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Leadership: “China Free” Label Could Undermine China’s Growth

Despite its unquestioned emergence as a global economic power, China does not have a single global brand. Can you name one? In survey after survey, American consumers can’t name one either. By virtue of its acquisition of IBM’s PC business, Lenovo is probably the closest China comes to a global brand – but it certainly isn’t home-grown. In its January, 2006 cover story, Fast Company suggested that fashion house Shanghai Tang could become China’s first global brand – but that has yet to materialize. In reality, the most-recognized Chinese brand is….Made in China.

Despite its unquestioned emergence as a global economic power, China does not have a single global brand. Can you name one? In survey after survey, American consumers can’t name one either. By virtue of its acquisition of IBM’s PC business, Lenovo is probably the closest China comes to a global brand – but it certainly isn’t home-grown. In its January, 2006 cover story, Fast Company suggested that fashion house Shanghai Tang could become China’s first global brand – but that has yet to materialize.

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In reality, the most-recognized Chinese brand is….Made in China.

A successful brand conveys favorable attributes about the company, products and services it represents – and the market responds by increasing the revenue, profits, and stock value of the world’s leading brands. What attributes are represented by “Made in China?” Aside from low cost, the “Made in China” brand projects nothing positive – and the shocking revelations of tainted toothpaste, pet food, and Thomas the Tank Engine toys coming from China has only tarnished the “Made in China” brand further.

And the market has responded. Reuters recently reported on the emergence of the “China-Free” label – implying that the source of tainted ingredients has been eliminated from the supply chain.

This counter-brand poses enormous risk for China and its sizzling growth. China has allowed its “Made in” brand to become synonymous with “disposable,” and no corporate brand has emerged to illustrate the improving quality of Chinese-made goods. In July of 2005, I warned in several Chinese business publications that poor communications practices are certain to doom Chinese growth and M&A activity in the US. Chinese companies Haier and CNOOC both suffered spectacular failures in their efforts to acquire Maytag and Unocal, respectively. Since then, things have gotten worse for China’s national brand. In certain political circles, the word “China” symbolizes environmental and labor practices that are anathema to many Western consumers.

In order to sustain its pace of growth – and maintain the social stability that ensures its power – Beijing has not done enough to bring its businesses and products up to the level demanded by Western markets. China allowed “Made in China” to say “cheap and disposable” – and its growth engine continued to chug ahead. If “China-Free” tells US consumers that a product is free of tainted ingredients, how quickly will it come to signify respect for the environment or adherence to international labor protocols?

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Unless China marshals its forces to protect Western consumers – as well its own citizens making products for export – “Made in China” will continue to imbue its products with a host of negatives and risk. Beijing should heed this wakeup call. “China-Free” could stop China’s growth engine dead in its made-in-China tracks.

Josef Blumenfeld • Tradewind Strategies • Boston, MA • jblumenfeld@tradewindstrategies.comwww.tradewindstrategies.com

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