Try naming a Chinese brand name that’s known worldwide

PUBLISHED : Saturday, 26 March, 2016, 11:28pm
UPDATED : Monday, 28 March, 2016, 4:49pm

A policy of yuan depreciation would do nothing for China’s economy, offering few benefits for exports and possibly triggering capital outflows, influential economists said yesterday at the Boao Forum for Asia

SCMP, March 24

 

In the early 1800s Britain went through an industrial revolution and the names associated with it are still known today around the world – Watt for the steam engine, Bessemer for steel, Wedgwood for porcelain, Stephenson for the railway and many others.

Later in the century a similar industrial revolution began in the United States and the American names it made famous are similarly still known everywhere –Rockefeller, Ford, Edison, Bell (shut up, you Scots), Dupont and many others.

Japan staged an industrial revival in the 1960s and even in remote villages in Africa people recognise Sony, Toyota, Honda, Panasonic, etc. The names of the later Korean me-too version of this industrial miracle have also won global name recognition – Hyundai, Samsung, Kia.

There was likewise an industrial revolution in China at the end of the twentieth century. In scale of output and range of goods produced it has dwarfed all the others. Its products dominate retail shelves across the world and its efficiency of production has hugely cut the prices of once costly household goods.

And now here is my challenge.

Give me a Chinese brand name known around the world, not just in the mainland but something instantly recognisable in African villages as well Texas shopping malls, a name that ranks globally with Ford, Sony or Samsung.

Go on. Scratch your head. There are none, are there?

It will not do any longer to say that China’s industrial emergence is too recent and that this brand recognition will soon arise. Sony and Samsung won universal recognition in much shorter time spans than the one in which Chinese manufacturers have been world leaders.

I think there is a fundamental reason for this. In essence it is that the each of the many steps of devising, manufacturing and selling a successful product is much more complicated than the consumer will ever know. Each one is fraught with questions about which of many options is the right one to take.

One way of dealing with these questions is to go up the chain of government in your country to the top politicians, who inevitably think they know more about everything than anyone else does. They would not otherwise entertain such questions, even in very general form.

If they then make the wrong decision and you lose money by producing what they tell you to produce, they can still make themselves look good by ruling that you are to have privileged access to financing and input materials. You then succeed, or seem to, and few people will ever know it is a cheat.

But it can only be done by starving some businesses to feed others that government favours and the sad fact is that government consistently gets these decisions wrong. Bureaucracy is not run on business lines.

Inevitably what then happens is that all the crucial industrial decisions are made abroad where government cannot interfere. Specifically, they are made in currencies, mostly US dollar, in which the open market, not government, establishes prices, interest rates and exchange rates.

Only this way can any business achieve the accounting standards that consistently allow its directors to know how well it is really doing. Only this way can any business establish a firm base on which to build an international brand name.

And that’s why Apple iphones are made in China but branded in America. That’s why China does assembly while almost all else from product conception to delivery into the consumer’s hands is done elsewhere.

For successful branding, first get the pricing right, not just of the final product but of everything that goes into making it. This is not yet possible to do in China, certainly not in yuan terms, and that’s why China has no brand names known around the world.

I have a novel idea for these “influential economists” at the Boao Forum. Don’t recommend any yuan policy, either appreciation or depreciation. Just tell Beijing to leave the yuan to its own devices and let it find its own level on the market.