Was reading China Law Blog's treatment of Chinese branding and trademarks
here where Dan Harris takes issue with a Newsweek
article, which states in part:

The simplest explanation for China's failure to build global brands is cutthroat domestic competition. In most product categories, hundreds or thousands of firms compete for domestic market share, leaving profit margins razor thin. . . . And because foreign brands have taken much of the market's high end, most companies are forced to compete on cost, leaving little room for investment in R&D or marketing. . . . Finally, the recent string of product recalls—including poisonous pet food and faulty tires—has left consumers wary of made-in-China goods.

Of course, I would take issue with this article as Dan does. His thoughts, and mine, after the jump.

First off, China's intellectual property protection for most companies is just not that bad. Yes it is horrible for companies requiring copyright protection, like software companies that sell their product on CDs and movie companies . . . . But, China's trademark protections are actually pretty good and there are a whole slew of foreign consumer and industrial companies making money head over fist in China . . . . China's IP protection may explain the lack of international brands in some product categories, but it does not even begin to explain the lack of Chinese brand power across the board.

The same is true of the alleged cutthroat competition. Yes, China has cutthroat competition (what country doesn't?) and yes price is central to the Chinese consumer. But many foreign and domestic brands are thriving.

My explanation is more elemental. Most Chinese companies just do not value brands as highly as Western companies. At least not yet. For the most part, they do not understand the value in spending massive amounts of money to create positive brand name recognition in places like the United States.

I would agree with most of his statements here. TM protection isn't all that bad, and to me, what comes to mind is Starbucks being able to enforce its trademark. Companies do okay here with trademarks. Sure, there will always be knock-offs and stuff, but every developing nation has to deal with it. Even Korea back in the days had a gray market that thrived because people tried to sell "export quality" and pirated stuff in country to ignorant tourists. But I hardly think that's the case. Also, if this is about global brands, then Chinese companies are free to register their trademarks (and service marks for that matter) in the U.S. as well. (heck, the EU even has 1 form application that covers twenty some countries in one fell swoop) No, I don't think the issue is IP.

And I don't think Newsweek got it right about saying foreign brands have taken the high end. I think that's true, but at the same time, Chinese manufacturing/sourcing has relied on the fact that it would do the low margin production work for those high end brands. And many people haven't broken away from the sourcing mentality just yet. If and when they do, that will be downright scary. Imagine thousands of Chinese factory owners getting the bright idea that they can do better by trying to become the next Dell Computer or Mattel, etc., rather than just sourcing for large MNCs. It can happen. It'll take time (and frankly, culture/society is a big part of it), but give some time and watch what happens.

I also don't think its an issue of consumers being wary of Chinese safety issues. While that exists, how many people are actually affected by this? Not many. Like it or not, Made in China is here to stay. And people know that. I really don't think its that big of a deal. (except for when the rather annoying media outlets keep saying things like "
Chinese drywall" when plenty of the stuff made in China is just fine) Unless consumers can afford to be wary (most can't, especially in this economy), its just rhetoric and fire drills.

I like Dan's last point a lot. Case in point: Lenovo. Who in their right mind would discontinue use of a global trademark license for what was considered the premier business/corporate laptop brand? But somehow, Lenovo opted to move away from IBM Thinkpad to Lenovo Thinkpad early. This got enough coverage, so I won't beat a dead horse, but I think this is dead on. No one values branding, marketing, and trademarking enough there… yet. And again, it'll take time. But it's only a matter of time before some companies figure it out. It's funny because trademarking is one of the simplest things and yet, companies don't think about it because of the "expense" which isn't much of an expense if you do the math. Seriously. It's just not worth it… yet. But they'll get it sooner or later I think. At least, I hope they do–blogging about their economy won't be fun if they don't get it sooner or later.