Speaking to the Financial Times last year, a senior executive from multinational appliance maker Haier was frank in explaining how the Chinese company has come to be a dominant global player with products in 30 percent of U.S. homes: quality, value, customer service and the coincidence of a German-sounding name.
Chinese companies with international exposure or ambition face serious challenges in countering the perception that “Made in China” is shorthand for a menu of corner-cutting business practices. China’s low-cost manufacturing model enabled the rise of a middle class but is now, ironically, a reputational weight on innovative Chinese enterprises up the value chain as they seek to take higher quality products and services abroad.
The 2013 Emerging Markets Supplement to the Edelman Trust Barometer offers sobering data to Chinese boardrooms:
- A significant gap exists in overall global trust levels between companies headquartered in developed markets (76 percent) and companies based in China (42 percent);
- BRIC technology companies fared best among developed market respondents (54 percent) with lowest scores for food and beverage (39 percent), media (34 percent), financial services (34 percent) and pharmaceutical companies (31 percent);
- Only one-third of respondents in developed markets trust Chinese companies in domestic investment situations including the process of buying a company (34 percent), a minority share (36 percent), or a major investment in a new plant or office (38 percent);
- When asked whether they trust global companies headquartered in China to do what is right, there was a striking 59 point gap between Chinese respondents (83 percent) and those in developed markets (24 percent); in Germany trust in Chinese companies bottoms out as 19 percent;
- There is a negative view towards state control or interference in Chinese corporate governance (Germany: 70 percent, UK: 47 percent, U.S.: 42 percent), a perception also supported by 51 percent of Chinese respondents.
- Consumer-facing Chinese brands such as Lenovo (disclosure: Edelman client) and Air China are making progress on global name recognition but only 3 percent of developed market respondents were able to name a Chinese CEO.
The diagnosis is uncomfortable but the report also offers a set of actionable drivers that fall firmly within the mandate of Chinese business leaders – key trust building attributes where performance is lagging behind domestic and international public expectation: responsible action in a crisis, transparency, protection of consumer data and IP, respect for employee rights and a responsible supply chain. To succeed in global markets Chinese companies must take verifiable steps to improve operational compliance beyond bare legal minimums and engage openly and frequently with customers, employees, investors, NGOs and other stakeholders.
Reputations require a long term investment but can be undone in minutes by unhappy members of the public with a smartphone and a passionate viewpoint. Proactive, regular stakeholder engagement that offers proof of Chinese company performance will drive the long-term process of building corporate trust, provide a foundation for a stronger national brand and ultimately secure growth opportunities for Chinese companies abroad.
Paul Flynn is associate director, Technology in Beijing.