The following post is excerpted from an article in PR Magazine, published by the China International Public Relations Association.
2003: The arrival of a turning point
If 10 years can be considered as a generation, international firms were no doubt the backbone of the first generation of PR companies in China from the mid-1980s to the mid-1990s. In 1984, Hill & Knowlton, one of the biggest PR companies in the world, was the first to set up an office in Beijing. In 1985, Burson-Marsteller, another leading international PR company, also entered China by way of forging cooperation with Xinhua News Agency. This venture led to the establishment of China Global Public Relations Company, the first local PR company in China. In the same year, Interasia, the first Sino-foreign PR company, was born. But, it was acquired by Edelman in 1993.
Entering the 1990s, Ogilvy & Mather, Edelman, Fleishman-Hillard, Rhodes, Ketchum and Weber Shandwick successively came to China. On June 2, 1995, 8 leading Chinese and foreign companies signed in Beijing a document entitled The Position Statement on the Professional Standards for Doing Public Relations Business in China. Seven of them were international PR companies, while China Global Public Relations Company was the only local PR firm. This showed the basic pattern of China’s PR market (especially PR companies-dominated consultancy industry) at the time.
After the mid-1990s, the fast-growing IT industry gave birth to a new generation of PR companies dominated by local firms in China. BlueFocus, Shunya, D&S, NTI and LINKSUS were representative of them. In its 2001 China Public Relations Industry Survey Report, the China International Public Relations Association released a ranking list to name the top 10 Chinese and international companies, e.g. “TOP10-International” and “TOP10-Local”.
Up to 2003, all the China PR industry survey reports showed that international PR companies far outperformed local PR companies. But, the 2003 survey report indicated for the first time that the top 10 surveyed local PR companies had a bigger average annual business turnover (RMB40 million) than the top 10 international PR companies (RMB30 million). However, international PR companies still took a slight lead in terms of operating revenues. In 2006, the separate ranking lists of Chinese and foreign PR companies were combined into “CIPRA TOP20” for the first time. From then on, all surveyed companies are comprehensively ranked in terms of operating revenues, number of employees, brand influence, service network, customers and expertise. In 2006, only 7 international PR companies were left on the list. The number continued to fall, with only 4 remaining in 2010. Of course, this may have something to do with international PR companies’ lack of enthusiasm for taking part in the surveys. Therefore, there are clear shortcomings if the survey results are used to reflect the whole picture of China’s PR market.
The challenges of glocalization
There is no denying that local PR companies (especially new companies) in China have made major progress and markedly improved their competitiveness in the past 20 years. Indeed, entering the 21st century, local PR companies have clearly outgrown their international counterparts in terms of annual operating revenues. While international PR companies might be said to have opened up China’s PR market in the early period, local PR firms have actually made this market bigger. In an interview with Fortune World in early 2003, I pointed out that the RMB2.5 billion industry business turnover as suggested in the 2002 China Public Relations Industry Survey Report was up to debate. “In fact, we actually estimated revenues in the whole industry from the operating revenues of the TOP 10 Chinese and the TOP 10 international PR companies. Because the survey only involved PR companies but not those customers which they served, such as enterprises, the inferred size of China’s PR market clearly is incomplete statistics.” “I put my estimate of the market size to around RMB16 billion. According to the prevalent foreign calculation method, the PR/advertising value ratio is roughly at 1:5. Currently, some RMB80 billion worth of advertisements is published in China each year, and the PR amount should be around RMB16 billion. In other words, PR companies’ operating revenues only account for 10-20% of the whole market size.” (China’s PR Market: The World’s Last Business Vanity Fair, Fortune World, Issue 5, 2003).
According to the 2010 China Public Relations Industry Survey Report, business turnover in the whole PR market that year stood at around RMB21 billion, and local PR companies accounted for at least over 2/3 of it. But, does big size equal to high competitiveness?
What is worth recognition is that local PR companies have performed extremely well in the Chinese market in recent years. This is due to their improved internationalized operations (after all, public relations is a concept imported from abroad) and their familiarity with the local market. In the face of international customers, let alone local customers, in the local market, local PR companies are in an advantageous position in their horizontal competition with their foreign counterparts. Following China’s accession into the WTO and the arrival of a post-WTO accession era, especially after a global financial crisis has given way to an economic crisis, more and more Chinese enterprises now enter the overseas market to get listed or make M&As there. As foreign PR companies continue to go through a localization process and can only gradually get familiar with Chinese culture, local PR firms will no doubt have an absolute advantage in the domestic market. This advantageous position may be difficult to change in the near term.
Besides the local and overseas PR markets, the difference or gap between Chinese and foreign PR companies is also reflected in a trend called “glocalization”. Some 10 years ago, I borrowed the concept of compulsory and voluntary routines in gymnastics as a metaphor to evaluate Chinese and foreign companies: On the whole, “foreign PR companies” are good at ‘compulsory routines’ and pay attention to standardized routines and procedures, while most Chinese PR companies are strong with ‘voluntary routines’. Without standardized procedures as guarantee, ‘voluntary routines’ can hardly get any quality assurance. Mere pursuit of standardization can easily result in lack of creativity and make major breakthroughs difficult”. I still hold this view today. Recently, I wrote an article entitled “New challenges of ‘glocalization’” for China Daily, and my basic view is still the same.
“In fact, both Chinese and foreign companies now increasingly realize that China’s PR market needs meticulous and creative changes, because this last business vanity fair in the world is by no means easy to grab. Adopting a localization policy to make an overall internationalization strategy successful and using an internationalization slogan to attract local attention serve the same purpose of taking a lion’s share of the internationalization cake. However, dire talent shortages are practically slowing down PR companies’ pace of business transformation. This is the issue to be urgently addressed or the huge challenge facing in “glocalization”.
Prof. Guo Huimin is Vice President of the University of International Relations and Director of the Academic Committee, China International Public Relations Association.