Where do Chinese brands go from here?

COVID-19 has caused China’s global reputation to take a hit, leading the government to spend billions of dollars in a PR campaign to ‘repair’ its image. Is there a chance this will cause a global rebellion against Chinese brands?

Last month, China’s handling of the coronavirus played a part in UK PM Boris Johnson threatening to limit the role of Huawei in its development of 5G in the UK. But Lenovo and Xiaomi have, in fact, made gains during this period, and the latter has surpassed Huawei to become the third largest smartphone vendor in the world. Based on earnings, Alibaba and Tencent have also been largely unaffected save for an expected dip in media advertising. TikTok too has continued its upward trajectory.  

State-owned news portal China Daily has claimed that Chinese brands are performing well overseas, owing to China’s international ‘facemask diplomacy’ or its efforts to offer aid and support to markets still heavily stricken by the pandemic. And domestically, some Chinese brands have shown to excel both during and post-outbreak by way of pivoting to digital agility and revised influencer marketing.

We hear from four experts about the global perception of Chinese brands, and what can be done to avoid a precarious future.

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Joy Ng, business director, Asia, AnalogFolk

‘Made in China’ has always been synonymous with lower prices, making Chinese brands an attractive option for consumers. Brands like Vivo and Xiaomi have shown the power of innovation and quality at a lower price point, with both brands having a significant impact on the global market. However, after the outbreak of COVID-19, any association with China can put brands at a disadvantage.

Lack of trust is the main factor, particularly with the Chinese government being blamed for its lack of transparency and timely communication as the pandemic unfolded. This same perception is now being imposed on Chinese brands, especially given the Chinese government’s historic involvement in private enterprises.

Xenophobia towards Chinese people, and subsequently Chinese brands, is also an unfortunate consequence of the pandemic. We are now seeing conspiracy theorists like David Icke linking Huawei’s 5G technology with the coronavirus spread, and frighteningly, people are willing to believe it.

Chinese brands may find themselves looking for ways to downplay their association with China when looking to expand into international markets. Brands like TikTok and DJI, which have a more ‘Western’ image and appeal, have seen little impact from the virus versus those with a strong Chinese heritage. 

It’s also vital to be proactive and transparent, with research showing that brands’ management of communications during the pandemic will significantly impact consumer purchase decisions going forward. 

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David Wolf, global corporate affairs and advisory, Allison+Partners

I would separate Huawei from the fate of other Chinese brands because for every Huawei out there there's a Xiaomi or Vivo who could venture overseas and do it with far greater ease. So, no, I don't think there is an abiding suspicion of Chinese brands generally.

But I would say Huawei’s great challenge right now is that people see the company as China's effort to attempt to control a large swathe of technology. So you're not looking at a company that's just going out and selling kits; you're looking at something far greater with much more baggage.

Lenovo, I think, is a very well-perceived Chinese brand globally, and I don't think that COVID-19 is going to change that. There are also real opportunities for companies like Fosun particularly with these investments in medical equipment and the like. I think there are tremendous opportunities still for Chinese brands. But I just think that China as its manifest in Huawei is going to face some challenges and that’s not going to go away anytime soon.

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Melinda Po, managing director of Edelman Shanghai & chief growth officer of Edelman China

COVID-19 has dented trust in Chinese brands, and while it’s too soon to measure the impact, we’ve seen leading Chinese brands adopting a mix of strategies to address this issue. Several brands have adapted their digital transformation strategies and localised their marketing approach in order to maintain always-on sales channels.

Meanwhile, consumer electronics brands have shifted production to be in-country in order to stabilize supply and employment. And, there have been examples of brands offering support for local government policies to help boost business recovery.

We know from our Trust Barometer data that nearly nine in 10 respondents want brands to shift to producing new products that help people meet the challenges of life during a pandemic. While we’ve seen the likes of Western brands like LVMH shift production to make hand sanitiser, there are similar examples in China of manufacturers—including well-known electric car maker BYD—rising to the challenge by shifting their operations to make personal protective equipment.

With so much uncertainty on the horizon for consumer brands, Chinese brands will need to adapt to the daily challenges and demands placed on them. In response, they will need to demonstrate swift decision-making and leadership when it’s called for.

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Nic Camacho, client partner, AKQA China

The reality is China is one of the few markets in the world that is actively operating in a post-quarantine world—with business, culture, and social livelihood getting back to a somewhat pre-virus paradigm (very much aware the world will never quite be the same,  but the sentiment is that ultimately life goes on).

How Chinese brands fare overseas is an ever-evolving dynamic. While a short-sighted few may view anything coming out of China as tainted in some way, some will base investments not by where goods come from, but by the inherent value and quality of those goods. Whether a foreign or Chinese brand, the focus should be on understanding how consumer mindsets and behaviors are rapidly evolving as the landscape shifts, and finding nuanced opportunities to continue to serve those needs in distinct ways. Getting distracted by anything else will see brands get left behind.

Meanwhile, foreign brands with a strong presence in China have and will continue to experience challenges as their global strategies and travel policies evolve. That said, those very same global brands are quite aware that even during this period, Chinese consumers continue to be highly engaged with consumption in some areas accelerating as opposed to slowing down.