The China Gateway

Event Recap

Cracking America: The challenge for Chinese companies in the US

Written by: Mark Jackson, Deputy Managing Director, Racepoint Global Asia Offices

The 15 months since President Trump’s inauguration have seen some seismic change in geopolitics. The US withdrawal from TPP, a questioning of the purpose and structure of NATO, the imposition of tariffs and the demonization of Mexico are just a few of the more remarkable moments.

With its ‘America First’ agenda, the United States has begun to retrench as a global leader leaving a power vacuum. China has jumped at the chance to rival the United States’ global power base. President Xi’s increasingly bold presence on the world stage – from his groundbreaking speech in Davos to the Belt & Road Initiative – shows just how much China under Xi is interested in becoming a dominant global force.

But whether it’s driven by the Trump presidency or if it’s part of a more long-standing trend, Americans seem to be increasingly wary of China and Chinese companies.

The Committee of 100, an influential group of individuals in China and the United States, has been studying macro-level issues affecting both countries’ engagement with each other since 2005. Its most recent report shows that fewer than half of the U.S. general public (48%) has a favorable impression of China – down from 59% in 2005. 49% of business leaders have a favorable impression of China, down from 62% in 2012.

When it comes to products made in China, China is facing a strong ‘Buy American’ sentiment among U.S. consumers. A recent Boston Consulting Group study covering product categories including baby products, appliances, electronics, and clothing found that 80% of American consumers interviewed would be willing to pay more for goods labeled made in the US.

Beyond the international tension and the perceptions of their most important international market, Chinese companies need to employ a different approach if they are to crack America. Most apply a similar modus operandi to other markets and in most places, it’s worked. But the US is different; consumers expect a different level of engagement and transparency. The #MeToo movement shows how far transparency has become engrained in the psyche of American consumers.

In this environment, how can Chinese companies adapt their communications? Here are three ideas:

1. Companies with a real heart are making huge breakthroughs in brand love which in turn is delivering great business results. Companies should go back to their vision and mission and really look hard at the business and find their emotion, their heart, then put it right at the center of their storytelling. People want to believe in the companies with which they do business. TOMS is a great example of a company which has figured out its heart and put it at the center of its communications. Blake Mycoskie founded the company just 11 years ago. When Bain Capital acquired a 50% stake 2 years ago, the sale valued the company at $625 million.

2. But your heart also needs to be authentic; it can’t just be a CSR campaign masking a company without a heart. In 2015, Seattle-based REI– an outdoor clothing company – announced that it would close all of its stores on both Thanksgiving and Black Friday. It would also close down all online sales and pay its 12,000 employees to take the day off and get outside. In effect, it sacrificed revenue to be authentic. In an outcome it could hardly have predicted, the movie got its own hashtag – #optoutside – gathering more than 1.2 billion social media impressions and 1.4 million people pledging to #optoutside. Last year, the company announced it would make the same move showing that its positioning and branding are more than mere words – they are true to the core of the company.

3. In an era of transparency, firms operating in the US must be prepared to be equally transparent. With its discrimination memo in August 2017, Google faced a backlash of criticism but acknowledged it and dealt with the issue in just a few days. Similarly, Whole Foods faced huge public outcry when the Department of Consumer Affairs found that it had overcharged customers for dozens of pre-packed items. Its co-CEOs Walter Robb and John Mackey acted swiftly and authentically to right the wrong.

Trust, emotion, authenticity, transparency, and agility. Get it wrong and the results can be cataclysmic. Get it right and the opportunities for Chinese firms in the US are huge.

 

Two sessions, three opportunities: The key takeaways from China’s Communist Party meetings

Written by: Toby Yu – Account Director, Racepoint Global, Shanghai

Much of the discussion around the 13th National People’s Congress (NPC) and the 13th National Committee of the Chinese People’s Political Consultative Conference (CPPCC) (often referred to as the ‘Two Sessions’) was centered around the landmark change in the Chinese constitution that will allow President Xi Jinping to stay in office for a third term and perhaps longer.

The two sessions on the 3rd and 5th of March covered significantly more than this relatively minor change, since they are the first party meetings to bring President Xi’s vision for China to life, which he had delivered at last year’s five-yearly National Party Congress: “Thought on Socialism with Chinese Characteristics for a New Era.”

The reforms are wide-ranging and touch on almost all aspects of life in China. Businesses trading in China need to understand the new zeitgeist so they can capitalize on the opportunities they present. Below are three of the most significant changes foreign businesses need to understand.

Stricter Censorship and Surveillance

The change in China’s constitution to allow President Xi to stand for a third term and possibly longer ignited discussion on Chinese social media and drove government censors into overdrive.

Several key terms were suddenly subjected to heavy censorship on Sina Weibo, China’s Twitter-like microblogging platform. Phrases such as “I don’t agree,” “migration,” and “emigration” were all banned to minimize conversation around the constitutional change. But other words and phrases have also been censored – the use of “boss” in describing state-owned enterprises; “China and Hong Kong/Macau” (should be mainland China and Hong Kong/Macau); and even the much heralded “One Belt One Road Strategy” has morphed into “Belt and Road Initiative.”

As brands such as Marriott and Mercedes-Benz found recently, China has become much more aggressive in its censorship of online content even outside its borders. These misdemeanors are tracked by the government and foreign companies are subject to fines, or worse.

Our teams in China are highly knowledgeable about the changing nature of the communications landscape and can help international brands prepare for the unique challenges. We’re well used to adapting global messaging to suit local needs, as well as monitoring all channels to ensure we stay ahead of any potential challenges.

Stronger Political Power amongst Local Technology Companies

Technology entrepreneurs had a very noticeable presence at this year’s meetings, demonstrating the government’s ambition to gain an edge in almost every area of the technology sector.

Richard Liu Qiangdong, founder and chairman of China’s largest e-commerce platforms – JD.com – was nominated to represent the industrial and commerce alliance while Ding Lei, founder and chairman of the country’s second-largest mobile game publisher – NetEase – was selected to represent the news and publishing industry.

For international technology brands, it is important to understand the changing political and influence landscape so they can connect with and build relationships with the key players.

Technology is our largest practice at Racepoint Global. Not only do we help international brands such as Lattice Semiconductor and Applied Materials navigate the challenges in China, we also help Chinese brands such as Huawei and China Mobile International successfully bridge to international markets such as the US and UK.

CSR and Sustainability

In the government report delivered by Premier Li Keqiang during the two meetings, he said China would reduce the population living below the poverty line in rural areas by 10 million. He also said China would increase support for vulnerable groups including the elderly, disabled and seriously ill. These promises will help deliver President Xi’s target outlined in November to eliminate absolute poverty by 2020.

In addition, Li stated that the government was paying particular attention to reducing the nation’s reliance on dirty coal in its goal of cutting persistent smog.

These areas represent opportunities for international brands to showcase their commitment to China. More investment in and focus on Corporate Social Responsibility and sustainability campaigns will not only elevate brand visibility but also win favor and trust from the local community and government.

At Racepoint Global, our communications professionals are highly-experienced in supporting the development and implementation of CSR & sustainability-related initiatives that take into account the nuance of the market, local policy, and cultural norms.

It’s clear there is a significant change starting to happen in China and with all times of change, those companies that understand the nuance, will be the first to spot and seize the opportunities that will inevitably present themselves.