Calls to boycott foreign products and services went out across China in the wake of the monumental Hague ruling which rejected the country’s territorial claims in the South China Sea. This perceived affront to national sovereignty resulted in a widespread outpouring of public anger towards the countries which were viewed to have supported the outcome of the tribunal, the United States in particular, which manifested itself in protests against Western companies like KFC,
Throughout this week, demonstrations ranging in size from a few individuals to over a thousand rang out in front of foreign chain stores in over a dozen cities in China. Protesters waved banners saying things about how boycotting the US, Japan, and the Philippines was to show love for China and how eating at KFC loses face for their ancestors. A survey by Ifeng.com showed that 40 percent of 144,000 respondents supported these demonstrations, stating that they were a sign of patriotism.
Protests in front of a KFC in China over the South China Sea verdict. Image: public domain.
A small enterprise called Hangzhou Bina Industrial Technology Company in Zhejiang province even went as far as to issue something they dubbed a “Patriotic Notice,” which informed employees that if they dared to purchase an iPhone 7 when it is released in September that they will be promptly sacked. This noticed also stated that the company would be willing to pay off employees anywhere from $150 to $375 if they were to replace their currently owned iPhones with a domestic brand.
In addition to this, it has become a recent trend for Chinese social media users to publish videos of themselves smashing their iPhones as a measure of their patriotism.
Cody Chao, a medical student in Suzhou, attributed these flare ups to frustration-aggression theory: “I guess the public just needs an outlet to vent their fury.”
However, this expression of fury should not be seen as representative of the Chinese population as a whole.
“The extremists protesting are the vocal minority,” said Mark Tanner, the director of China Skinny, a Shanghai-based consumer research firm. “Fortunately, the most open-minded Chinese are the millennials, who are driving consumption growth in China.”
Chao concurred: “On social media everybody is posting things saying KFC, McDonalds, or Starbucks in this or that city are under attack, but I was just walking past an Apple store in Shanghai and nothing seemed to be going on. Well, everything is going on in the Apple store: everybody was playing with the devices.”
While these calls for boycotts, demonstrations, and abject expressions of xenophobia are bound to quickly defuse, is this flare-up representative of a deeper public sentiment? Is a broader, though more subtle, “Buy Chinese” movement on the rise that could have an adverse impact on the future growth of foreign brands in China?
“The nationalistic outbursts do have an impact on sales,” Tanner said. “In 2012, when anti-Japanese sentiment was running red hot, Japanese sales took a hit. For example, in March 2013, sales of Japanese cars dropped 14.3% year-on-year when the overall industry was growing in double digits.”
Anti-Japanese protest in Taizhou, Jiangsu in 2012. Image: Wade Shepard.
However, Tanner added that this anti-Japanese sentiment was part of a much broader campaign that had varying degrees of governmental and media support, and can only remotely be correlated with the demonstrations against foreign brands that we’re currently seeing. But that doesn’t mean that there isn’t a growing trend among Chinese consumers to buy domestic.
“Most Chinese consumers are inherently nationalistic and proud of what their country has done, and would rather support local brands in many categories,” Tanner said.
This position is backed up by a McKinsey report from last year, which found that 62% of Chinese consumers now prefer domestic brands if the quality and price are equal. In 2009, that number was 42%.
“Any self-respecting Chinese consumer wouldn't be seen dead with a local brand,” Tanner described the attitude of this earlier era to me in a previous interview.
This has now changed. The “Buy Chinese” ethic isn’t all nationalistic jingoism, as Chinese products now present a viable consumer option in and of themselves, having drastically improved their quality, marketing, and distribution channels. A decade ago, the rejection of foreign brands in China on patriotic grounds would have left a prospective boycotter at a clear disadvantage, as there were simply not comparable domestic options that could seamlessly take the place of their better established, higher quality international rivals. But now, the Chinese brand has emerged, and companies like Huawei, Xiaomi, and Oppo/Vivo are now putting out products that are on par with their foreign competition. In 2011,
Patriotism being demonstrated through consumer choices has also been popularized in China by key social figures and celebrities. This is no better exemplified than by Peng Liyuan, who very publicly flaunts domestic brand fashion.. In October 2012, a few months before she became the first lady, 86 percent of Chinese consumers said they would not consider buying domestic luxury products, according to a survey by Added Value. Just a year and a half later this number dropped to nine percent.
While in market segments where Chinese brands are comparable to foreign brands there is now a strong preference to buy domestic, this doesn't mean that foreign brand sales are "going to drop off a cliff," as Tanner pointed out. Although local competition is on the rise in all segments, foreign brands still reign supreme in China in the higher ends of areas such as food and beverages, health and vitamins, luxury goods, sports apparel, and automobiles. A huge number of people in China also still really like their iPhones and KFC, regardless of whatever this says about their patriotism.
However, without foreign brands possessing their key advantages — image and perceived higher quality — the preference or social pressure to buy domestic may erode their market position in China. To put it simply, foreign brands in China are no longer going to win huge swaths of consumers on name and “foreignness” alone; their pedestals have been eroded and they must now get down in the dirt with everyone else and fight for their respective share of the world's largest market.
