Since the Greek people voted to stay on the European course in mid-June, China’s political and economic leaders have a right to feel relieved. The immediate concern that the Greece situation could spark a breakdown of the entire Eurozone, which would also distress the export-based Chinese economy, is gone for the time being.
However, it has become apparent that continued reliance on export-oriented growth has put the country at the mercy of a decreasingly affluent western consumer base, a risky strategy for a national leadership determined to increase its people’s living standards and China’s national wealth.
The question thus becomes, how to react? On the local front, Jonathan Low – a founding partner of PredictivAsia, a consulting firm that measures the economic impact of brand and reputation – has called for a stimulation of domestic consumption and an increase in Chinese household disposable income.
As far back as 2010 – a year and a half after the onset of the 2008-09 financial crisis – he pointed out the role that corporate reputation and brands play in encouraging consumers to buy a local product, which could be vital in pursuing domestic growth. “Executives attempting to create brand values and establish corporate reputations in China have the opportunity of a lifetime,” he said.
Since the crisis has rekindled and taken hold of Europe, that advice has now been translated into global marketing as well – especially in the transport equipment sector.
In the past decade, the local manufacturing segment has weathered its fair share of criticism, partly based on the enduring preconception that China’s manufacturing industry might be able to outgun its European and American counterparts in the cheap production department, but whether producing domestically or off-shore, quality control issues still have some way to go. Zhu Yinghuang, editor-in-chief emeritus of China Daily, the country’s largest English-language newspaper, blandly called it “an image problem.”
Since the GFC and the more recent Greece trepidation, however, China watchers are now beginning to see a turnaround in that quality thinking as the world’s most populous nation increasingly grasps global standard requirements, hoping to increase China’s brand value on the local and the global front.
In Triangle’s case, for instance, high quality build has gone to the head of the priority list, combined with a strong focus on sustainability. And, this renewed effort has not come a minute too soon. According to a Financial Times report, China’s international reputation has slipped since the Beijing Olympics.
Ranking China at 56, down eight places and well behind India at 23, the report says the country’s public relations challenges had included environmental damage and censorship battles. To continue prospering, companies like Triangle have therefore taken the offensive.
At the 2012 Global Automotive and Tire Industry Forum & Business Summit in Beijing, Ding Yuhua, President and Chairman of the Triangle Group, stressed the importance of keeping pace with global developments while protecting the environment. “In the face of the global economic crisis’s severe challenges, all countries have made great efforts and tried every means to realise economic recovery,” he said. “At the same time, people are also deeply aware of their responsibility to protect the global environment – the common homeland of mankind – which is becoming an increasingly urgent and important issue.”
At present, one in every four tyres produced worldwide is manufactured in China, and 46 per cent of the tyres leaving factories there are destined for export, according to British industry resource tyrepress.com. Gao Yunhu, associate director of the Materials section at China’s Ministry of Industry and Information Technology, reported to the summit that in 2011, China produced a total of 830 million tyres, a year-on-year increase of 8.5 per cent. Total revenues for the industry last year amounted to nearly RMB 400 billion (€50.3 billion), Gao shared, while profits amounted to RMB 191 billion (€24 billion).
Hence it is no surprise that China’s more than 500 domestic tyre manufacturers have a solid interest in maintain a stable global image in order to expand on that market position.
According to Yuhua, the key to success is focusing on sustainability and green production. “Driven by the development of economic globalisation, it is pressing for the automotive and tyre industry to speed up the process of energy conservation and environmental protection,” he said in Beijing, stressing that tyres alone account for 20 per cent or more of the energy consumption of a vehicle. “Energy-efficient tyres could achieve fuel-savings of five per cent or more (…), which makes them an important carrier for the innovation of automotive technology.
“After experiencing the economic crisis, the automotive and tyre industry (…) is now facing a turning point and a challenging industrial upgrading situation,” he added. “Basically speaking, this is people's new understanding of the relationship between economic development and natural environment.”
Over the past half decade, Triangle has invested more than 1.5 billion RMB (€189 million) in energy conserving technology. Last year, for instance, the company shut down a 34-year-old production line, that, although profitable, did not comply with Triangle’s new sustainability focus. Adopting digital technology, robotics and an intelligent bar code system, the company wanted to create a “green and intelligent factory,” said Yuhua.
In addition, the Triangle Group now intends to initiate a project called “the industrialisation of the green tyre” which will see Triangle working with relevant agencies and institutes in the drafting of new standards for tyre performance, quality inspection and environmental impact.
According to company Chairman and President Ding Yuhua, that new focus on sustainability and intensified R&D are hardly separable, as progress in one field must be accompanied by advancement in the second. Last year, Triangle has therefore taken a leading role in the research sector, too.
“Along with financing through state-owned banks, China is investing in developing the qualitative improvement of its tyre industry,” tyrepress.com reported in April. “One area of investment was work towards establishing around 100 National Engineering Laboratories (NEL) for facilitating innovation in a range of industries. The interests of China’s tyre industry will be served by a dedicated laboratory, and in August 2011 China’s government appointed the Triangle Group the host company for a joint-funded [NEL].”
Fuelled by that political and economic act of faith, Triangle has put itself into a leading position both on the domestic and global front as the new lab is charged with the task of technology innovation for the entire Chinese tyre industry. According to Yuhua, Triangle has already obtained more than 200 “achievements” through independent innovation in the fields of product design, material mechanics, manufacturing process and equipment development. All these achievements were patented and successfully translated into the production process, he said in Beijing.
At the same time, Yuhua officially committed to building a whole new economic model for Triangle – “featuring green products, green manufacturing, a green supply chain and green consumption.” In that sense, he is in line with current research, which sees great benefit in utilising sustainability to change a brand’s image. Around the globe, leading-edge businesses are already building brand value by integrating sustainable production into their supply chain strategy, and benefiting from the accompanying cost reduction.
Facing the opportunities and challenges of economic globalisation and prompted by the EU’s nerve-straining debt crisis, Yuhua has realised that now is the time to act. Since six of the world’s top 20 largest tyre manufacturers are located in China or Taiwan, he is keen to force open the world’s gravitation towards better-known names and boost Triangle’s image in the world. As a side effect, this could also create new consumption values both in China and around the globe, making the Middle Kingdom more crisis-proof in the long term. Yuhua: “We would like to face the challenges together, share opportunities and achieve a win-win situation.”