Overview: 23% value rise sets new record
19th Congress and Chinese Dream present opportunities for brands
The BrandZ™ Top 100 Most Valuable Chinese Brands 2018 grew 23 percent in value, to $683.9 billion, a substantial rise over the 6 percent growth a year ago, and the greatest one-year increase since publication of the first China Top 100 ranking in 2014.
During that five-year period, market-driven brands produced all the value growth in the BrandZ™ Top 100, rising 271 percent, while state owned brands (SOEs) only slightly increased in value. (Please see Five-Year Finding)
Fifteen categories increased in value in the 2018 BrandZ™ China Top 100, compared with 12 categories a year ago, and the rates of value growth were greater. Conversely, fewer categories declined in value and the declines were less severe. In addition:
- The BrandZ™ China Top 100 Portfolio increased 179.1 percent since July 2010, almost three times the rate of the MSCI China Index.
- A 25 percent increase lifted the value of Tencent to $132.2 billion, making the internet portal China’s most valuable brand, by far, for the fourth consecutive year.
- Education led category value growth, rising 68 percent on top of a 46 percent rise a year ago, reflecting the commitment of Chinese to a better life for themselves and their children.
With the addition of the logistics category, the China Top 100 report now studies 21 categories. For some categories, growth accelerated toward the end of the year, on a sustained spike in consumer confidence and stronger-than-expected GDP growth of 6.9 percent, according to the World Bank.
Sales of fast moving consumer goods (FMCG) rose 3.6 percent for the third quarter of 2017, signaling the start of a recovery, according to Kantar Worldpanel. Media spending, sluggish during the first half of 2017, picked up at the end of the year, and GroupM expects the pace to continue.
The year-end lift corresponded with the convening of the 19th Party Congress and the articulation of an agenda to rejuvenate China and achieve the Chinese Dream with sustained economic growth, more evenly distributed wealth, and elevated global stature.
Brands embrace innovation
Innovations by Chinese brands contributed to reaching these goals. In the BrandZ™ Top 100 Most Valuable Global Brands, Chinese brands score as high as European brands in the BrandZ™ Innovation metric, and only lag the US. In the BrandZ™ China Top 100, half the Innovation Top 10 come from technology or retail, specifically e-commerce.
The technology and retail leaders—Tencent, Alibaba, and Baidu (BAT)—continued to expand their ecosystems, disrupting categories while enabling consumers to navigate more of their lives on their mobile devices without switching platforms. The BAT brands recently entered the insurance category, for example.
In a development that Alibaba’s Jack Ma calls New Retail, Tencent, JD.com, along with Alibaba and other online brands, acquired or collaborated with major brick and mortar retailers. These affiliations provide broader insight into consumer behavior, online and offline, and they enable the retail brands to respond more effectively and efficiently by integrating data and logistics.
Although this kind of integration is happening in other parts of the world, it is most advanced in China where 751 million people, more than twice the population of the US, use the internet. Because of the openness of Chinese consumers to try new things, and the innovations of Chinese brands, China leads the world in the evolution toward a cashless society.
Innovation crosses many categories. Innovative Chinese brands have invested substantially in the development of electric cars, for example. And Chinese government incentives promote this innovative technology as a way to abate air pollution, a demonstration of China’s soft power leadership on an important global issue—climate change.
But the cars category had not been expected to lead the overseas growth of Chinese brands. Until now, the brands with the highest proportion of revenue gained from overseas came from strategic State Owned Enterprises (SOEs)—oil and gas or airlines brands—and the technology and appliance brands, many of which began as original equipment manufacturers (OEMs), making products for Western companies to brand and sell.
Car brands Geely and Great Wall plans to introduce cars in Europe and North America, respectively, over the next few years, however, and the electric vehicle maker BYD already supplies electric buses to many countries and is developing public transportation, including buses and monorails, in China and abroad. Tencent invested in Tesla (and Snap) because, for some Chinese brands, acquisition or investment has provided access to overseas markets, and technology.
The technology brands Lenovo and Huawei are among BrandZ™ Top 100 leaders in the proportion of revenue derived overseas. With its Mate 10, Huawei successfully entered a new positioning territory for a Chinese brand—premium. Huawei encountered problems expanding in the US, however, when AT&T declined to be its telecom provider partner.
This development illustrates the influence of geopolitics on Chinese brand international expansion. US security concerns also slowed the American market expansion of DJI, a pioneer drone brand. DJI is one of the many innovative Chinese brands—in robotics and artificial intelligence, for example—that do not yet qualify for BrandZ™ Top 100 eligibility because of size or not being publicly traded.
Beyond Belt and Road
Because of physical proximity and consumer expectations for quality at an affordable price, neighboring Asian countries have been the logical starting points for many Chinese brands developing overseas business. But, as the plans of Geely and Great Wall indicate, Chinese brands in more categories are expanding overseas, venturing further in the geographic regions they enter and value propositions they offer.
The overseas awareness of Chinese brands is increasing, in part because brands benefit from the publicity surrounding Belt and Road, the Chinese government’s initiative to restore the global trading stature China enjoyed during the Silk Road period, which began over 2,000 years ago, during the Han Dynasty.
The gap in the number of online searches for Chinese brands, compared with brands from other major industrialized countries, declined 29 percent between 2013 and 2017, according to BrandZ™ research conducted with Google. (For full details, please visit The BrandZ™ Top 50 Chinese Global Brand Builders 2018)
Overseas acceptance of Chinese brands is also increasing, although it varies by country and age, according to BrandZ™ research. While older people are more likely to retain their impressions of Chinese products as cheap and possibly unsafe, younger people tend to view Chinese brands positively and they associate Chinese brands with innovation.