“It was really distressing for me to talk to a WHO expert and have him tell me, ‘I have no idea where it’s safe to buy food here….’” - Sharon LaFraniere.

When Luoyang journalist Li Xiang broke China’s latest food scandal last week, exposing the industrial reprocessing and resale of “gutter oil” in a massive operation allegedly concealed by government officials in Henan, the news sparked yet more public outrage over China’s food safety record, while triggering what seems to have been brutal retaliation by the producers, who are suspected of ordering the killing of Li earlier this week in what is being treated by the authorities as a murder-robbery.

As awareness has spread that the Chinese government is hoarding organic food for its own consumption, the question of food safety has never been a more sensitive public topic, which is why this week on Sinica we’re pleased to welcome Barbara Demick of the Los Angeles Times and Sharon LaFraniere of the New York Times. Both excellent China watchers doing investigative work on China’s growing food scandals, Barbara and Sharon join Sinica regulars Jeremy Goldkorn and Will Moss to bring us the inside scoop on how bad the situation really is and why food safety is so difficult for China to get right.

Get the links to the show from Popup Chinese, download the MP3 here, or search “Sinica” on iTunes. Also, City Weekend just named Sinica the best China podcast. All credit to Kaiser and Jeremy, but I’m thrilled to be playing a regular part.

*Alright, I’m not entirely the Ed McMahon of Sinica. I’ve written extensively about the communication and trust issues surrounding the food industry in China. You may wish to browse the following from my archives:

• PR slime – in color! Imagethief talks PR scandals on BonLive (video interview, Dec. 2010)
• Sanlu melamine milk powder crisis becomes a national issue (Sept. 2008)
• Melamine in Sanlu milk powder? Now that’s a crisis! (Sept. 2008)
• China’s food crisis PR strategy: Blame everyone else (June. 2007)
• The great donkey meat – tiger piss – media whore axis (Sept. 2005)

What? No fries?

But first, some housekeeping. I worked for Burson-Marsteller for six years, all here in China. It was a great experience. Much of what I know about PR and virtually all of what I know about doing PR in China I learned at Burson. I still use Burson-Marsteller China as an agency, and hold the people there in the highest regard. All agencies make mistakes. No one in PR wants to damage the reputation of a client, or their own agency. When it happens, we try to learn from it.

I don’t know what the chain of events involved in the Burson-Facebook project was, and I don’t know any of the people involved. I have no inside track. But as an industry observer, and in the spirit of learning from the situation, here are four lessons to take from this episode:

If it will embarrass you to have a pitch go public, it’s a bad pitch

The art of selling stories or viewpoints to journalists, bloggers or the public is a pitch. In writing or verbally, a pitch should stand alone as something you’d be comfortable going public on its own. If a pitch doesn’t pass that test, and its public release would embarrass you, your agency or your client, it’s a bad pitch. Any pitch that doesn’t identify the interest behind it is by definition a bad pitch, because lack of disclosure in a pitch suggests that someone would be embarrassed to be connected with it.  Rethink the strategy. Yes, this tars a whole branch of political PR based on anonymous leaks. So be it.

There’s nothing wrong with criticizing a rival…transparently

It’s silly to pretend that slamming competitors isn’t part of PR. In the industry it’s called “depositioning”, a sanitized word that suggests some lingering discomfort. Outside it might be called smearing or, for those in the tech industry, FUD (fear, uncertainty and doubt). So what’s the difference between a smear and a legit piece of competitive PR? Transparency, for one thing. There is nothing wrong with criticizing a rival (or a client’s rival) or pointing journalists at their shortcomings. But you’d better be prepared to stand behind your claims, and that means being well researched and transparent.

PR instincts and journalism instincts are not the same

PR agencies hire a lot of ex-journalists for their story instincts and their usefulness in media relations due to their contacts and credibility with other journalists (more on this below). But the fit isn’t always natural. Someone senior from a global agency other than Burson told me recently that they have about a ten percent long-term stick-rate from their senior journalist hires in the US. I’m not surprised.

One problem is that although they overlap, journalist instincts and PR instincts are not the same. Oversimplified, journalistic instincts emphasize spotting and piecing together stories while PR instincts often emphasize identifying and managing risks. We spend as many years and as much work developing our instincts as journalists spend developing theirs. Any crossover in either direction means a learning curve. The risk that should have been spotted in this particular case was that the backstory of the pitch –an anonymous client paying a major PR firm to slam Google on privacy– was more interesting than the pitch itself.

Set a thief to catch a thief

Despite the blurring of the line between mainstream media and blogging, journalists and bloggers are different. If you send a bad pitch to a mainstream journalist, generally it just dies (perhaps along with some of your credibility). If you send a bad pitch to a blogger, there’s every chance it’s going to published and ridiculed. Welcome to blogging. This isn’t 2003, and everyone should be up on this. I understand hiring mainstream journalists to pitch other mainstream journalists, but it seems to me that the PR industry has been slow to embrace using bloggers the same way. As a blogging PR person I don’t think bloggers are particularly more resistant to working in PR, but I definitely think they respond to PR differently than mainstream journalists. And that’s definitely true for tech bloggers.

Thoughts? Feel free to argue with me.

See also:

Lou Hoffman’s “Ishmael’s Corner”: More to the Facebook PR campaign against Google story

With an assortment of topics like that presented by a China media expert, international journalist, noted bridge blogger, history Ph.D candidate and a spin doctor (for good measure) how can you go wrong? It’ll be like drinking knowledge straight from the garden hose every minute you listen.

Well, not really, but pretty good fun. Online on iTunes, or listen or download at the Popup Chinese Sinica page.

From: Mr. Wang [e-mail removed]
To: William Moss
Subject: Win-Win situation cooperation from “Made in China” development to Made in your country

Dear Sir or Madam: We are oversea market development Dept.of group of China Chongqing Big Science & Development(Group) Co.ltd,one of professional China Auto Manufacturers, Our products include cars,bus,pickup,SUV,truck and CNG series products,CNG tricycle,CNG two motorcycle more information,we are find Africa,south Asia,east middle and middle south America developing country a certain economic strength partner set Auto assemble plant.
1,Cooperation method: manufacture Auto Turn Key Project or joint venture.
2,Conditions for cooperation:Partners are the basic conditions include capital over 500000,and have over 2000M2 workshop or land.
(1), Turn Key Project model service supply technology,engineer,train, equipment,all spare part and technology rise,after service for project
(2), financing: when plant start  batch production we may supply  include Usance 90-120 days L/C,D/A90-120 days and credit sales,Prophase credit not established before,we do not provide credit)
(3),When both part set up nice credit relations,does not exclude the possibility of us direct investment.
(4), if plant can take local government guarantee large orders we can provide long-term (2-5 years) credit.which is include Export Buyer’s Credit,Financial Leasing, Time(Usance)Letter Of Credit,Open Account (O/A), Our China Bank include China development bank (http://www.cdb.com.cn/english/index.asp),China development fund http://www.cadfund.com/en/index.asp and China export & import bank of China(http://english.eximbank.gov.cn/),If need deail message, please you inform us.Why this project can success, this project’s advantage include:
1, Chinese products nice cost performance.
2, Due to SKD,CKD manage,customs duty preferential freight cost save.
3, When you develop market, due to plant technology supply and we will supply all help, you supply very nice sale after service by your 4S shop.
4, Project the key to success is “to proceed from reality in everything, seeking truth from facts” Money more rich much practice, money less money less way, please you full in a questionnaire(Please you look enclosure), we will make cooperation plan according to this questionnaire message.
5, We provide cooperation and support technology and credit.
If you have any any advice, please you inform us as soon as possible.
(when you reply our letter,please answer to under E-mail box at the same time)E-mail; [removed];[removed] ;[removed];  Mr.Wang  Oversea market development Dept.of China Big Science & Technology Development(Group) Co.,Limited Tel:[removed] Fax;[removed];Mobile:[removed];Skype:[removed]; MSN: [removed];

