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China 2015: MARKET DYNAMICS | Going Global

A year ago Alibaba was unknown in the West. Today it’s the most publicized example of a Chinese brand with global ambitions and a resounding expression of western confidence in a Chinese brand and in China.

By raising $25 billion on the New York Stock Exchange, in the most lucrative IPO (Initial Public Offering) in history, Alibaba illustrates the potential brand value that can rapidly emerge from China.

For now, there are two Alibaba brands: the one that Chinese consumers see as a powerful ecommerce site; and the one viewed by westerners a singular investment opportunity. But those pictures will merge into stereoscopic alignment.

Meanwhile, even this distorted view of Alibaba should improve the international perception of Brand China, the cumulative notion of what Chinese

brands represent. And a more positive perception of Brand China will help facilitate the overseas acceptance of Chinese companies, not just as hot stocks, but also as consumer brands.

Two leading Chinese technology brands already gain a significant portion of their revenue overseas. Lenovo, the world’s leading

PC maker, drives 62 percent of annual revenue from overseas business. Global business drives 53 percent of revenue for ZTE, a maker of telecommunications equipment and systems.

hat airlines and oil and gas companies also derive a lot of revenue from outside of China,
is not surprising. But so do the home appliance brands, both as manufacturers for other brands, and also from their own branded businesses. TCL gains one-third of revenue from overseas; Hisense, 30 percent; Midea, 22 percent; Gree, 15 percent; Haier, 11 percent; and Supor, 10 percent.

The brands with the highest proportion of revenue from overseas are SOEs (State Owned Enterprises): both Strategic SOEs, such as banks that help advance government policies, and Competitive SOEs in consumer-facing categories like food and dairy.

However, market-driven brands are building global business more rapidly, a development that resonates with Alibaba’s stock market success. Of the 20 Chinese brands that lead in the proportion of revenue derived from overseas, half are market driven.

That’s up from five market- driven brands only a year ago. Ecommerce giant Alibaba is among the new brands. But the market-driven brands operate in diverse categories, including: cars, home appliances, real estate, retail and technology.

The global expansion of Chinese brands depends on the determination of Chinese brands to shift from being manufacturers for western brands to being marketers of their own brands. The expansion also depends on changing international consumer perception of Brand China, so that the country long associated with low-price merchandise is viewed as a source for reliable, value-added products and services.

This transition would mirror how consumer perceptions of the products made in Japan or made in South Korea changed over time. And with China, the trajectory of change may be sharper, as illustrated not only by the explosive growth of Alibaba, but also by how a Chinese brand like Xiaomi, a maker of low price smart phones, can suddenly challenge South Korea’s Samsung for market share in China.