In Beijing’s Tiananmen Square, a big clock is counting down to 1
July 1997 - the date of China’s reunification with Hong Kong. But
marketers and their agencies aren’t waiting for that particular midnight
Many clients with an eye to the Greater China opportunity have already
crossed the border and are urging agencies to follow. While there’s a
feeling that networks which have so far done little to build a presence
in China are by now too late, there’s also a danger of going in too hard
and fast, warns Eddie Gonzalez, group managing director of Dentsu Young
The agency established the market’s first agency joint venture in 1986,
and got its fingers burnt, Gonzalez admits. Developing markets such as
China can bleed available resources. New-business opportunities might
look good when the client presents them, but if the agency invests at
once there may be little return for two years - especially if they work
a commission system.
Dentsu Y&R now sticks with core corporate clients, rather than reacting
to every business opportunity. Nonetheless its headcount on the mainland
equals that of its Hong Kong regional head quarters - some 150 - an
increase of 50 per cent on last year.
Preferred client bases are Shanghai - for fmcg companies such as
Unilever, Kraft Foods and Kodak - or Beijing for clients involved with
infrastructure and regulatory issues, like IBM.
Relocation gained momentum after a spate of joint venture partnerships
gained approval in late 1995. Sustained consumer spending also helped
tot up overall 1996 billings for mainland China of USdollars 1,198.7
million, up 47 per cent on 1995, compared with a 12 per cent rise in
Hong Kong to a total USdollars 2,194.6 million (AC Nielsen Survey
Performances in China were pretty much in line with expectations, the
group managing director of Ogilvy and Mather, Mike Murphy, believes. By
the end of 1998, O&M plans to expand its mainland China operations to
six offices. It now has three in the key cities - Beijing, the
commercial centre, Shanghai, and the South’s richest provincial city,
Guangzhou (the former Canton).
Ultimately a regional approach to client servicing, as in the US, will
be most effective, Murphy says. For now he advocates carving greater
China into six. Beijing, Shanghai, plus a Northern China office -
primarily to service Kimberly Clark - and a central China presence.
Servicing the Cantonese south can be shared between Hong Kong and
Guangzhou. An office in a sixth business zone will exploit business
between Taiwan-based companies, and their entry point via China’s Fujian
Although more multinationals bring together Hong Kong and the People’s
Republic of China, Taiwan is the possible third point in the greater
China triangle. Both O&M and Saatchi and Saatchi have transplanted
Mandarin-proficient Greater China chiefs from Taipei to a more
strategically useful mainland location.
What is required is people on the ground who are in touch with the
clearance bodies, explains Saatchis’ general manager of greater China,
King Lai, an American-raised Chinese, now based in Beijing. ’The 1997
issue needs to be very clearly examined when you talk about agency
management - is Hong Kong still going to be a centre of influence, or
just another Southern Chinese city?’ he adds.
With its key client, Procter and Gamble, thrusting hard into the PRC,
and Chinese billings accounting for 68 per cent of its 1996 total,
Saatchis’ greater China operation has an incentive to shuffle resources.
But overall, agencies are still split on the question of lead markets
and suitable structuring.
McCann-Erickson claims to have answered this by fully integrating Hong
Kong and China operations in 1996, creating separate profit centre
offices with individual decision-making heads.
But the reporting line still ends in Hong Kong for others, including
Grey, Euro RSCG Ball, and Bates - despite it having the fastest growing
China billings of any agency last year, USdollars 14.5 million, up 49
percent on 1995. Bates’s managing director, Jeffrey Yu, believes the
more mature territory will keep its edge for Southern China, with
Shanghai emerging as the centre for the North. Even local Chinese
clients have indicated they’d prefer to come to Hong Kong with
assignments than go through Guangzhou.
At Batey Ads, Asia’s biggest independent network, the sentiment is
Only account servicing is done through a local partnership in Beijing,
with creative and planning roles rooted in Hong Kong. That’s proved a
cost-effective strategy, says the agency’s chief executive officer and
creative director, Mike Fromowitz, considering the expense involved in
Fully-fledged joint venture set-ups may allow direct purchase of media,
but local partnership arrangements staffed mainly by locals keep costs
Although the group has lost pitches to networks with greater mainland
ammunition, there’s a flip side: Fromowitz is hopeful of picking up a
big mainland client, attracted by its creative track record. Hong Kong,
he says, has the opportunity to maintain its pre-eminence as long as it
maintains its level of expertise.
That’s a worry. Agencies concentrating hardest on mainland China - O&M,
Grey and Saatchis among them - are thinly spread. And Singapore is
starting to challenge Hong Kong as an alternative regional ad hub.
There remains a shortage of seasoned ad people with managerial
Those planted in China must also be able to add local context - a
challenge for Westerners. Nonetheless, the chairman of Grey, Vivica
Chan, hopes the learning curve in China will be ten years - compared
with the 20 years it’s taken to develop Hong Kong’s talent pool.
Hong Kong is still the lead market for talent, people and technology but
China is the main business base now. ’But I don’t agree with those who
feel the Hong Kong end is suffering,’ Chan says.
Top executives pulling the strings from Hong Kong find they spend half
as much time supervising activity over the border as they did a year
ago, as more experienced staff are lured to senior positions there. As
the Tiananmen clock ticks towards reunification, that’s surely a sign
that the power base is shifting.