Emphasis above is mine. Note that contact information has been removed, but the name of the company is as sent, should you wish to inquire about any of their products or services.

Doesn't come much bigger.

At any rate, if you’d like to swap gossip on the sidelines of a tech conference in Beijing, you can look for me at the upcoming CHINICT event at Tsinghua Science Park on May 26th and 27th, where I’ll be lurking as one of their annointed blogging parters (disclosure: yes, that makes this a sponsored post – note the badge at upper right if you’re reading this on the web). I’ve been there for two of the last three years and generally had myself a pretty good time. (Last year’s event was during my first week on my current job, and it didn’t feel right to check out for two days.) Looking at the speaker and participant lineup, many of those same usual suspects whom you know from twitter and the China blogosphere will be there. Check the CHINICT website for info and give me a shout if you’re there.

Note: At CHINICT’s request I’ve made a slight change in this post regarding the relative sizes of the shows.

Our topic was “Brand China” in two senses of the phrase: The ability of the Chinese companies to establish their brands internationally, and Chinese soft power and international perceptions of China as a whole. Some of the key points to emerge from the discussion are below, mingling stuff from the main discussion, Q&A and some of my sidebar discussions afterward. This will be a bit of a stream-of-consciousness tour of some of the main topics and points rather than a coherent essay.

Landscape

The Chinese national brand and company brands are intertwined. There is no separating perceptions of Chinese companies from perceptions of China among western audiences at the moment. Following on the experiences of countries like Japan and Germany, David and I agree that companies have to lead the national brand rather than vice-versa, although that will come with some challenges.

David feels that Chinese brands need to be more assertive about grabbing hold of the positive things about being Chinese and not running from them. I agree with that, but only partially: I think it’s practical in certain areas where there are established, positive attributes to work with – fashion and (don’t laugh) food come to mind. But there are also areas where the perception deficit is so significant or the political aspects are so charged that it’s not yet practical to do that.

Three key things for developing brand China

I suggested that there were three key things that could improve China’s soft power and the overall “China brand”: Encouraging entrepreneurs and businessmen to take a lead role; unfettering popular culture; and reworking the government approach to messaging to external audiences.

Charging businessmen and entrepreneurs with leading relates back to need for companies to lead development of the national brand. There are smart, articulate businessmen and entrepreneurs here who have a real stake in how China as well as how their companies are perceived overseas. They could make an excellent vanguard for Chinese public communication. The problem here is that businessmen, especially in private business, must tread with supreme delicacy around issues of importance to the government. Totally understandable risk aversion acts as a large brake on their potential as communicators.

We also discussed the cultural issues that might inhibit Chinese businessmen and companies from taking lead roles in public communication, and the impact of cultural issues on Chinese acquisitions of foreign companies. We all conceded that this is a challenge. I suggested that newer companies or companies from more private-leaning (as opposed to state-linked) industries might be in a better position here, suggesting the Internet industry as a likely candidate. David hit me with the catastrophic meltdown of the Yahoo-Alibaba relationship. That’s a fair point. On the other hand, Jack Ma is a great spokesperson, Alibaba has long internationalized their communication, and they certainly know how to build a brand, so let’s see.

Popular culture is another potentially very powerful force in China’s favor. This is especially true of film, which is very accessible and for which there is a natural and existing (if a bit niche) constituency in the west. But it’s another area in which the potential is limited by the involvement of the state. My personal view of the last few years of exported Chinese cinema is pretty dim, what with the huge fixation on vast, ponderous period epics and three-hanky melodramas. It would be nice to see a broader range of Chinese film being exported. And, of course, it would be nice to see an even broader range being made and distributed here. But with the media largely steered into anodyne themes and all-audience suitability (no film ratings in China) the potential is once again limited.

One aspect of media that I think we all feel will not make a big impact is the expanded foreign news services such as Xinhua CNC. As I said in the session, anything too close to the government will trade at a discount, especially by Western audiences. I’ve written in some detail about Xinhua CNC before, so I’ll only repeat one other point I made about that yesterday: One of the real opportunities for Chinese overseas news organizations is to focus on the areas of the world that Western media chronically overlook and which, coincidentally, happen to be areas that China has an interest in, such as Africa and Southeast Asia. But they still have to come up with a good product.

The last of the three areas I mentioned was government messaging. As long as external messaging, especially on sensitive issues, sounds hostile and archaic to western ears the Chinese national brand will be penalized. The way I phrased it last night is that they need to find a more nuanced approach and give their diplomats room to tailor the substance of their messages to different national audiences. This again is an area that the government holds very close for pretty obvious reasons.

You can see a repeating theme here. All of these three areas rub up against the political philosophies that underpin the Chinese government. I am not going to get into a discussion of the rightness or wrongness of those philosophies now because that’s way too big and sensitive an issue, and also beside the point of this post. However it does point to an essential conflict between the traditions of government in China and the demands of a modern, global communication environment. This is something that will be wrestled with for a while here, but it’s also something I think that some elements of the government understand well.

A more human touch and the Led Zeppelin factor

When I think back across those three points, it’s clear to me that one of the things I seek is a sense of human engagement – less communication via institution, more communication via influential individual voices that can put a human face on China. One of the advantages of living here is that you come to see the China as a country of people, rather than either an impenetrable monolith or a collection of news story archetypes (the jailed dissident, the victim of corruption, the thuggish official, the sphinxlike modern artist…). It also reflects my personal belief that in general institutions suck at public communication, and that people can do a much better job. You can see this at work in things as basic as Wen Jiabao’s fairly well-received (though not covered in China) appearance on Fareed Zakaria’s show on CNN, which we also remarked on.

