1. The Global Recession Hit China, Too
China's economic growth isn't an unstoppable force after all. The economic recession that is spreading around the globe is hitting the Middle Kingdom as well. Falling exports have shuttered thousands of factories in Guangdong province, putting hundreds of thousands of workers out of a job. China's growth rate dropped below 10% this year for the first time in over five years. Auto sales, property values and stock prices in China have nose dived.
2. Melamine Misery
Manufacturing problems have gotten worse in China, not better. Issues with product safety and quality were the No. 2 story on last year's top ten list. We're keeping it in the same spot this year, due to the tragedy caused by melamine, a chemical additive that has turned up in everything from infant milk formula to Lipton milk tea to Cadbury's chocolate bars. Hundreds of thousands of Chinese babies were sickened by melamine and as many as six died from the tainted milk. Dozens of companies recalled products all over the world. The government has promised to ensure higher standards in food manufacturing. In mid-December, for example, China's health ministry banned 17 substances as food additives. Banned chemicals include boric acid, used in insecticide and added by some manufacturers to noodles and dumplings to increase their elasticity, and formaldehyde, used to improve the appearance of dried seafood. However, the government's ability to control and regulate China's food industry remains questionable.
3. The Torch Relay That Went Up in Flames
China competed for the right to host the 2008 Olympic Games in Beijing to prove the country had become an economic and political giant. But there's more to being a global power than military might and a prominent role as the world's factory, as China's Communist party discovered. The gap between what foreigners think of China's role in political hot spots like Tibet and Darfur and what Chinese believe about their own government turned deepened last spring, following a deadly clash between Chinese police and protesters in Chinese-controlled Tibet.
After hijacking the international debut of the Olympic torch relay on March 24, 2008 in Athens, anti-Chinese activists mobilized more protests along the route, except in China. At home, pro-China Olympic mania supported Chinese athletes, Olympic teams--and sponsors. Torch relay sponsors Lenovo Corp., Samsung Electronics, and Coca-Cola Co. were caught in the tug-of-war.
Protesters called on Olympic sponsors to withdraw their support of the games and pressure the Chinese government—a move that could have ruined sponsors' businesses in China. The debate ended abruptly on May 12, 2008, when a catastrophic earthquake rocked China's Sichuan province.
4. Sichuan Earthquake Shifted the Spotlight
The tragedy changed the tenor of the 2008 Olympic Games, taking heat off sponsors. It also introduced a new era of philanthropy for Chinese companies and individuals. By December 2008, donations in China, mostly earmarked for victims of the earthquake, reached 100 billion RMB ($14.7 billion). The largest individual donor was Hong Kong tycoon Li Ka-shing, who gave 240 million RMB ($35.1 million). The biggest donation from a multinational marketer was Swiss pharmaceutical company Novartis's 1.3 billion RMB ($189.8 million) contribution, according to the head of the Social Welfare and Charity Promotion Department at the Ministry of Civil Affairs.
Virtually every major marketer with significant ties to China chipped in with funds and supplies. Ford Motor Co. gave ambulances and emergency vehicles, Motorola provided emergency telecommunications equipment and FedEx chartered flights to deliver medical supplies. Bayer and Pfizer supplied medicine. China's largest dairy, Yili Group, transported all of its stock in Sichuan province to the earthquake site.
"A lot of times companies talk about contributing to the communities in which they do business. This has become a moment of truth about what kind of company are you and what are you willing to do," said Scott Kronick, president, China of Ogilvy Public Relations Worldwide in Beijing shortly after the earthquake hit China in May.
5. China's Debut As an Olympic Host
Given the problems with China's economy, the melamine scandal, the earthquake and the torch relay, even some Chinese sports fans have almost forgotten about the Olympic Games, the country's formal debut on the global stage. But dozens of national and international sponsors, and the exhausted marketers who worked there, may call the 2008 Olympic Games the story of the decade. The most successful sponsors included Chinese and multinational companies--Coca-Cola Co., Chinese dairy Yili Group, PC-maker Lenovo Group, China Mobile and Adidas. The losers were mostly state-run companies new to marketing such as fixed-line telecommunications provider China Netcom Group, energy giant Sinopec Corp. and Air China, according to Greg Paull, principal R3, a Beijing-based marketing consultancy. R3 and its partner CSM Media Research tracked the performance of Olympic sponsors for two years in China's ten largest cities.
