive. Many Hong Kong and overseas businesspeople have surely realised by now that it is no longer easy for them to have direct and frequent access to the major decision-makers as they had in the past.

To be sure, the multinationals, particularly consumer-goods manufacturers, still command the loyalty of mainland consumers. Indeed, any new food scare (and the mainland is certainly not short of those these days) would push more middle-class mainlanders to imported brands. For instance, after the scandal over the melamine-spiked baby milk powder in 2008, sales of imported powder soared to 597,000 tonnes in 2009 from 350,000 tonnes in 2008.

But mainland consumers' attitudes are also shifting subtly. That can be illustrated by a popular belief that the quality of products made for them by the multinationals on the mainland is inferior to that of the products made for their home-country consumers. That explains why some mainlanders would rather pay more for imported products even though they are also made on the mainland and sold much more cheaply.