On the issue of humanizing communication, the topic of the Olympic opening and closing ceremonies came up. I’m afraid I was rather harsh in my judgment, describing them as “charmless.” Don’t get me wrong: It was also stupendous, amazing and, at times, breathtaking. But it was also mostly devoid of human scale and completely devoid of humor or warmth. This isn’t an exclusively Chinese problem. Superbowl halftime shows are also pretty charmless. But American football doesn’t have a global brand problem (or maybe it does, since no one outside of North America cares about it).

My favorite moment of the Olympic ceremonies was when sportswear magnate Li Ning was hoisted into the rafters of the Bird’s Nest to light the Olympic flame, but that’s because I consider that maneuver the greatest ambush marketing stunt of all time, conducted at the expense of Olympic sponsor Adidas.

That notwithstanding, David and I both think that Li Ning is one of the Chinese brands with the best prospects internationally. In Q&A someone asked if it was possible to reconcile Li Ning’s desire to compete with Nike, Adidas, Reebok etc. with their need to build a domestic market. Our answer: Sure. Brands are global, but marketing is local. More broadly, I see fashion and Chinese streetwear as something with real international potential, niche though it might still be.

Further to the Olympic thing, I am apparently alone in the entire universe in having liked the handover to London 2012 in the Beijing closing ceremony, where Jimmy Page was hoisted out of a double-decker London bus on a hydraulic platform to the riffs of “Whole Lotta Love” while a multiculturally-correct throng punted soccer balls around the bus. Admittedly I have a big soft spot for Led Zeppelin and maybe it would have been more contemporary to hoist, oh, Lily Allen or someone like that out of the bus. (Although with Lily Allen there would have been a high risk of profanity — it’s a sign of the times that Whole Lotta Love is the safe choice.) But as goofy as it was, the London handover was a good antidote to the general stiffness of the Chinese proceedings. We’ll see how their actual opening ceremony goes. It’s -gasp- less than two years away now.

Comparisons with Japan and Korea

Comparisons with the rise of Japanese and Korean corporate and national brands came up a couple of times in the discussion, including in the Q&A. Both of those countries made the leap from being seen as producers of low-quality or anonymous products into the being the homes of extremely powerful global brands, especially in the automotive, technology and consumer electronics businesses.

We talked a bit about parallels in industrial policy between China, South Korea and Japan, but also the very different situations that each nation faced, especially with regard to economically and politically important American audiences. Japan and Korea both rose to industrial prominence as American client states. Even when American suspicion of Japan was at its height, in the late eighties, that fundamental dynamic was in place. China, on the other hand, is a large and increasingly powerful geopolitical rival to America. It’s also emerging in a very different media age than Japan and China did. On the other hand, one thing worth remembering is that the emergences of Japan of Korea both took place over generational time spans. China has been growing rapidly since reform and opening-up, thirty years ago, but it has really only been integrating globally for a decade, so let’s all see how things look ten or fifteen years hence.

We somehow managed to get through the entire discussion without touching on the product quality crises of a couple of years ago. Longtime readers will know that I devoted a lot of attention to those issues (classic posts here and here), and that was much more a product of the flow of the discussion and the Q&A than an intentional omission. Quality management will remain a bugaboo of “brand China” for a while, but, China’s enforcement issues notwithstanding, that’s something other countries have had to overcome as well. We also didn’t get into the innovation environment here, and its impact on the national brand. That will have to wait for another discussion.

The event should be podcast shortly via our friends at Popup Chinese, and I’ll throw up a link once I get one so you can get more of the actual discussion. I fear the quality won’t be great since it was recorded with little electronic dictaphones rather than from our microphone feeds, but we’ll see what we get. The audience questions were excellent, so it’s worth catching that part of the discussion if you can.

Also, we were a very Ameri-centric panel. In fairness to CET, I was the second choice after Hung Huang, so it’s not for lack of trying. The result was that we framed many of the issues in terms of western –and especially American– audiences. The world is obviously bigger than that and you could have many more discussions about brand China in other parts of the world.

And now a word from our sponsors…

Or, more correctly, for our sponsors. The event was hosted by the extremely swish Capital M restaurant, which, to my mind, is pretty much the sole redeeming feature of the “improved” Qianmen Pedestrian Street. Capital M is by the same group responsible for the well-known M on the Bund. They provided a good room for the event and an astounding dinner for the speakers who had participated in all the Trialogues.  I’m already planning a date night with Mrs. Imagethief there. Not that the company last night wasn’t superb –I’ll refrain with some effort from gratuitous name dropping, but it was a lively table– but there is good company and then there is good company, if you know what I mean.

Update:

In his blog, Atlantic Monthly journalist and former Beijing resident James Fallows notes the inclusion of a China Daily supplement in the Washington Post. An interesting addition to the soft-power arsenal, but subject to the usual state media disadvantages. Now, a Caixin supplement…

I put a link to Gady Epstein’s excellent post on the recent dairy industry PR meltdown in my own earlier post on the topic, but it’s worth coming back to at more length (and not just because I’m referenced in it). Gady’s post is one of the very best discussions of the dark side of PR in China in any source, and anyone interested in the topic should give it a careful read.

Gady remarks a bit on the possible origins of the scheme to undermine competitors through black PR, including referring indirectly to a comment in my own post where I said I felt it a bit too conspiratorial (actually, I said “Snidely Whiplash”, but if you didn’t grow up watching cartoons in the ’70s*, I meant “conspiratorial”) to suppose that the plot had originated at the highest levels of Mengniu management. On that point, Gady writes:

BossePR has worked with Mengniu’s most senior executives for years, people above An up to the very top. Do you conduct black-bag special ops at the behest of a division head if it is against the wishes or previous inclinations of more senior managers?

I suppose it depends how explicit those wishes or previous inclinations are.

Bear in mind that this is all speculation and conjecture. I think that it is plausible that a plan to discredit rivals was hatched or at least discussed at the very top of Mengniu. It would be dumb of said management, but it is plausible. However, I also think that it is entirely likely that top management involvement, if any, could have been more indirect. I would have little trouble believing either a sort of Thomas Becket, “will no one rid me of this turbulent dairy priest?” situation, or a win-at-any-cost culture tolerant of sketchy behavior in the pursuit of business goals.

In any of the above situations, top management would still deserve a good share of the blame. In practice, it seems more likely that a bunch of mid-level types and agency people will get their heads rolled, with the damage stopping a comfortable distance from the executive suites.

There is nothing particularly Chinese about discrediting rivals. It is a time honored PR tactic often referred to by the antiseptic term “depositioning”, which makes it seem vaguely professional and like you’re not engaging in some kind of wicked skullduggery. In fact, your skullduggery may be someone else’s hard-nosed marketing. Witness the technology industry’s time honored tactic of dispensing FUD –fear, uncertainty and doubt– about rivals. The trick is to employ some subtlety and to not to cross the magic line separating FUD from, oh, libel. Plus, the self-infatuation of many technology executives means the source of FUD is often –though not always– clear. If Steve Jobs is trashing Android, well, he’s pretty clearly talking his book, as it were.

