What are the qualities we look for in a brand? Successful brands are built on the foundations of performance, reputation, and honesty. A strong mutuality of interest between producers and customers sustains successful brands; such relationships are perhaps the crowning glory of enlightened capitalism.
China displays all the qualities of a brand, but they are unbalanced. For its sheer size we know very little about the country, and what we do know is not always favorable. The recent execution of Zheng Xiaoyu, the former head of the State Food and Drug Administration, after he was convicted of corruption, was widely reported. So was the recall by Mattel, the US toymaker, of more than 18 million products from around the world because they were found to have dangerous levels of lead paint. Other Chinese-made products—children’s jewelry, fruit juices, seafood, toothpaste, blankets, and car tires—have also been recalled for reasons of health and safety.
Perhaps these are symptoms of a country that is struggling to come to terms with the immense and rapid changes that are taking place within its borders. Certainly the extraordinarily harsh sentence passed on Zheng Xiaoyu is an indication that the Chinese government is determined to stamp out corruption, an endemic problem, or at least make an example of high profile corrupt officials. The government is also shutting down companies implicated in the product recalls and has pledged to spend US$ 1 billion to improve product safety. It is particularly concerned about the poor standards of Chinese-produced food and medicines which have caused deaths at home.
China’s development is being paid for by the huge surpluses it generates in trade with the rest of the world. This is why the government has acted to reassure its trade partners that not only are its products reliable but that China also offers a safe haven for investors where corruption is heavily penalized. It is therefore concerned about presenting a positive image, one that is sure to be enhanced by its hosting of the 2008 Olympic Games (colorful stories abound concerning the government’s attempts to clean up Beijing’s taxis—and the habits of their drivers—before the arrival of the Olympics visitors next year).
It is also concerned about improving the very poor air quality of its major cities prior to the opening of next August’s Games. A Tokyo-based colleague, just back from Beijing, reports that “it is scary to think that athletes are going to run major marathons through that soup in the summer heat.” The authorities completed a test last month by taking up to 1.3 million cars off the roads over a four-day period. This produced some improvement but the result was far from satisfactory. In Beijing and Shanghai the authorities have the will and the leverage to achieve improvement. In the provincial industrial centers, my colleague writes, “the chaos of new money, corruption, and indifference seem destined to lead to a major environmental catastrophe.”
China’s poor human rights record, its reputation as the world’s biggest polluter, its willingness to cut corners in manufacturing processes and thus produce tainted and dangerous products—even its apparent contempt for intellectual property—these factors point towards what we in the West might see as a disturbing lack of moral compass.
But what of China’s intentions? It is tempting to quote Churchill’s famous wartime reference to Russia: “I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.” China is similarly opaque.
What seems certain however is that old-fashioned communism is a busted flush and that China is moving towards a form of market economics, opening up parts of its economy to outsiders and encouraging the development of a “non-state sector.” Nor does China need lebensraum (Nazi Germany policy advocating the acquisition of territory to accommodate its population), and so it is very unlikely to adopt an aggressive position towards its neighbors (although Taiwan has always been a target and could even go the way of Hong Kong). But in its dash for growth it may use its huge store of capital to monopolize access to the resources—particularly energy, raw materials, and staple goods it cannot produce itself. Thus a form of economic imperialism may develop which would bring it head-to-head with the world’s largest economy, the US.
This would destabilize the “mutuality of interest” that sustains successful brands. At the moment there is strong interdependence between China and the West. The West has grown used to a ready supply of cheap Chinese products, and the Chinese are modernizing their country with the proceeds. China now has US$ 1.3 trillion of foreign reserves, the most in the world, and the government is currently setting up a $200 billion overseas investment fund. This has already been active, with the Chinese stake in Barclays Bank announced last month, and in the American hedge fund Blackstone earlier this year. Chinese companies have also been buying Western brands, particularly in the automotive sector. The Chinese are determined to internationalize their economy.
China’s growing influence in the world seems so far to be limited to trade and investment. Its motives therefore may be considered, pace Churchill, to be wholly self-serving. But China also has a vital role to play in Asia—and in promoting global security—through its relationship with its erratic and ramshackle neighbor, North Korea. If China can take the lead in bringing North Korea to its senses, guarantee the independence in perpetuity of Taiwan, and avoid an outbreak of economic warfare with the US, it could replace the US as the guardian of freedom and economic development in East Asia. But it has a long way to go.
Just how far is difficult to determine. Remember that strong brands are built on the foundations of performance, reputation, and honesty. China possesses all three in varying degrees, but like its economy, which is volatile, they are unbalanced. China the brand remains a work in progress.