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China Law Insight

Corporate

Go Forth and Build Brands in China

Posted in Corporate, IP, Trademark

By Mark Schaub, Sun Liang, Wang Ni and Melanie Stoeckert  King and Wood Mallesons’ Corporate  Group

On 17 December 2012 the Chinese Ministry of Commerce (“MOFCOM”) promulgated the Guiding Opinions on Promoting Brand Consumption in China (the “Opinions”). The Opinions are not particularly interesting for what they do but for what they signal as to MOFCOM’s attitude towards brands, and in particular the importance placed upon the building and developing of Chinese brands.

The main concepts embodied in the Opinions are as follows:

Brands Matter

It is clear on a number of fronts, that the Chinese authorities are not content with China being relegated to producing for foreign brand owners or for producing no-name brand products.

Proper branding results in higher sales at higher prices. The Opinions reflect that MOFCOM considers the cultivation of Chinese brands, and also the encouragement of international brands within China, as an important piece in their strategy to develop Sino-foreign trade and international economic cooperation to a higher level.

MOFCOM recognizes that, to date, Chinese brands have failed to compete with their Western counterparts. The “brand gap” exists for a number of reasons including a relatively late start for Chinese manufacturers and being poor at promotion.

MOFCOM has directed Chinese commerce departments at all levels to understand, from a strategic perspective, the importance and urgency of developing and cultivating Chinese brands.

We are in this Together

MOFCOM’s Opinion outlines a number of ways in which entrepreneurs and enterprises need to work together with the authorities to build an environment conducive for brands to develop and flourish in China.

The Role of the State

The authorities see themselves as having the following role:

  • Setting policy
  • Improving legal protection for brands (including cross department law enforcement)
  • Establishing a secure on-line platform where vendors and consumers alike are confident to trade
  • Encouraging the consumption of branded products in China
  • Encouraging basic research on branding
  •  Compiling Chinese brand development reports and indexes so as to gradually establish and develop a sustainable information service platform for China in relation to both domestic and foreign brands
  • Encouraging Chinese enterprises to seek assistance from trade associations and intermediaries so as to gain a professional understanding of brands
  • ncouraging Chinese enterprises to acquire foreign brands and sales channels

State Encouragement but Market Rule

However, the market is also seen as playing a vital role. The Opinions do stress that policy should be market orientated and, indeed, even foresee that greater success by foreign brands in China will lead to benefits in the long term development of China brands and Chinese consumers. Consumers should benefit from a greater range of products as well as prices which converge (i.e. gap in pricing between domestic and foreign products should be reduced). Chinese companies will be encouraged to engage in collective displays and have a concentrated promotion of Chinese brands from a number of perspectives.

MOFCOM also recognizes that companies, not governments, create brands and stresses that innovation should be fostered in respect of brand creation and development.

Conclusion

As stated at the outset, the Opinions do very little in and of themselves. Rather, their importance is serving as a guide to MOFCOM’s attitude towards the next stage of China’s commercial development.

Reading between the lines, it seems clear that MOFCOM is keen to encourage Chinese enterprises to build and develop brands which can be winners both at home and internationally. The authorities also seem to realize that this cannot be achieved without a strong market at home and consumers that are brand conscious. In this regard, foreign brand owners will also benefit from a more welcoming market, secure online platforms and better enforcement and protection of their rights.

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