What is particularly Chinese about this case is that it involves a complex skein of intertwined ethical problems across multiple industries. If you have a media that easily falls into bed with big companies and an ethical environment that tolerates PR firms willing to sock puppet for cash and a public primed to believe the worst of scandal-plagued industries, well then you have a recipe for trouble.

It’s great that Chinese media blew the lid off this, but there are plenty more lurking scandals where this one came from.

Speaking of Gady and dairy, looks like I’ll be back on Sinica this week, with Gady pinch-hosting for traveling Kaiser, as we discuss PR in China as well as some other interesting stuff.

*Snidely Whiplash was the villain from the Dudley Do-Right cartoons. He was played by Alfred Molina in the 1999 Brendan Fraser clunker, but I’ll always remember him like this:

Curses! Foiled again!

Ye Kai, a writer, denounced that reading such textbooks is like drinking melamine-contaminated milk after finding that many textbooks used by primary schools in Shanghai have distorted facts.

“I strongly protest these tainted textbooks,” he was quoted as saying by Guangdong-based Yangcheng Evening News on Sunday.

A big round of applause for the Chinese milk industry, which has finally attained the status of popular bogeyman and metaphorical villain. It takes years of spadework (or being the American finance industry) to achieve something like this. Nice work, everybody.

Totally unrelated, but also of interest: The one textbook inaccuracy actually cited in the article concerns Thomas Edison, who apparently, despite information to the contrary in Shanghai textbooks, did not use a mirror to illuminate an appendectomy at age seven.

My heavens. An entire generation lost.

And that light bulb thing was total BS, too.

A couple of months ago baby formula maker Synutra found itself the victim of allegations that its product was linked to early puberty in girls. Its shares ate a big one on the NASDAQ and the company spent much time defending itself furiously. So furiously, in fact, that I was moved to ding them on Twitter for a CEO quote blaming the situation on “certain parties in the media.” Don’t blame the media was the gist of my message.

As true as I still think that is in general, Synutra’s CEO may have had a point. Chinese media reported yesterday (and the China Daily relayed in English today) that executives from giant dairy company Mengniu and one of their PR firms, BossePR, have been detained on suspicion of stoking rumors against both Synutra and Mengniu’s chief rival, Yili. Mengniu is denying the allegations.

Who knows what really happened. As one analyst points out in the China Daily story, baby formula isn’t really a huge part of Mengniu’s business, so why go after Synutra? This is probably true at the board level. I find it hard to believe that the senior management of Mengniu were sitting around the conference table and came up with a plan to slander Synutra. It’s just a touch too Snidely Whiplash for me.

On the other hand, while the baby formula business may only be a small part of Mengniu’s business, I’m sure it’s damned important to whomever manages it at Mengniu (and is, presumably, judged on its success). There are two reasons why the allegations are at least plausible. First, as anyone living here knows, despite its brand images of purity and healthy, angelic children, the milk business in China is capable of complete sordidness. One need only read up on the now legendary melamine scandals of 2008 to be reminded of that. And there is more where that came from. In our family all the milk comes from one of the expensive organic farms near Beijing. It costs about triple what regular local milk costs, but when it’s your kid you err on the side of less melamine if you have the means. The milk industry in China is like the finance industry in the US now: Trust is so damaged that people are primed to believe the worst of just about any company, and it’s not hard to get the rumors flying.

The second factor is that using PR agencies and Internet firms to run sock-puppet campaigns attacking rivals is a time-honored tactic here. (BusinessWeek has written a bit about this here, although this story lumps some companies I respect together with some I don’t.) I’ve run into it in both the car and consumer electronics industries. It’s not always incendiary child health stuff like the Synutra allegations. Sometimes it’s just garden-variety griping about products. Even that can be extremely difficult to defend against. On the Internet, criticism is forever and anonymous rumors or allegations can take on a life of their own, at warp speed if they’re salacious or involve the health of children. And it’s generally pretty cheap to do, so the temptation to stoop to such tactics can be powerful, especially in a competitive consumer business.

I’m a fan of transparency online. When I was on the agency side my advice to clients was straightforward: Don’t astroturf, don’t sock puppet. The long-term benefits are small and the risks to reputation are high (as may be the legal risks). I expect that most international agencies would give similar advice and that most PR managers, especially at international firms operating in China, would agree. At least to your face.

Nevertheless, when push comes to shove, it seems some companies still take the easy path, and many agencies will do what they need to do to keep a client happy. Also, many large companies use a range of international and local agencies, often reporting to different managers facing different pressures and having different points of view about what constitutes ethical PR. A company without a clear policy or tight management of such things may find that not every department is equally scrupulous in its approach. I wonder if that’s what happened to Mengniu.

Note:

After this post was published I also appeared on Blue Ocean Network’s “Chinalogue” program along with Alistair Nicholas of AC Capital Consulting [Note - now of Weber Shandwick - WM] to discuss…PR slime! By which the producers of the show meant the recent Mengniu vs. Yili vs. Synutra PR sockpuppet slagfest. The heavy-breathing title of the segment aside, most of the show was a fairly sober discussion of PR ethics in general. The video is here.

See also:

• China Hearsay: Holy Cow: Defamation case against Mengniu raises some questions
• EastSouthWestNorth: The Chinese dairy wars — Roland’s awesome collection of Chinese press coverage and statements (in translation). Well worth a look.
• Forbes’ Gady Epstein with an excellent in-depth take: Creating a scandal for a fee: the dark arts of China PR

Happy, happy!

I don’t mind the idea of “monetization”, in the sense of making money or making a business profitable. I like a paycheck and a profitable business as much as the next capitalist (within limits – as a lefty I also believe in government regulation). But every time I run into the word “monetize” in a presentation or news article I get a little pain in my side, like a weasel gnawing on my ribs.

I don’t know why I hate this word so much. Perhaps it’s the miasma of management-consultancy buzzword that clings to it. Maybe it’s that every time I see it, it’s being discussed in the context of the financial prospects of some social media service to which I have committed every conceivable piece of personal information — underwear size, starlet infatuations and such. Maybe it’s because “monetize” is a nakedly transitive verb. Monetizing is something you do to someone. Or more accurately, to the vast pool of faceless someones. Like those aliens on the original Star Trek series who shrunk the crew of the Enterprise down into little, chalky, white cubes. My god, Jim! They’ve been monetized! So when the management of Facebook or Twitter or whomever is gravely discussing how to monetize their users, I get this reflexive thought: Hey, pinheads, thats me you’re talking about!

The funny thing is that on an intellectual level I don’t even particularly mind being monetized. I’ve been successfully monetized by E-Bay, Amazon, iTunes (iTunes has probably monetized several generations of my descendants by now) and indirectly monetized by just about every social network, blog and website that’s ever carried an ad. None of which I’ve minded as long as I was getting decent content or services out of the deal. Monetize me, baby. Turn me into one of your little, white cubes.

