Foreign brands are having an especially traumatic time in China
these days, but competitive pressures ahead of the mainland's WTO entry
have provided something of a boost for multinational advertising
agencies.
In the last few months alone, China's leading corporations - from China
Telecom to TCL - have taken their branding accounts to international
agencies.
Media, though, remains tightly controlled by local brokers. This is
partly the result of long-standing relationships, but more to do with
the way local firms have divided budgets across their nationwide
networks.
But there are signs that even this is starting to loosen up, especially
since media owners have moved to a single rate card, doing away with the
three-tier cards they previously had for foreign, joint-venture and
local advertisers.
MindShare claims its local business component is taking off, according
to newly-promoted China chief executive Chris Walton. "We're still
multinational-biased, but we're starting to see a recognition from local
clients that knowing the cost of everything and the value of nothing is
actually not the best long-term way to build their brands."
The former regional business director of MindShare landed the top post
after Leo Wong - encouraged by China's double-digit adspend growth rates
- left to set up a media buying company in Shanghai.
Last year, total monitored adspend shot up by a whopping 57 per
cent.
Even economic uncertainties in the US this year don't appear to have
dampened the growth momentum. Adspend in the first quarter is up 22 per
cent over the same period in 2000. At the time of his departure, Wong
noted: "There is plenty of room for people like us."
Indeed, there is also plenty of room for multinationals. Both MindShare
and Zenith are pouring in more resources to capitalise on the expected
spending spike. As Walton takes over the helm, overseeing offices in
Beijing, Shanghai and Guangzhou, Zenith has also created a similar
position . It has promoted its managing director Lee Li to oversee its
four China offices, including Taipei, with a brief to open offices in
second tier cities and boost share from the current 12 per cent to 20
per cent before 2005.
Equally bullish, Walton has forecast billings of Rmb 2.5 billion (about
USdollars 302 million) to three billion this year. Economic and
political jitters across the ocean, involving China's leading trade
partner, have not deterred Walton. Instead, he is buoyed by encouraging
signs like the eight per cent growth in China's first quarter GDP
performance. "It ain't bad at all in times of uncertainty."
To a large extent, China's low- tech economy has spared it much of the
pain afflicting its high-tech regional rivals like Taiwan, Malaysia and
Singapore, where the technology slowdown is cutting deeper. Beyond
healthy adspend figures, government programmes should go some way to
keeping the economy buoyant amid troubles emanating from the US.
Looming hiccups on the export front have led the Chinese government to
bank on domestic demand to drive growth. Far-reaching initiatives like
the ambitious "Go West" programme to develop infrastructure and industry
in China's poorer western regions are expected to go a long way in
spreading domestic demand beyond the big three cities of Beijing,
Shanghai and Guangzhou.
Admittedly, such programmes are years from fruition, but a spurt in
investment should have a multiplier effect on the economy. "A lot of
China growth will be domestically generated. The government knows that
the export markets are potentially weaker and there is a need to invest
significantly in the infrastructure," says Walton.
The other more pressing factor driving the "Go West" push is the need to
curb rural migration to the cities because of its potentially
devastating social consequences.
Adds Walton: "If people don't start to realise the benefits en masse in
China wherever they come from, they will start heading to the big cities
and this could lead to social unrest.
"For these reasons, there is a recognition in the government that
they've got to try and stimulate domestic demand."
Walton's promotion also marks a return to Shanghai - his first overseas
posting when he arrived from the UK in 1996 to work as media manager at
J. Walter Thompson. MindShare was set up a year into his JWT stint,
prompting a move to the media agency, which was then followed by a
transfer to Hong Kong in 1998.
But it will be a different China that Walton expects to return to.
MindShare has offices in the three big cities and a team of 200
employees.
"When I first arrived in Shanghai, there weren't even people meter
ratings, just diary ratings," he recounts. "China is developing so
quickly that we can now offer a service that is light years ahead of
what the situation was back in '96."