6. Adidas Wins China's First Gold Lion
Adidas wasn't a top-performer according to R3's research but its marketing campaign found plenty of fans overseas. An Adidas print campaign by TBWA scored China's first Gold Lion at the Cannes Lions International Advertising Festival in June. Consumers liked the ads, too. Adidas' sales rose 30% in 2008, said Christophe Bezu, Hong Kong-based senior VP and head of Asia/Pacific for Adidas. China is now the German company's second-largest market globally after the U.S., after starting 2008 in fourth place.
7. Haier Blows Its Chance to (Finally) Build a Global Brand
Will marketing at Haier, one of China's biggest companies, ever catch up with its distribution? It seemed possible when the white goods and electronics giant tapped a China-savvy foreigner as its first global chief brand officer in Nov.ember 2007. Larry Rinaldi embarked on a dramatic effort to upgrade Haier's image during an important year--Haier was a national sponsor of the 2008 Olympic Games in Beijing. In the U.S., the company also needed help. Haier products like mini-refrigerators are a hit in college dorm rooms, but the brand still says cheap Asian knockoff. Alas, Mr. Rinaldi's stint was short-lived. He resigned in April 2008, reportedly because of concerns that Haier was dodging its contractual agreements with ad agencies, a complaint agency partners have lobbed at Haier for years.
8. Coke Tests China With Huiyuan Bid
Coca-Cola Co. wants to expand its non-carbonated drinks business in China by acquiring the mainland's largest producer of pure fruit juices for $2.4 billion. Coke made a cash offer to purchase China Huiyuan Juice Group, a Hong Kong-listed company that owns the Huiyuan juice business throughout China, already Coke's fourth-largest market. If approved, the acquisition will be one of the largest foreign takeovers in China, making it a test case for an anti-monopoly law passed just last month. The deal will also test China's willingness to let local firms fall under foreign control, something it has been loathe to allow in the past.
9. Ugly Betty Hits No. 1
Move over Supergirl, and make room for Ugly Betty. Who says Chinese don't watch television anymore? Chou Nu Wu Di (Ugly Wudi) is even more popular in China than in the U.S. The Chinese version of "Ugly Betty" debuted Sept. 28, 2008 at 10 pm on the provincial channel Hunan Satellite Television. The first season, which ran seven days per week, ranked No. 1 in its time slot across 30 markets every day. Normally, the 10 pm-midnight time slot is dominated by CCTV 8, the drama and entertainment channel broadcast by China Central Television. The second season starts Jan. 5, 2009, and will again by sponsored by Unilever, in one of China's most successful branded content initiatives to date. Unilever has used the show to promote three brands, Dove shower cream, Clear anti-dandruff shampoo and Lipton milk tea, in a deal orchestrated by GroupM's Mindshare division in Shanghai. The last series to attract ratings this high was Supergirl Voice, an American Idol-style series that also aired on Hunan Satellite TV. Supergirl's 2005 season finale was watched by 400 million Chinese.
10. The Rise and Fall of Baidu
Just two months ago, the local search engine giant was riding high. CR-Nielsen confirmed Baidu was the most popular web site in China, with 171 million unique users. The company was the darling of advertisers looking for an easy way to reach a broad swath of Chinese web surfers and Chinese investors seeking a safe bet. In December 2007, Baidu shares traded on Nasdaq at $418.22. By Dec. 16, 2008, the price had fallen to $118.09, a drop of more than 70%, after Baidu slashed its fourth-quarter revenue forecast by $20 million. The company blames its problems on China's economic slowdown, which has dented online ad spend. But Baidu faces huge legal problems because of questionable paid search listings for unlicensed medical and pharmaceutical companies.
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