But emotionally it’s a different matter. It sounds impersonal. Distant. Exploitative. I can’t help but think that the mass usership of Facebook and such would be less prone to collective freakouts at every attempt to “monetize” them if some more accessible –and perhaps less transitive– way could be found to discuss the process.

I suggest from now on instead of “monetizing” we use the term “encashing.” That sounds like it might actually benefit users. If I’m “encashed”, perhaps –just maybe– a box full of money will show up in the mail, if only by accident.

So go ahead, Facebook. Encash me. But don’t try to securitize me or I’ll set the dogs on you.

I've been encashed!

I’ll answer question that from my point of view in a moment. But first, there were two related articles in the last day or so I thought worth mentioning. One was a post on the always useful China Media Project providing a brief overview of the history and significance of the bulletin boards (or “forums”) in China. The persistence of the forums as agenda setters is one of the defining characteristics of the Chinese Internet. It’s also a major thorn for ethical PR people because the forums can be difficult for companies to engage with and the easiest (and laziest) solution is often to pay off commenters to promote your brand or disaparage your rivals. The rationalization is something like this: It’s relatively cheap, it seems to work and, hey, even the government uses paid commenters to manage public opinion, so why shouldn’t we?

Well, to paraphrase something my mom used to say, if the Chinese government jumped off a bridge, would you? (In my case, it depends. Is the government wearing cool shoes?)

Call me naive, but I continue to believe that the best long-term approach is transparency and respect for customers, fans and Internet users in general. But as long as companies operating in China don’t want to feel like they’re fighting asymmetrical battles against companies willing to employ such tactics, or feel like this is the easiest route to buzz or managing issues, the temptation will be there.

The second article is a long Xinhua piece on the phenomenon of cyber-celebrity in China. This has been another defining aspect of the Chinese Internet. It’s not unique to China –America, after all, gifted the world with Gary Brolsma and the Numa Numa Dance– but I don’t think we can compete with China in terms of color, consistency, or cynical appropriation for marketing purposes. This article gets into a discussion of forum ethics and promotion of Internet celebrities. Perhaps more interesting, however, is the pathos that seeps out of the article. One thing China and the US have in common is the degree to which people will humiliate themselves by publicly attempting to demonstrate that they have talent despite vast evidence to the contrary. There’s a surprisingly bitter appearance by the formerly impervious-to-self-doubt Furong Jiejie.

So, by an indirect and rambling route (sorry, but you should be used to it by now) we come to the question I posed earlier. Is it OK to release a viral video with an in-obvious brand message and only disclose the identity of the brand after a week or two?

Well it’s legal, and sometimes even successful, but I don’t think it’s a good idea.

There’s an obvious question that arises in that you can do a print or TV ad campaign that doesn’t immediately identify the brand. So why not an Internet campaign? The problem is that a viral campaign requires people to be complicit in spreading your ad, while most other campaigns do not. For a funny video, most people might not care if they’re unwitting agents of advertising, but at a fundamental level it’s still deception. If there’s one thing we’ve learned from Facebook’s recent problems it’s that you can get yourself in trouble by overestimating the desire of people to be involuntarily coopted into marketing campaigns. Perhaps that reaction isn’t as strong in China, but I’m reluctant to bet a reputation on it. Personally I think that if someone is going to forward a link to their friends, they have the right to know who they might be promoting by doing so, and to weigh that in their decision. If you want to build a real and sustainable relationship with your community of customers, you should treat them with due respect. Part of that is not deceiving them, even as part of a joke that you will let them in on later. Finally, many of the most powerful viral videos I’ve seen have been completely clear about the brand behind them. It seems to me that if you’re sufficiently creative, you shouldn’t need to resort to deception, and take the risks that it entails.

I have no doubt that there will be different opinions about this, especially as it relates to China. Sock it to me.

Furong Jiejie. Who says China doesn't have soft power?

“PowerPoint makes us stupid,” Gen. James N. Mattis of the Marine Corps, the Joint Forces commander, said this month at a military conference in North Carolina. (He spoke without PowerPoint.) Brig. Gen. H. R. McMaster, who banned PowerPoint presentations when he led the successful effort to secure the northern Iraqi city of Tal Afar in 2005, followed up at the same conference by likening PowerPoint to an internal threat.

“It’s dangerous because it can create the illusion of understanding and the illusion of control,” General McMaster said in a telephone interview afterward. “Some problems in the world are not bullet-izable.”

In General McMaster’s view, PowerPoint’s worst offense is not a chart like the spaghetti graphic, which was first uncovered by NBC’s Richard Engel, but rigid lists of bullet points (in, say, a presentation on a conflict’s causes) that take no account of interconnected political, economic and ethnic forces. “If you divorce war from all of that, it becomes a targeting exercise,” General McMaster said.

Commanders say that behind all the PowerPoint jokes are serious concerns that the program stifles discussion, critical thinking and thoughtful decision-making. Not least, it ties up junior officers — referred to as PowerPoint Rangers — in the daily preparation of slides, be it for a Joint Staff meeting in Washington or for a platoon leader’s pre-mission combat briefing in a remote pocket of Afghanistan.

In fairness, there is nothing intrinsically wrong with presentation software, whether it is PowerPoint or Keynote or whatever. It’s just that presentation software is almost universally abused, even by those of us who know better. Often even well-intentioned people with good presentation skills succumb to corporate culture. It’s certainly happened to me.

However, the New York Times article spends a great deal of time on one apparently infamous slide, which they have an image of. It is designed to show the complexity of the situation in Afghanistan. I actually don’t hate that slide as much as everyone else seems to me. To me, it’s all in the intent. If that slide is there to be talked to at length, and used as an detailed explanatory tool, it’s a disaster. However if it’s there simply to serve as a visual metaphor for the complexity of the situation in Afghanistan, it could potentially be quite powerful. Context is important.

Also on the military theme, don’t miss retired Marine colonel and counterinsurgency specialist T.X. Hammes’ essay, “Dumb-Dumb Bullets“, on how PowerPoint erodes decision-making capabilities. As a writer, it resonated with me.

The other kind of bullet points.

Huang Guangyu, the richest man in China, went on trial last week in Beijing. The founder of home electronics chain Gome was brought up on charges of bribery, money laundering, and insider trading. The dragnet in the investigation leading up to the trial has already widened, and has implicated a number of high-ranking cadres in the Ministry of Public Security’s white-collar crimes division. In this edition of Sinica, we discuss the perils of wealth, and what Huang’s trial means for rule of law in China. We also examine China’s dilemma over soaring property prices, and Beijing’s sharp new policies to curb speculation. Do they portend the collapse of the real estate bubble?

The usual lively discussion ensued. Find it through the Sinica link above, or on iTunes.

