Beijing tries to push beyond 'Made in China' status to find name-brand innovation

Last year, China overtook Germany to become the world's largest exporter, and this year it could surpass Japan as the world's No. 2 economy. But as China gains international heft, its lack of global brands threatens its dream of becoming a superpower.

No big marquee brands means China is stuck doing the global grunt work in factory cities while designers and engineers overseas reap the profits. Much of Apple's iPhone, for example, is made in China. But if a high-end version costs $750, China is lucky to hold on to $25. For a pair of Nikes, it's four pennies on the dollar.

"We've lost a bucketload of money to foreigners because they have brands and we don't," complained Fan Chunyong, the secretary general of the China Industrial Overseas Development and Planning Association. "Our clothes are Italian, French, German, so the profits are all leaving China. . . . We need to create brands, and fast."

The problem is exacerbated by China's lack of successful innovation and its reliance on stitching and welding together products that are imagined, invented and designed by others. A failure to innovate means China is trapped paying enormous amounts in patent royalties and licensing fees to foreigners who are.

China's government has responded in typically lavish fashion, launching a multibillion-dollar effort to create brands, encourage innovation and protect its market from foreign domination.

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Lenovo's lesson

Lenovo might not have much of a brand overseas, but its association with a foreign firm has helped it in China. Lenovo's computers routinely command twice the price in China that they do in the United States. Lenovo offers its top-of-the-line ThinkPad W700 to the Chinese government at $12,500; in the United States, it runs for $2,500.

Chinese officials pushing the going-out strategy have looked at Lenovo as a model for Chinese firms seeking to become known multinational brands. But for China's companies, going out might be the secret to staying alive at home.

This year, the Chinese car company Geely bought Volvo from Ford. Pundits figured it was to expand China's economic heft -- and its brands -- overseas. But as Geely's founder, Li Shufu, put it, "Volvo will find a new home market in China."

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Beijing tries to push beyond 'Made in China' status to find name-brand innovation


Washington Post's Special Report: The other superpower