When the tanks rolled through Tiananmen Square in 1989, it would have been hard to imagine another powerful machine would be threatening to conquer the western world 15 years later.
This time, instead of crushing student protests, China is beating the west at its own game in the form of one of the ultimate symbols of capitalism – the advertising buck.
According to a report by Initiative Media, China now ranks third in the global list of advertising economies, behind only Japan, and the US.
And although the US dollar is set to remain all powerful as the global advertising fightback in 2004 cranks into gear – with the $7.3bn predicted increase in USadspend this year bigger than the total advertising market in 37 of the 44 markets covered by the survey – a revolution in China is ushering in a new world order.
Ad spend to soar 15% The figures for China are awesome. Initiative predicts that advertising expenditure in the country will soar by more than 15% this year compared to last, to an estimated $22.7bn (£12.3bn).
At that rate, China will be hard on Japan’s heels in a matter of years and it is already getting on for twice the size of UK’s advertising economy.
But what are the implications for the old order, and should the advertising industry in the west see the Chinese dragon as an opportunity or a fire-breathing threat? “It should be an opportunity,” says Sue Moseley, managing director of Initiative Futures, which produced the report.
“When countries as huge as China open up, there’s a massive new market for western advertising companies.
“The relaxation of regulation has seen the introduction of some, such as News Corp, but it’s been limited so far and has also been stimulated by local companies.”
However, the re-evaluation has only just begun.
With a population of more than 1.3 billion – nearly five times that of the US – the Chinese economy is a sleeping giant that is rapidly awakening to its full potential.
The Chinese effectively began separating their communist principles from economic policy back in the late 1970s, although events such as the Tiananmen Square massacre and tensions with the Americans over the build-up of its nuclear arsenal were hardly conducive to a warm economic glow.
It’s ironic, not to say extremely sad, that two of the advertising superpowers still have enough missiles trained on each other to blow each other to kingdom come – several times over.
However, since China joined the World Trade Organisation in 2001, boom time has arrived, in terms of both foreign investment and local growth.
Television has led the way and China has certainly not left the job to its western big brothers.
Although the likes of News Corp and Time Warner have been given limited access to southern China – western broadcasters having previously been confined to hotel compounds and embassies – the growth in the small screen has been led mainly by Chinese companies.
The national TV network, ironically called CCTV, now offers more than 10 free-to-air channels, and satellite TV is also spreading across the country. CCTV’s annual auction for broadcast sponsorship of its evening news programme would have made ITV green with envy. A record was set in November for the amount offered for a single slot.
“Whereas foreign ventures have continued to enter and advertise in China, local Chinese enterprises are big believers in advertising and have driven the significant portion of expansion in advertising spend,” says King Lai, chief operating officer of Initiative, Asia Pacific.
Radio, internet, phones
The growth is not limited to TV.
Pop music-led radio networks are springing up; internet use is on the rise, although ad spend figures are not yet available; and mobile phone ownership is accelerating.
The Chinese have formed “work units” with magazine printing permits to print Chinese editions of foreign titles for distribution in mainland China.
Emap’s FHM is a recent arrival.
Despite this phenomenal growth, China’s rise could continue at an even higher rate, especially with the country due to stage the 2008 Olympic Games.
The event is a huge driver of global adspend and a massive coup for a country whose previous association with the Olympics in most people’s minds is one of drug using athletes.
In future, China could be racing home by a distance on the advertising circuit, and who is to say the next Interpublic, WPP or Publicis will not be Chinese? Japanese advertising companies, such as Dentsu, which owns a chunk of Bcom3, have already made major inroads into the global market.
Because of its political history, China has much further to go, but many see it as inevitable that, at some point in the future, the shots will be called from Beijing.
“You could comfortably speculate that the stronger they get, the more they would want to start exploring outside,” says the managing director of a top international advertising company.
“That, of course, could lead to yet more consolidation in the advertising market. Will the big players be coming out of China in future, rather than the west? It stands to reason – unless, of course, there’s another revolution in China.”
Inward-looking it may be at the moment, despite its huge growth, but when you think it was just a few years ago that the US sent warships to the region, because of the crisis over Taiwan, anything could happen.
If you need evidence of the rapidly changing culture, forget the arrival of the likes of FHM and its cover girls; what about the (true) story of the Chinese businessman who has applied for permission to market his nappy products under the Chinese name of George Bush? Bushi nappies could take a while to take off, but people almost as powerful as Bushi Jnr are starting to sit up and take notice of the potential for the new world order.
“We may be witnessing a fundamental shift in economic power,” says Sir Martin Sorrell, chief executive of WPP, in a recent interview with the Far Eastern Economic Review.
Some 15% of WPP’s revenue comes from Asia, but Sorrell points to the “internal engines” that drive China’s advertising economies and are nowhere near as dependent on the fortunes of the US as other Asian countries.
Trouble with culture clash
WPP is the biggest group in Asia, but even this giant has had trouble breaking into China because of the political set-up and the culture clash.
Of its top 40 clients, only one is Asian, although Sorrell is convinced that in five to ten years Chinese companies such as Haier and Lenovo (“who?” you might ask) will be global giants taking on the Unilevers of this world.
China is far from the only eastern country on the rise in advertising terms, however, and it seems that political upheaval is no barrier.
Japan’s economic growth in recent years was the initial driver, says the study, but other booming advertising economies in Asia include Russia, India, Thailand and Indonesia, which is forecast to achieve the highest rate of
growth in 2004 despite a period of major turbulence.
The Asian economic crisis in 1997, the 2002 Bali bombing and three presidents since 1998 have been unable to stop the seemingly inexorable march of advertising in Indonesia. It appears to be only a matter of time before we will be looking east as well as across the Atlantic for advertising’s dominant markets.
“If there’s to a be change in the world order over the next few years, it will be that Asia overtakes western Europe as the second-largest advertising region,” says Lai.
“This could be as soon as 2005, should current rates of growth continue.”
But western Europe is unlikely to accept economic defeat lying down and is welcoming its own eastern contingent, with 10 more markets to join the EU on May 1, including Poland and Latvia.
“Many of the new central and eastern European generation actively embrace all things western as symbols of progress and freedom, making them a key opportunity for advertisers,” argues Moseley.
When China embraces all things western and begins truly playing the west at its own game, things could really start to change. For UK agencies, a trip to the restaurants in Soho will no longer be the only involvement with eastern culture most of their employees ever have.