But stick with me, because that’s the point. The fact is that everyone and their goldfish has an opinion on Google’s fortunes in China, but few people actually know anything conclusive, so what we’re getting is a huge dose of punditry, analysis and opinioneering. This is the kind of thing that PR people live for, because what we’re witnessing first hand is the creation of a narrative. Or, rather, several narratives that serve different worldviews, audiences and points of view.

This is PR in action: The effort to influence perception and opinion with regard to an entity or event, generally with the objective of supporting some kind of end-state result (higher sales, a political victory, popular consensus, the launch of a war, etc.).

PR people are often accused of being liars. This is a shame, because a good PR person doesn’t lie or make up facts. I’d like to tell you this is because PR people are noble souls who want only the best for the planet and fuzzy puppies, but the real reason is that lying makes you vulnerable and doesn’t usually work very well (and, yes, it’s also wrong). Lies can often be proved false, and this can cause your position to unravel pretty quickly, often with devastating consequences. Even if you string the lie out long enough to achieve a stated objective, you’ll take damage on the backside if your story comes apart. See, for example, weapons of mass destruction and the Iraq war, which claimed the reputations and legacies of many people.

But PR people do often try to interpret the facts (or obscure them) in specific in selective ways. In the vernacular, we spin things. In fact, the very term “spin doctor” (sometimes credited to the novelist, Saul Bellow) refers to trying to define the interpretation of events or facts — to determine which way they “spin” in the public sphere.

PR people do this for a living. But we’re not the only ones who do it. Anyone with an agenda tries to interpret facts to create a narrative that serves that agenda, or that serves their world view. Often, dueling parties compete to establish the defining narrative of a situation or event. Consider how Democrats and Republicans competed to establish the narrative for health care reform in the interest of divergent political objectives. The media and public spheres of discussion are thus, often, noisy and squawky collections of competing narratives interpreted or distorted from the same basic set of facts in order to serve different agendas. Sometimes it takes a long time for a “definitive” narrative to emerge. Sometimes a definitive narrative never emerges, or different audiences arrive at divergent narratives because they’re exposed to different influences (anyone who looks at how Chinese and Western audiences fail to see eye-to-eye on many issues will be familiar with this).

This is essentially what has been happening with Google over the past few weeks, as people have competed to establish different narratives regarding its withdrawal from China. There has been a huge amount written and said about Google’s predicament and options in both the Chinese and Western media and blogospheres. At last count I had 27 articles bookmarked since the announcement that Google would shift it’s Chinese search operation to Hong Kong. And there were plenty that I didn’t bother to bookmark.

Well, that’s just too much damned stuff to analyze, and I am way too lazy to pore through it with a notebook and try to draw any meaningful conclusions about what it all means (hey, I don’t get paid for this). Also, my overwhelming impression is that there is so far roughly zero consensus on what it all means.

What I did do, however, was to put together a handy chart that shows the key known facts, and, based upon all the articles I’ve read, how each of the major interest groups that I observe is spinning or reacting to each of those facts. In each case, the vertical thread through the series of facts creates the skeleton of a narrative. And that’s what each of these parties –Google, its rivals, the Chinese government, the Western activist community– is trying to do: They’re each trying to control and define the narrative of Google’s situation in China to serve their own agendas. They are, in other words spinning. Here is what the result looks like:

I realize this is a vast oversimplification and there are no doubt various interests omitted, but this captures most of the main parties and facts. What’s not included here is any kind of conclusion of each narrative. In my opinion, the story is still unfolding and its too early for that. But we’ll see how things go over the next few weeks.

The other thing is that these narratives aren’t in equal competition. To use a possibly inappropriate military metaphor, there are different theaters of operation in which the stakeholder have varying levels of influence. So, in the US, Google and the activist (and analyst) community are the loudest voices. in China, the Chinese government has the tools to define the public narrative, and has been using them liberally, although there is some ferment in the margins (also here).

Eventually, there will be a canonical version of Google’s misadventures in China. or at least one canonical version in the West and one in China. These may not be the creation of a single group. One group might control interpretation of one element of the story, and one group control another. But for the moment, the fun is in watching the battle to own the story. Enjoy it while it lasts.

Finally, from a PR perspective, there is possibly one overarching lesson that can be drawn from this whole situation. I can’t take credit for this insight, it comes from Craig Adams, a colleague of mine. But it’s deceptively straightforward and I agree with it wholeheartedly. He said that if you have to sell out your basic principles to do business in China, that’s a pretty good sign you should reconsider your plans.

Other sources (just to prove I’ve done my homework):

• Official Google Blog: A new approach to China: an update
• After China Move, Google Faces the Fallout – NYTimes.com
• Rio Tinto Is and Google Refused To Be, Corrupt, Rule of Law in China (Asian Healthcare Blog)
• G-Day: Letter from China : The New Yorker
• Billionaire linked to Rio Tinto bribe case | Stuff.co.nz
• FT.com / China – Redirection of users ‘just a little trick’
• RConversation: China, the Internet and Google: my uninvited testimony
• An Interview with David Drummond of Google – Science and Tech – The Atlantic
• Google Braces for Fallout in China – WSJ.com
• Stance by China to Limit Google Is Risk by Beijing – NYTimes.com
• Silicon Hutong: The Google Shuffle and the Hong Kong Twist
• China Kowtows To Nobody, Especially Google – Forbes.com
• Stance by China to Limit Google Is Risk by Beijing – NYTimes.com
• Google’s China Site Redirect Was Pretty Clever, Actually (Silicon Alley Insider)
• Google’s unwise move to Hong Kong – How the World Works – Salon.com
• Letter from China: Life Without Google : The New Yorker
• Brin Drove Google to Pull Back in China – WSJ.com
• Google Searches for a Foreign Policy – NYTimes.com
• Three Google / China Follow-Ups – Science and Tech – The Atlantic
• China Unicom Dumps Google from Android | John Paczkowski | Digital Daily | AllThingsD
• China says Google breaks promise, totally wrong to stop censoring (Xinhua)
• Google Would Remind My Grandpa of the Arrogant White Invaders – China – Gizmodo
• Heard on the Street: On Rio Tinto and Google in China – WSJ.com
• Google Official Calls for Action on Internet Restrictions – NYTimes.com
• How China’s internet generation broke the silence | World news | The Guardian
• Goodbye Google and GM information (China Daily)

Previously:

Google detonates the China corporate communications script (January, 2010)

Note: Table slightly updated to correct “mainland” to “Greater China”.

Before you gasp in a fit of effete surprise, let me explain. As a card-carrying Bay Area intellectual snob, my pedigree is more Whole Foods than Wal-Mart, even if Whole Foods is basically just Wal Mart for Prius-driving gourmets (well, and my mom). But in my neighborhood in Beijing  walking-distance supermarket options are limited to the eye-wateringly expensive import-barn in the basement of Shin Kong Place (RMB35 for four kiwi fruits? Sure!); the fast-declining Bonjour, in the basement of the equally fast-declining Sunshine 100 (like Carrefour without the lingering veneer of French-ness and, in winter, heated like hell’s supermarket); and the Wal-Mart at Wanda Plaza.

