Foreign or Domestic: Which Brand is Best?

By Staff Reporter LI WUZHOU & TAN ZHEN

The Maikenji Fast Food Restaurant at the foot of Great Wall has a distinctly Western look.

A surprisingly large number of Chinese people appear to wear foreign-brand designer clothing as a matter of course. From the international metropolises of Beijing and Shanghai to the remote north of Heilongjiang; senior white-collars, farmers and factory workers alike sport threads bearing such labels as Bellvilles, Luck, Smalldeer, and Jack & Jones.

Foreign Brands Rule

Can everyone be so well off as to afford foreign brands? A closer scrutiny of designer labels written in English generally reveals that the majority can’t, as the garment in question is either fake or made-in-China under a foreign name.

In recent years it has become practice in the Chinese garment industry to register a trademark abroad at minimal cost, or purchase the usufruct of a provisional brand from a small European factory, and affix its name to goods otherwise produced in China. “We have no choice,” says made-in-China brand Bellvilles’ proprietor defiantly. “Unless our goods have a foreign trademark, large shopping centers refuse to rent us counter space, and punters aren’t interested. Clothing with foreign labels sells at three times that with a Chinese trademark, so why shouldn’t we profit from this snobbery? “

This foreign label phenomenon prevents Chinese enterprises, many of whom actually produce the clothes that sell as foreign brands, from becoming known in their own right. Sixty to seventy percent of formal eveningwear supplied to the world is produced in one factory in Chaozhou, Guangdong Province. Wholesaling it profitably, however, requires affixing the foreign distributor’s trademark, as otherwise the selling price would be 80 to 90 percent lower. Famous Chinese companies, such as Shanshan, Romon, Mailyard and Smart Garments, export quality suits, but under foreign brand names.

This brand snobbery carries through to TV advertising, when a Made-in-China biscuit advertisement, for example, will portray happy children, biscuits in hand declaring: “Love that real American flavor!”

It is also evident in big Chinese supermarkets, where American grapes no better than those from Xinjing’s Turpan at a price 10 times higher. The same is the case for Thai rice.

That foreign brands rule was indubitably endorsed at the 2003 Car of the Year show, where only three of the 14 brands were local: Zhonghua, Chery and Geely. The Chinese car market has an unashamed bias toward foreign autos, hence the Bluebird name being dropped in favor of NISSAN; and the famous double-arrowhead Elysee DPCA logo being changed to that of Citroen.

According to Xu Ye, manager of the Jiling Yongtong car showroom, drivers that have purchased a Great Wall SUV or Hafei Saima spend hundreds more on changing their name to the Toyota or Mitsubishi brand. That means fewer Chinese cars brands are seen.

Successful Foreign Brands Indigenize

Meanwhile, foreign brands vie to achieve the highest degree of “indigenization,” in order to win even greater favor with Chinese consumers. A recent survey on the Horizonkey website showed that the world top three indigenizers are IBM, Volkswagen and Coca-Cola.

Shanghai Xinhualian Plaza.

Some American joint venture companies use domestic sounding names on their products, while others actually their own Chinese name, such as Olay (skin protection), Rejoice (hair shampoo), Ariel (washing powder) and Safeguard (soap). In order to set up a genial brand image, Coca-Cola changed its trademark of 20 years for one more China-friendly. This US giant has also invested millions of dollars in developing the Chinese soft drinks series Heaven and Earth.

Many foreign companies buy Chinese brands expressly to keep in with Chinese consumers. Overseas companies feature in the backbone enterprises of 22 fields of light industry. One-fourth of China’s cosmetic companies are joint ventures, and foreign currency accounts for 30 percent of capital asset investment in electron industry. The world’s largest cosmetics company--the L’Oreal Group --- recently announced in Beijing that it would purchase the Chinese brand Mininurse, which has been the national second most popular skin care brand since its establishment. With its 280,000 domestic sales outlets, Mininurse is a profitable feather in L’Oreal’s cap.

There is even more frantic dealing within the brewing industry. Heineken made a bid to purchase Guangdong Brewery Holdings Ltd this year; Scottish & Newcastle are discussing a 60 million-dollar investment in Chongqing Beer; last September, the Belgian Interbrew Beer Group spent 1,30 million dollars on China’s third most popular Zhujiang Beer Group stock; and English SAB Miller, second largest brewer in the world, has purchased several inland beer brands, including Harbin Beer. All these breweries seem to work on the principle of developing local brands rather than popularizing those from abroad.

Creating a China Brand

Why should it be that in China, a country that produces quality products at low prices, its local consumers still prefer foreign to domestic commodities?

A look back to the Opium War of 1840, when the Western powers destroyed the Chinese domestic market, might shed a little light. At that time, the market became swamped with foreign products such as nails, matches and umbrellas with whose quality and price the Chinese national industry could not hope to compete. At the beginning of opening-up in the 1980s there occurred a similar situation, where home produced products were squeezed out by foreign brands such as Toshiba and Hitachi because every household wanted to own appliances made in Japan. It seems, therefore, that Chinese consumers equate foreign goods with high quality.

Chinese enterprises, however, have proved that they are capable of producing high quality goods at a low price. In the 1990s, sales of domestically produced color televisions surpassed those of imported sets, and locally made cell phones resisted imported mobile monopolization.

China’s developing brands are also beginning to appear on the international market. Chinese Haier electric appliances account for 10 percent of the European market, and Chinese computer brands Lenovo and Donghai are advancing into the world IT industry. The state-owned Double-Star Group shoe manufacturers have grown from a 1980s small workshop to a concern encompassing 10 overseas companies registered in 46 countries. A large number of excellent and well-reputed local brands, such as Golden Star, Changhong, and Konka are also gaining ground on the world market where, in contrast to China, the Made in China label is actually becoming a common sight.

Encouraged by the success of Korean and Japanese native brands, in recent years young Chinese consumers have begun to buy local brands off their own bat. This is partly because home produced goods have improved vastly in quality, and also because they want to put the Made in China label on the world market map.