Increasingly, international commentators are criticizing the Chinese brands, or rather, China's lack of brands. But they are not alone. The Chinese language press has been doing that for a longer time.
Some business consultants say they have been disappointed with waiting to serve Chinese companies with rising international brands, like Sony and Samsung, when it is about time they appeared in the global market. But so far, there have only been one or two exceptions.
But why is branding failure such a widespread phenomenon? Some say it is mainly because of the disregard for intellectual properties and because of too many imitations and convenient look-alikes of international brands.
Others say Chinese manufacturers are spoiled by the abundant labor supply at home - so they have no need to compete for branding when they can always compete on low prices.
Indeed, the indulgence in price wars has, as Alexandra Harney's book, The True Cost of Chinese Competitive Advantage, has revealed, distracted and delayed Chinese manufacturers' pursuit in innovation. In the worst cases, relying on low prices simply becomes an addiction that destroys a factory's reputation and drives it out of the market.
Both schools of criticism bear some elements of truth. But fortunately (or unfortunately), both types of practice that they have criticized are coming to an end - thanks mainly to inflation.
Labor is no longer cheap. In Guangdong, where most of China's low-price exports used to originate, the wage level for skilled workers has been on a steady rise for the last few years.
Two years ago, a model worker's wage, depending on his level of skill, could exceed that of someone with a post-graduate degree in Beijing. In theory, the financial reward for the elite workers has remained markedly higher, sometimes several times as much, than for the rest of the nation to be attractive enough for those from the most distant corners.
At the same time, all major production materials - from energy to metals - have become more expensive. Some old materials and production operations are being phased out to meet the more rigorous environmental requirements.
One assumes that there will still be some small companies attempting to evade the government's policies in order to make low-priced imitations of global brands. But their risks will be higher and their returns lower than ever. They will be unable to survive if they are to use the same production materials and pay the workers the same wages.
However, the fact that labor and materials are no longer cheap is only one factor that may help Chinese manufacturers change their ways. There must be other changes, too.
There will have be a change in the general social setting. In the 1980s and and the '90s, as the first generation of Chinese entrepreneurs came to the fore, few of them probably thought they could survive till the 21st century. There were a lot of uncertainties surrounding their small ventures. Interference from local officials was heavy. At the level of the central government, laws and policies were incomplete.
As they could not afford to think of long-lasting businesses, all they cared about was how to make some quick profits before the political "wind" would change. It was only from this perspective can one explain why all Chinese factories seemed to settle for the making of non-brand imitations at one time.
Now, as many of the first generation of entrepreneurs find themselves in the middle of the leadership transition of their companies, they seem to have realized that they can have a longer framework for planning their business growth.
E-mail: younuo@chinadaily.com.cn
(China Daily 04/28/2008 page4)