OK, we have a Jingkelong, too, but it’s not much use if your shopping needs extend beyond soft drinks, instant noodles and strawberry-flavored UHT milk. Once upon a time we had a Jenny Lou, but Jenny apparently decided our neighborhood was for losers and moved down to the accursed Jianwai Soho instead. So Wal-Mart it is. Plus, they deliver, which is essential when your shopping needs include kitty litter for two.

With Wal-Mart fresh in my head, and fresh kitty litter in my guest bathroom (for the cats, not for the guests, although there have been some parties…), I was therefore interested to see a Washington Post article covering in mostly positive terms Wal-Mart’s efforts to get its Chinese Suppliers to improve their environmental and labor standards (part of a special report called, “The Climate Agenda.”):

As a result [of Wal-Mart's urging, Hong Kong-based soap and cosmetic manufacturer] Lutex has been paying attention to more efficient light bulbs, better ventilation and less packaging. It switched from Styrofoam to recycled paper and saved enough Styrofoam to cover four football fields. And Lutex, which has been here since 1991, says it treats four tons of wastewater that it used to dump into the municipal sewage line. That water was supposed to be treated by the city, but like three-quarters or more of China’s wastewater, it almost certainly wasn’t.

“We heard that in the future, to become a Wal-Mart supplier, you have to be an environmentally friendly company,” [CEO Benny] Fung said. “So we switched some of our products and the way we produced them.”

Wal-Mart has more than 10,000 suppliers in China. In addition, about a million farmers supply produce to the company’s 281 stores in China. If Wal-Mart were a sovereign nation, it would be China’s fifth- or sixth-largest export market. So the company hopes that small measures taken by all suppliers start to add up. Its 200 biggest suppliers in China have already trimmed 5 percent of their energy use.

***

In October 2008, Wal-Mart held a conference in Beijing for a thousand of its biggest suppliers to urge them to pay attention not only to price but also to “sustainability,” which has become a touchstone for many companies.

“For those who may still be on the sidelines, I want to be direct,” Wal-Mart chief executive Lee Scott said sternly. “Meeting social and environmental standards is not optional. I firmly believe that a company that cheats on overtime and on the age of its labor, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honor its contracts will ultimately cheat on the quality of its products. And cheating on the quality of products is the same as cheating on customers. We will not tolerate that at Wal-Mart.”

Well, if he says so.

My first reaction to this story was, “What a PR score!” Cynical me wasn’t really prepared to consider if there might actually be something to this. But might there be real business motivations for moves that seem antithetical to a company with a mission to drive costs to the absolute lowest level?

One possible answer to that question can be found in a post at the well-known “Naked Capitalism” economics blog. Yves Smith suggests three factors that could motivate Wal-Mart to put real effort into pressuring its Chinese suppliers to improve. They are:

• Creating an “insurance policy” against possible American trade restrictions that might be based upon setting minimum environmental and labor standards.
• An effort to differentiate itself in the Chinese market by demonstrating attention to food quality standards and environmental issues.
• A move to appease evangelical Christians who increasingly see earth-stewardship as part of their religious duty.

In fact, two out of those three things (see if you can spot which two) are still essentially public relations. Personally, I have a hard time believing the third is anything close to being a sufficient motivation for a serious revamp of Wal-Mart’s Chinese supplier relationships, but, then, I live a long way from the American heartland and am thus not well attuned to its priorities.

The second point seems plausible, but as a regular Wal-Mart China shopper I can attest that Chinese shoppers seem perfectly enthusiastic about Wal-Mart already. Wal-Mart also does a brisk trade in allegedly organic Chinese produce (we buy it, but I’m really not sure how far to trust the “organic” claims). At any rate, as an approach it sure couldn’t hurt, unless it starts leading to significant job losses at Wal-Mart suppliers in China, in which case, all bets are off.

Ultimately, although the impact is in China, I still see this as primarily a move to influence the customers and activists back home in the US who have the greatest ability to influence Wal-Mart’s business. China environmental and labor issues are important in China, of course, but arguably not as important as they are in the US. (Next up for trouble: Apple? Don’t miss the bizarre fanboy comments.)

As for me, I’ll take a pass on the live soft-shelled turtles (where are the PETA people?), but the produce section isn’t bad and you can’t beat a fuzzy car-seat cover that carries the inscription, “Space cat who dreams of happiness!” If only I had a car.

Space Cat Who Dreams of Happiness

A few days ago, on the construction site across the main boulevard from where I live, a set of huge characters went up, exhorting the workers to “close the gap, finish the building”. OK, twenty-foot characters seemed a bit excessive, but exhortations hung on the side of construction sites are pretty common in this town.

Then it turned out that the characters lit up at night. Great. Two rows of twenty foot, illuminated characters pointed more or less straight at our bedroom and living room windows.

And then they hung an enormous screen in a conspicuous gap in the characters, and this is the result:

Yes, that’s right, I have watch this sign count down for the next three and a half months. At least. Because four years of Olympic countdown times and a smattering of Shanghai expo counters just weren’t enough. (Only one row of characters is visible in this photo, taken from a balcony at the eastern extremity of our apartment, but trust me, there are two.)

The photo really doesn’t do justice to the scale of this thing. These characters are colossal, each well over a tall building storey in height. Maybe it’s just me, but couldn’t they have simply used the money to offer the workers a bonus for finishing quickly, and spared every resident of Soho New Town, Blue Castle, China Central Place, and the old local neighborhood on the northwest corner of Dawang Qiao the tyranny of watching this thing ratchet down by days for a third of the year?

Perhaps this isn’t quite intrusive enough. I actually think they should have installed personal countdown clocks in the living rooms of all our apartments, and perhaps forced our TVs to display it as well any time the sets weren’t tuned to CCTV’s “Network News”. Perhaps a refrigerator magnet, too.

This building has actually had a troubled construction. It was going strong until the beginning of 2009. Then construction wrapped up shortly before Chinese New Year, for the holiday we originally thought. But it never started again. I can only presume the backers became victims of the financial crisis. But like that building that lay fallow on Gongti, near Dongdaqiao Rd. Sanlitun Rd., for something like three years before finally being completed, it appears to have found fresh backing in the midst of Beijing’s insane property bubble, and is now racing toward completion. One presumes the developers want to get the units offloaded before people come to their senses and realize that there is an upper limit on the investment value of a bunch of apartments nobody is living in.

At any rate, I’d like to thank them all for blotting out a big chunk of what little sky is visible from our apartment and replacing that sky with an enormous, crimson death-clock.

Also, what is up with the new CCTV tower? That thing still isn’t open. Are they waiting for something to happen with the burned-out hulk of the Mandarin Oriental? That’s a big pile of real estate to be sitting idle. But, then, when you’re an opaque, quasi-governmental entity, maybe that just doesn’t matter.

