Zhongshan on the Move
By Michael Alan Hamlin
September 23, 2002

Taiwan and China don't agree, officially, on much. But when it comes to naming the father of modern China, there's long-standing unanimity. Dr. Sun Yat-Sen is revered on both sides of the straits that separate China from its "renegade" province for restoring the nation's dignity as it emerged from colonial and dynastic exploitation. Unfortunately, local warlords, the invading Japanese, and Mao Tse Tung and his cultural upheavals hobbled China for close to a century following Sun's overthrow of the corrupt Manchu Dynasty.

Today, however, Sun's vision for China seems pretty real. The country is mostly united. Foreign investment is somewhere around US$45 Billion annually. More than four million people a month subscribe to mobile telephone service. And gross domestic product has consistently grown between seven and eight percent a month for years. Its banks and state-owned enterprises may be bankrupt, but the private sector doesn't seem to notice.

Or at least that was my impression last week, during a short visit to one of China's bustling southern cities, Zhongshan in Guangzhou, which happens to be the birthplace of Sun Yat-Sen. Zhongshan is a an educational and manufacturing center, and is booming on the strength of a Hong Kong-led real estate boom, demand for products churned out by the city's myriad contract manufacturers, what appears to be a mini-IT boom akin to that of South Korea's, and a healthy tourism sector.
I was in Zhongshan to speak at a branding seminar organized by the Yangcheng Evening News Group, a large mostly Guangzhou daily with a circulation of a whopping two million.

Corporate branding is a hot topic in China, and for good reasons. One reason is government's recent introduction of new regulations meant to safeguard intellectual property, including corporate logos and patents. These new regulations make it difficult to leverage well-known foreign and local brands alike by companies selling knockoff products with minor logo modifications.

Aside from the increasingly tough regulatory environment for local companies, they are facing the challenge of liberalization and increased competition. At the same time, they are seeing their traditional cost advantage wither, and as a result much of the demand for contract manufacturing shift to competitors in Indochina. As a result of these trends, Zhongshan-based enterprises are looking for new ways to sustain and grow their companies.

One of those ways is developing their own corporate brands. As it happens, the Yangcheng Evening News organizes business and management seminars twice a month in various venues in Guangzhou. At the request of the Zhongshan Consumer Protection Association, Yangcheng organized last week's branding seminar in Zhongshan. Speakers included a marketing and branding expert, an economist, and two government officials responsible for implementing the new regulations meant to protect corporate logos, patents, and other intellectual property.

One thing that became quickly apparent in the discussion was an alarming confusion over the concept of corporate brands, logos, and patents. Not as used to "no-holds-barred" competition as most of the rest of Southeast and North Asia, participants - and some of the speakers - had real difficulty differentiating a logo from a corporate brand. Missing were all the attributes of a corporate brand which serve as components of a value proposition.

Another source of confusion was the practical cost of developing a brand. Many of the participants looked upon the proposition of investing in brand building as an expensive exercise that small manufacturing and service companies couldn't afford. They seemed to feel that government, by forcing them to respect the brands of their competitors, was limiting opportunity and impinging on competitiveness. And they were worried.

But the message was clear. "You must obey the law," one government speaker said matter-of-factly, and the silence that followed his statement was profound. And it seemed to convince participants that if they were going to continue to be successful, they were going to have to think of new ways to do it. Times change, and so do economies, and the companies that drive their growth.

That's a question I'm often asked about in the context of globalization and social safety nets. Who's going to help people, companies, and economies transition as the world changes? And, isn't it possible to hold back change, at least for a while? My short answers to those questions aren't usually liked very much. In the end, people have to help themselves. Government's obligation is to provide a solid education that will prepare people for a world that is inexorably changing.

While it is possible to hold back progress, the result is generally what we have in countries like North Korea, and the Philippines. While these two countries are very different, both have traditionally been consistently insular with hugely negative results. In North Korea's case, the purpose is to protect a regime. In the Philippines' case, it's to protect a thin upper class.

Of course, the arguments that are used to hold back progress have to do with the poor and their inability to leverage alternative sources of income. But no one should think, for instance, that Filipinos pay twice what they should for basic commodities like sugar so that poor people can keep their jobs. They are forced to pay those prices so that large, inefficient millers and their insane profits are protected. The poor are just a convenient excuse.

In Zhongshan, not many are looking backward, for whatever reason. They are so prepared for competition and being competitive that at least one state university will switch to English for all classroom instruction next year. And while the citizens of this city are nervous about the future, they are also excited. Because they know that if they manage change, instead of resist it, the future is going to be a lot of fun.

And certainly more fun than the alternative.

(Michael Alan Hamlin is the managing director of consultancy TeamAsia and the author of three books on Asian economies and companies. His latest book is Marketing Asian Places, of which he is a co-author (Wiley, 2001). He can be reached at mahamlin@teamasia.com.).

Copyright © 2002 Michael Alan Hamlin. All Rights Reserved.

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