Right here, right now
Understandably, the West has difficulty grasping the scale and complexity of Asia Pacific’s potential development. China is, after all, not just one country; it consists of more than 30 provinces, with so many languages and dialects that even Mao Tse Tung had to be accompanied by an interpreter when travelling. Incidentally, the population may well be closer to 1.5 billion rather than 1.3 billion – a census will shortly confirm the real number. The Chinese government consistently seems to underestimate its statistics, like those for GDP growth, but, whatever the true figure, it is still equivalent to four or five Americas. Likewise, India’s 1.2 billion plus population covers 27 states.
Of course, only 200-300 million Chinese people can currently afford the goods and services being marketed to them, but even this is already almost equivalent to all of America and is a dynamic situation, one that will change rapidly in the coming years. There are more than 875 million mobile phone subscribers in China. Of those, over 600 million subscribe to one company, China Mobile (China’s top brand, one of the top 10 most valuable world brands and the most valuable brand outside the US) – equivalent to twice the population of the US.
BrandZ™ Top 10 most valuable Chinese brands
|Rank||Category||Brand value US$m|
|1||China Mobile (telecoms operator)||56,074|
|2||Industrial & Commercial Bank of China||38,090|
|3||Bank of China||22,344|
|4||China Construction Bank||21,676|
|5||China Life (insurance provider)||18,320|
|6||Agricultural Bank of China||16,494|
|7||Petrochina (oil & gas)||14,223|
|8||Tencent (internet service portal)||12,199|
|9||Baidu (search engine)||9,715|
|10||Ping An (insurance provider)||8,443|
- Source: Millward Brown Optimor
Furthermore, India, itself equivalent to three to four Americas, seems to have been stimulated into more rapid growth, driven perhaps by neighbourhood envy and the Chinese model of state-directed capitalism – although India bills itself as the world’s fastest-growing democracy. Look at the dogfight for the Indian phone operator Hutchison Essar, which Vodafone won in a market growing now by 15 million subscribers a month, even more than China at eight million a month. There are now 791 million Indian subscribers, with Airtel having 159 million, and Reliance and Vodafone having around 130 million each.
This really is back to the future. In 1820, China and India generated around 49% of worldwide GDP. But by the early 19th century, Meissen and Wedgwood were undermining the high-quality, high-price Chinese porcelain industry with similar quality, but cheaper products. It is the exact reverse today. China and India are heading for the same share of world GDP in 2025 that they had in the 18th century, having bottomed out at 8% in 1973. China’s development has been rapid and will continue, but not without bumps. The government is conscious of overheating, and an imbalance in rates of development between the coast and the hinterland. There has, it is true, been a slowdown in 2008 and 2009, but the 2009 Party Congress set an 8% target for GNP growth in 2010, which was achieved. The 12th Five-Year Plan lowered the target rate of growth to 7%, with a shift from savings to consumption, a welfare safety net to discourage saving and encourage consumption and a charter for services growth – all in all a five-year plan for the development of WPP in China. WPP recently signed a memorandum of understanding with SASSAC – the government investment holding company, with $1.79 trillion in sales – and Peking University to teach branding to state-owned enterprises and to provide a curriculum for a new $5 million university of advertising in Shanghai. These are just two examples of opportunity.
Evidence of China’s arrival on the world stage is everywhere – its confidence at former UK Prime Minister Brown’s G20 summit in 2009, President Obama’s low bows to the Chinese leadership and, most visibly, the Beijing Olympics and Shanghai Expo. Few self-respecting multinational companies bent on expanding into China or national companies seeking to grow inside or outside China missed out on the branding opportunity presented by Beijing 2008. The Chinese Government committed $45 billion of investment around the Games, in contrast to London’s $14 billion for 2012. Beijing was a whopper, but it did not end there. The Municipality of Shanghai invested $3 billion in Expo 2010 and there was the Asian Games, in Guangzhou, also in 2010.
Watch out for increasingly subtle Chinese military and economic influence, too. Take the recent economic contact with Fidel Castro in Cuba to counterbalance Taiwanese tensions. Or Chinese investment in Galileo’s GPS systems, which drew a coruscating response from the Pentagon. Equally, Beijing will not be prepared to rely on America to defend its vital and growing energy supply interests in the Middle East and Russia, as its recent energy deal with Russia showed. It is busily building trade bridges throughout the oil- and energy-producing regions of the world, particularly Latin America and Africa.
It is in Africa that China is changing trade relations, with more than 800,000 Chinese reportedly participating in projects there. Increasingly, Africa is the continent of opportunity, rather than war, disease and poverty. Although recent events have changed the map again, President Muammar Gaddafi’s original volte face did energise North Africa and Egypt, and China’s focus has drawn the attention of Western governments seeking to curry favour, too. We at WPP have invested in Smollan and the Jupiter Drawing Room in South Africa, and Scangroup and TNS in Central and North Africa. In Africa, as well as China, sport plays a symbolic role. The 2010 FIFA World Cup in South Africa was an iconic event for the African continent and one in which our agencies dominated. Stand by for this decade to be the decade of Latin America too, as the FIFA World Cup in 2014 and Summer Olympics in 2016, both in Brazil, will focus increasing attention on the scope for development and growth.
There is another challenger to American dominance – the Muslim world. Already, Muslims number 1.6 billion people or a quarter of the world’s population. By 2020, they will account for 2.1 billion or approximately 30% of the world’s projected population. The recent struggles in Afghanistan and Iraq, continued tension with Iran, and regime changes in North Africa really only continue the 1950s’ Suez conflict, the oil crisis of the 1970s and the invasion of Kuwait in the 1990s.
Westerners have made little attempt to understand the Islamic mind and assume that Muslims share their value systems. This is wrong-headed and short-sighted. Muslims are different and it will be increasingly necessary to make a serious and sincere attempt to understand them – something President Obama’s administration clearly grasps. WPP announced new Muslim marketing initiatives at the Muslim conference in Kuala Lumpur in May 2010.
- Source: IMF
- f: Forecast.
- Prior to events on 11 March 2011.
- Source: GroupM
- Prior to events on 11 March 2011.