ANALYSIS: Newsmaker - MindShare bullish on China adspend spike. Chris Walton sees plenty of China opportunities ahead.

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."

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