Chinese companies begin to hold their own in good company

This year's eagerly awaited Interbrand Best China Brands report has just been published, and what great reading it makes for the progress of Chinese brands.

According to Interbrand's highly respected brand valuation methodology, the total brand value of this year's 50 Best China Brands rose 22 percent compared with the total value of the 50 Best China last year, which represents the largest increase in the table's overall brand value since the inception of Best China Brands 15 years ago.

Overall, Chinese Internet and financial services brands dominate this year's rankings with Tencent and China Mobile in first and second position, respectively, and China's mega-sized banks and insurance brands China Construction Bank, Industrial and Commercial Bank, Bank of China, PingAn (insurance) and China Life (insurance) occupying fourth to eighth in the rankings, respectively.

Tencent, founded in 1998, has grown into one of China's largest Internet service portals with platforms that include WeChat (mobile text and voice messaging service), QQ (instant messenger service) and Tenpay (online payment service).

In August, WeChat alone boasted 438 million users, 70 million of whom are based outside China.

Tencent's total brand value is now estimated at $54 billion, which represents double that of last year. Not only is Tencent the most valuable and fastest growing Chinese and Asian brand, this year's increase makes it the fastest growing brand in the world.

Tencent's success will hopefully provide a leader and instill confidence in China's army of young, privately owned, entrepreneurial firms across many industrial sectors.

Tencent's No. 1 ranking is demonstrable proof, if proof were needed, that Chinese industry has changed, and is changing further where modern, market-driven and privately owned organizations are building increasingly competitive brands, domestically and internationally. These organizations have not benefited from any public monopoly enjoyed by many of China's sluggish state-owned enterprises.

Massive credit, therefore, is due to Tencent and its brand-building team but perhaps excitement, respect and attention should also be reserved for this year's eight new entrants.

These are also dominated by technology and financial services brands, with Alibaba Group (diversified e-commerce company) and Huawei (telecommunications and network equipment provider) in third and 13th places, respectively. Other notable new entrants include insurance provider PICC Property and Casualty Company, 20th; Hong Kong-based corporate conglomerate Chow Tai Fook, 22nd; and e-retail electronics brand JD.com, 25th.

Of these new entrants perhaps Huawei most typifies the new, modern, long-term looking and investment-led Chinese corporate brand. Huawei also broke into the world's most valuable brands for 2014 for the first time, ranked 94th. Huawei's meteoric rise is all the more impressive given strong competition in smartphones in the shape of Apple and Samsung. Huawei is now the third-largest smartphone manufacturer worldwide, close behind these two technology titans.

Huawei is also leading the way for large parts of Chinese industry with its impressive international expansion. Huawei's sales outside China now constitute 65 percent of the worldwide total.

Alibaba has also shown no fear whatsoever toward international expansion with its recent listing on the New York Stock Exchange.

This is the fourth year that Interbrand has looked much further than the top performing Chinese brands and delved deep into China's increasing number of small, privately owned companies with a view to future brand building in China. This year's report, therefore, is much more than a brand valuation snapshot; it also provides considerable discussion on brand development generally inside Chinese companies, now and in the future.

As a result, Interbrand doubled the number of brands included in this year's survey to 100 and added an additional eight categories, leaving a total of 21 categories. It's clear recognition of the emergence of more and more competitive Chinese brands.

But what is most revealing and exciting about this expansion in brands surveyed is their relatively modern, market-led business culture. Not only are they not state-owned they also bear few characteristics of the backward business culture that runs deep inside many of the largest Chinese state-owned enterprises.

Interbrand also draws the conclusion from its findings that Chinese entrepreneurs have been developing market-oriented corporate cultures where brand building dominates, and that they have been doing this for some time and across numerous product and service categories.

European industry should expect this trend to continue, propelled partly by increased competition across the Chinese mainland. Younger, more modern, customer-focused and brand-oriented Chinese companies will soon emerge more and more. There are excellent opportunities for all sorts of Sino-European tie-ups.

Some of the key findings of this year's Chinese Best Brands report are also consistent with my research into the development of Chinese brands. European firms need to be aware of these developments and the opportunities that result with more and more competitive Chinese brands.

Key developments among Chinese brands recently include: increased investment in marketing communication, a more market-driven approach (especially true of the younger Chinese brands born after the start of China's open door policy in 1979) and an increasing acceptance and use of traditional China as a form of emotional brand association, so that well-known rivers, lakes, mountains as well as people are now seen more in brand promotional content.

Crucially, the Best Chinese Brands 2014 highlights modern, market-driven Chinese companies and maintains that their brand building will continue apace. European firms please take note.

Some of these more modern, market-driven Chinese companies to watch include: Tsingtao (beer), Ctrip (travel agency), Sunning (consumer electronics), Yili (food and dairy) and ChangYu (red wine)

Other emerging Chinese brands to look out for are those with increasing sales revenue outside the Chinese mainland. Chinese home appliance producer Midea is a prime example. Little known outside China, it now boasts almost 20 percent of its sales from overseas business. Another modern, market-driven emerging Chinese brand, Gree, which makes air conditioners and home appliances, also produces healthy overseas sales revenue, about 17 percent of total sales revenue. The Bright Food Group, based in Shanghai and owner of the UK breakfast cereal brand Weetabix, says 14 percent of its sales revenue comes from overseas markets.

Finally, the co-branding initiative between two of the companies named above, banking giant ICBC and insurance provider PICC, perhaps signifies most the movement toward branding and brand building that is now taking place in Chinese companies.

The ICBC PICC Car Credit Card is a co-branded and car insurance-themed chip credit card. It's a magnificent example of brand-led rather than product-led management.

European firms should now wake up to the fact that collaboration with Chinese companies may well take a similar, co-branding form and not simply consist of the usual joint venture or alliance where the Chinese partner's brand goes nowhere.

European firms should not see co-branding demands as a threat. Rather, this will build trust and open up opportunities far inside and across the Chinese mainland for the European partner and may also contribute to a more competitive brand offering to the European public.

How many Sino-European co-branding initiatives exist now? None. The race is on, therefore, among European firms to start the Sino-European co-branding ball rolling and establish first-mover advantage.

In all, this year's Best China Brands report provides the most public proof that Chinese companies are now following the modern brand management approach with investment-led and long-term growth strategies at the core of their corporate expansion plans.

The days of the mantra "China and low-cost production" are fast being consigned to the history books and replaced by "China and creative brand building".

Expect more domestic and international Chinese brand building success next year and beyond.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer in marketing at Southampton Solent University's School of Business. The views do not necessarily reflect those of China Daily.

Zhang Chengliang / China Daily

(China Daily European Weekly 11/28/2014 page10)