China is fertile ground for the advertising industry, with over 1.2 billion potential consumers and an expanding middle class. But poor- quality media and skills shortages are the two big hurdles. Nicole Dickenson reports

China is fertile ground for the advertising industry, with over 1.2

billion potential consumers and an expanding middle class. But poor-

quality media and skills shortages are the two big hurdles. Nicole

Dickenson reports


China’s biggest attraction for multinational companies is its huge size.

With a population of more than 1.2 billion, it makes Europe look tiny.

On top of the mind-boggling numbers of consumers, living standards are

improving dramatically and will continue to do so. There are already an

estimated 300 million middle-class city-dwellers in China and the number

of people crossing the poverty threshold is expected to double by the

end of the century, so manufacturers can look forward to an explosion in

demand for their products.

Spending on consumer goods is hardly paltry at the moment at dollars 300

billion a year. It is no surprise then that practically all the big

global manufacturers have rushed to set up in China and are prepared to

spend megabucks in the process. General Motors plans to invest dollars 2

billion in a number of car assembly plants over the next few years,

despite the periodic threat from the US of trade sanctions against


Old hands are already reaping a handsome return on their investment.

Procter and Gamble has an estimated 60 per cent share of the Chinese

shampoo market and its sales of shampoo and soap products total dollars

500 million a year.

The presence of so many foreign companies has fuelled the advertising

market, which has been growing at rates of anywhere between 30 and 50

per cent a year in the 90s. China is tipped to become the third-largest

ad market in the world behind the US and Japan by the end of the


The lion’s share of adspend is centred in key urban areas. As one

regional media director says: ‘China is not one market but lots of

isolated urban markets separated by thousands of square miles of



China is very much a TV market, and a complex one at that. Alongside the

national broadcaster, China Central Television, which broadcasts eight

channels, 1,500 provincial and city cable TV stations vie for viewers’

attentions. The urban areas are highly cabled, but overall only 10 per

cent of the country has access to the cable network.

The media has to work within the straitjacket of limited freedom of

expression. All broadcasters are state-owned and self-censorship is

commonplace. There is little data on viewing beyond the broadcasters’

own figures, which makes China a media planner’s nightmare.

‘China’s naive and sophisticated at the same time. It’s akin to the US

in that there’s national TV, spot buys, ratings, sponsorship, programme

making and barter and so on. But it’s naive in the sense that

broadcasters don’t know how to measure their audience and are not very

adventurous about marketing what they’ve got,’ Pete Watkins, chief

executive of Saatchi and Saatchi Asia, says.

The poor quality of programming has driven Saatchis to set up syndicated

programme deals, co-producing soaps and game shows for clients, and to

sell airtime. According to Watkins, the reduction in airtime costs is

significant and the advertisers get better ratings at a better price.

Outdoor is also very big in China, taking almost 30 per cent of total

adspend by some estimates. This is thought to be due to a combination of

the poor quality of newspapers and magazines and the fact that outdoor

offers advertisers the chance to carry out targeted regional campaigns -

vital in a country the size of China.

Newspaper advertising is limited by government restrictions on

pagination - the average provincial paper contains just two to four

broadsheet pages. Magazines take under 3 per cent of adspend because

their printing quality is generally considered to be abysmal.


China is still very much a developing market as far as the advertising

industry is concerned. Skills shortages are a problem in every industry

in China, but the fact that advertising is not seen as a glamorous

business makes it hard to attract good local people. Watkins says that

it will probably take at least 20 years for the locals to build up the

necessary expertise and advertising skills.

As the media market is so complex, agencies really need experienced

staff, but it’s difficult and expensive to persuade Western expats or

agency executives from more developed Asian ad markets like Hong Kong,

Taiwan or Singapore to relocate there. As a result, poaching is rife and

staff turnover high.

Staffing shortages are particularly acute in support services.

Production companies may have the most advanced technology but often do

not have the expertise to operate it.

The lack of media research is also a problem. Two organisations are

currently battling it out to provide industry standard TV audience

research. The Central Viewer Survey and Consulting Centre (CVSC), which

used to belong to CCTV, has teamed up with France’s Sofres to provide

ratings on 54 areas, while SRG Nielsen plans to install people-meters in

the three main cities, Beijing, Shanghai and Guangzhou, and diaries in

12 others. It seems that CVSC/Sofres has so far found the most favour

with ad agencies.


The shifting legal framework is a major headache for ad agencies. A year

ago, the authorities suddenly decided to enforce the regulations on

advertising, which meant that agencies had to ditch 50 per cent of their

ad copy. Unsubstantiated claims in advertising were restricted and

indecency and bad taste in advertising banned, an alarmingly vague

structure. The restrictions on unsubstantiated claims in advertising and

the ban on tobacco advertising had the most impact. Also, laws on

advertising are subject to different interpretation in different

provinces, which causes problems for creatives.

Government control over media and advertising can be expensive in other

ways. Last year advertisers and their agencies were fined dollars 30

million for breaking government rules.

In addition to these hurdles, the sheer size of the country is a problem

in terms of marketing and building up distribution, sales and marketing.