Foreign brands encounter a new form of protectionism

The Economist: Doing business in China

The rights of 44% of Chinese consumers, says the official Consumers’ Association, have been “seriously violated” in the past year. It has recommended a ten-point action plan to tackle the problem. The uninitiated would be forgiven for thinking that its campaign was aimed at local firms, which are notorious for churning out shoddy or dangerous goods. But much of the venom in the press, at any rate, is directed at big multinationals.

Read the whole thing. It’s very interesting and to my mind serves as an excellent example of the selective reporting one finds increasingly in China, as well as the selective criticism there. We all know domestic firms get exposed from time-to-time, but generally only when people die. On the other hand non-Chinese companies are put through a microscope. These are the sort of hypocritical comments I come across from too many Chinese (never at the same time, of course):

Foreign companies rip off workers, but domestic ones are fuelling the economy.
Foreign companies make imperfect goods, but domestic ones provide cheap things for people on a low budget.
Foreign companies are neo-colonialist exploiters, but domestic ones are unfairly attacked by the evil Westerners because they cannot compete and they hate China.

Here’s the summary at the end.

Makers of designer goods, of course, are no more infallible than other firms, but the companies concerned cannot help wondering whether they are victims of a new form of protectionism—bad publicity.

It’s either that or some sort of commerical xenophobia spread by the populist media. Either way it isn’t good.

The Discussion: 5 Comments

Exactly. And this is why foreign companies cannot act like Chinese companies. Foreign companies must operate fully legally and on things like the environment, they must operate at an even higher standard than the laws prescribe. Foreign companies are far more vulnerable to bad PR than domestic companies and they must be cognizant of this. If they do things the “Chinese way,” they will get slaughtered.

March 25, 2007 @ 12:53 am | Comment

It has to do with the higher expectation from the reputable international brands. Consumsers generally pay a premium for these brands. Plus, from media’ perspective, catching an MNC in a compromising position is certainly very newsworthy. And genuinely disgruntled local consumers might also think that these MNCs have deeper pocket, and more likely respond to their complaints as they’ve been operating in far more stringent environments.

I suspect that local competitors are behind some of these media coverage and government agency invovlement pretty much like the Shanghai Bar filed complaint against foreign law firms for practicing Chinese law. I’m not convinced that this is government-santioned prectionism through bad publicity or “commercial xenophobia.” Smart international firms on solid footing may well seize opportunities and turn any smear campaign into a positive one.

Ina larger context, economy in China has reached to a point where they’re no longer super keen on attracting FDI in labor intensive, low tech sectors.
I bet you’ll see in lesser frequency that either the media or regulators have qualms with a high-tech firm such as computer chips maker.

March 25, 2007 @ 5:16 am | Comment

Foreign brands have an unspoken, but very noticeable premium in good-will. It’s taken for granted by most Chinese that “foreign” products are higher quality than “domestic” products.

I personally think that’s a bunch of nonsense. There are plenty of great domestic Chinese products, and there are plenty of inferior foreign products… (not to mention much of the latter is now made in China as well).

Bottom line, Raj, the phenomenon that you are describing is just the first step of a necessary equilibrium-finding process. Soon, Chinese consumers will realize that they’re expecting too much from foreign brands.

March 25, 2007 @ 9:17 am | Comment

Naa, CCT, Raj is not speaking about the sometimes absurd adoration of many things foreign, especially american, in China.
He is speaking about the double standards, which the sometimes over boarding Chinese Nationalism is creating. Where legitimate criticism of the environmental or social standards of foreign owned firms is not also applied to domestic brands where the same problems occur.

March 25, 2007 @ 5:50 pm | Comment

Thanks for clarifying my position for me, Shulan.

No one is expecting cheap Chinese goods to last for 10 years, but it’s ridiculous for so much focus to placed on what are usually small issues concerning foreign companies, when domestic ones seem to get away with much more.

March 26, 2007 @ 2:39 am | Comment

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