Toxic Roots: The Challenge of China’s Tech Expansion


Recently there have been a number of Chinese technology companies that have enjoyed moderate successes abroad. Just last week we featured UCWeb’s mobile browser, which has surpassed 100 million downloads globally [1]. Similarly, Tencent’s chat application Weixin, which has been promoted in foreign markets as WeChat, also looks to be doing well. It was recently featured in a New York Times piece, overviewing its global aspirations.

But when it comes to Chinese tech companies – or indeed Chinese brands in general – excelling on the global stage, there are really not many other success stories to look at. Interbrand’s 2012 ranking of the world’s most popular brands does not have a single company representing China, while neighboring Japan and Korea have seven and three respectively. Lenovo might be the most prominent, as the company is poised to become the world’s leading PC maker this year, if it hasn’t already.

Huawei at CEATEC Japan

Huawei at CEATEC Japan

Part of the challenge for Chinese companies abroad is overcoming the global stigma that comes with originating from China – which is real, whether it’s justified or not. Bill Bishop has an excellent overview of the importance of ‘soft power’ in China’s tech space, something that the country is sorely lacking at present. The controversy surrounding Huawei, ZTE, and their suspected ties to the Chinese military is – whether those ties are real or not – damaging to their global business, not to mention damaging to brand China as a whole.

Similarly in the internet space, China’s leading search engine Baidu (NASDAQ:BIDU) has encountered problems in its own expansion plans. After its initial efforts in Japan proved futile, an attempt to expand to Vietnam earlier this summer was impeded by the political turmoil surrounding the disputed Paracel islands, resulting in many protestations from Vietnamese netizens.

Since I currently reside in Japan after a few years in China, I find it interesting to compare the challenges of China with those faced by Japanese companies in their expansion decades ago [2]. The parallels between the challenge posed to American now by China, and by Japan years ago, have been pointed out before. Of course, Japan didn’t have to expand under the spookiness of communism, so perhaps the comparison is not quite fair. But currently, even with all the challenges now facing Japanese electronics manufacturers, the country as a whole still possesses more than enough soft power in the eyes of the world. And Japan continues to pump out cultural and even digital exports that are embraced on a global stage [3]. My colleague Charlie recently posited that, like Japan did, China might indeed be better served by more hit games than by the Confucius Institute.

When Softbank stepped up to buy 70 percent of Sprint last month, it made more than a few people wonder what might have happened had the acquirer been a Chinese company. Thinking back to the blocked Huawei acquisition of 3Com, it’s likely that such an effort would have been equally futile.

What is perhaps most interesting about cases like UCWeb and WeChat, and even Lenovo to a certain extent, is that their brand names are not visibly Chinese companies to the average consumer unless you are reasonably familiar with the technology industry. While I’m sure Tencent would never confirm such a thing, I believe its WeChat branding is a conscious effort to leave the baggage of made-in-China behind. Its social games studio in the US is similarly low-key, flying under the moniker of Icebreak Games.

It’s also important to note, as Duncan Clark pointed out in the afore-mentioned New York Times piece, that app stores really do level the playing field when it comes to apps like WeChat or UCWeb’s mobile browser. But for companies in other industries like appliance maker Haier, keeping Chinese roots buried (the Haier America website has no overt mention of China) appears to be an unspoken strategy.

But what about other Chinese tech companies with aspirations abroad? Can a company like Xiaomi, for example, successfully make it in an overseas market without a stealth re-branding that obscures its Chinese origin? I’m not certain. Of course there is no rule that says companies need to fly their nation’s flag abroad, but given that many Chinese companies are fond of literally flying the flag at home, it’s interesting to observe the stance they take elsewhere. As it stands right now, for Chinese companies looking to market their products overseas, the current perceived toxicity [4] associated with the made-in-China brand is something very real that must be considered as a part of expansion plans – at least for now.

  1. Many of these users are in its home market of China, but it’s success in India in particular is encouraging.  ↩

  2. Not that I was around at the time…  ↩

  3. Hatsune Miku for example, which is now an internet/cultural icon, or more recently even the success of certain mobile games like Cygames’ Rage of Bahamut. We’ve written a lots more about Japanese internet companies expanding abroad.  ↩

  4. I think this is a case where even if the perception is unjustified, that the effects are very real. It’s also interesting to note that even in China, many consumers prefer the made-in-the-USA brand as well, as much as 60 percent according to the Boston Consulting Group.  ↩

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