A quick pointer to an excellent post at the Wall Street Journal’s China Real Time blog, which busts several myths concerning Google in China that have been widely repeated in the past few days, including those concerning the health of Google’s business in China, whether or not they already uncensored search results here, and more. From Beijing-based correspondent Sky Canaves (@skycita), showing once again that, if you want to know what’s going on in China, talk to someone who’s here.

The first half of the post discusses alleged hacking attempts on Google, apparently with the aims of both recovering Google source code and accessing the Gmail accounts of dissidents. But the second half of the post is more interesting. The money grafs below (emphasis mine):

We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

No doubt a great deal has transpired behind the scenes in the lead up to this announcement. To save time, here’s what I don’t know:

• Whether this is linked to rumors of Google’s possible withdrawal from China and staff exodus that circulated several weeks ago.
• The relative weights of the hacking issue, censorship issue and Google’s business struggles in China in leading the company to make this statement.
• What, if any, discussions Google had with Chinese authorities prior to making this statement (they speak of discussions “over the next few weeks”), or whether there are actually continuing negotiations.
• Whether recent blocks of Google Docs and Google Groups in China contributed to this decision.
• Whether Google would have done this if their business in China was stronger. China contributes a minuscule portion of Google’s revenue.
• What will actually happen to Google’s business in China in the long run.

Here is what I do know:

Google has taken the China corporate communications playbook, wrapped it in oily rags, doused it in gasoline and dropped a lit match on it. In China, foreign companies tend to be deferential to the authorities to the point of obsequiousness, in a way that you would almost certainly never encounter in the United States or Europe. Scan any foreign company’s China press releases and count the number of times you see the phrase, “commitment to China”. Demonstrating “alignment with the Chinese government’s agenda” is an accepted tenet of corporate positioning and corporate social responsibility work in China. This is testament to the degree of direct power that the Chinese authorities wield over the fortunes of foreign businesses in China. Even when foreign companies are in dispute with the Chinese government they tend to offer criticism obliquely as long as they have a business stake or operations in the country. Note, for example, the scrupulous diplomacy of Rio Tinto’s communications concerning the detention of its employees last summer, a far more serious situation than anything Google has encountered (although also with far more money at stake).

In this situation Google has undertaken a bet-the-farm confrontational communications approach in China. They will not have made this decision lightly. Dressed up in the polite language above is what is essentially an ultimatum: Allow us to present uncensored search results to our Chinese users or we’ll walk. The Chinese government is not likely to cave to an ultimatum from a foreign company, no matter how decorously delivered. As Richard Waters of the FT has pointed out, the language does leave some wiggle room for further negotiation. However, Imagethief cannot imagine a circumstance in which the Chinese government will give Google free reign, especially in the current, highly restrictive climate for Internet services. Barring some surprising developments, the clock would therefore appear to be ticking for Google.cn, if not Google’s overall operations in China. It will be very interesting to see how this plays out.

Would Google continue with an office in China if there was no Google.cn site? They could still conduct R&D here, for instance. But Google’s R&D operations in China have been troubled (remember the Sogou IME scandal?) and if the security issues are taken at face value continuing operations here in the absence of a local business to support might simply be extra risk. Consider how many China R&D operations are “PR&D”, designed to demonstrate that essential “commitment to China” in support of a revenue-generating business in China. It’s not that real R&D doesn’t happen here, but how many companies do high-level, primary R&D in China in the absence of an on-shore business and supporting government relations program? And could Google attract talent to a pariah operation? Distraught Chinese netizens are already laying flowers at Google’s China headquarters.

The Wall Street Journal’s story (sub) on the unfolding situation makes some interesting points (emphasis again mine):

The common assumption, however, is that no matter how onerous the limitations and challenges faced by foreign companies in China, the market is too big and important to walk away from.

That calculation has forced a number of foreign firms to accept conditions in China that they might not tolerate elsewhere. The country has 338 million Internet users as of June, more than any other country.

Google would be the most high-profile Western company in recent years to draw a line under the kind of compromises it is prepared to make and walk away from China.

It would be an extremely rare case of a foreign company taking a stand on human rights, and placing that issue over commercial considerations. A number of foreign companies exited China after the Chinese army crushed student protesters around Tiananmen Square in 1989. But they mostly came back in the following years.

A Google withdrawal would also be an implicit rejection of the argument made by many technology companies that their presence in China overall helps expand access to information for Chinese citizens, despite censorship.

That’s the very last line in the story, but I found it one of the most interesting. If you followed the original justifications offered by many American Internet companies for launching businesses in China, or the congressional hearings on the matter in 2006, you will recall that the argument that even a censored presence in China improved access to information for Chinese Internet users was central. If Google repudiates that argument it will put pressure on other American Internet firms currently toeing the regulatory line in China, especially Microsoft, and weaken one of their core public arguments for a continued presence in China. Then again, it may also represent an opportunity for them. After all, “Google” doesn’t phoneticize well in Chinese, as the flap over the “谷歌” brand demonstrated. But “Bing” works quite nicely indeed.

This only the latest chapter –albeit potentially a critical one– in the very interesting story of Google in China. Someone needs to write the book. Anyone want to step forward for that?

See also:

• Rebecca MacKinnon’s roundup of responses.
• James Fallows’ analysis on how this development fits into a broader picture of increasingly tense economic relationships for China.
• Sarah Lacy in TechCrunch, citing tweets from both Bill Bishop (@niubi — now also blogging again at Digicha) and Marc van der Chijs (@chijs).
• Brief US State Department statement.
• CNBC interview with David Drummond (Video – also embedded below): “We’re not saying one way or the other whether the attacks were state sponsored…” Note also the silly use of the word, “cyberterrorists” by the interviewer.
• Brief, relatively straightforward report from the People’s Daily online (Chinese).
• Chinese telecoms analyst Xiang Ligang calls it “psychological warfare”, doesn’t think Google will pull the trigger, and doesn’t think it will be a cataclysm if they do (if I read it correctly – Chinese).

Updates:

• On the corporate communications aspect, this quote from Jonathan Zittrain of Harvard’s Berkman Center, in a Mercury News story (via Jeff Jarvis’ BuzzMachine):

“In a world in which we are so used to public relations massaging of messages, this stands out as a direct declaration. It’s amazing,” said Jonathan Zittrain, professor of Internet law at Harvard Law School and co-director of Harvard’s Berkman Center for Internet & Society.

• Jeremy Goldkorn (of Danwei) at the Guardian:

The fallout will be interesting. I can’t recall a single case of a major international company with operations in China taking a stand like this. As someone who agreed with Google’s reasoning when it entered China, I also support this move. If it cannot operate here in accordance with its global standards, it should leave. I have given up on getting my own website unblocked by the government and am resigned to the fact that it’s only accessible to people who are outside China or know the technical tricks to get over the Great Firewall.

I’d rather be outside the wall and free than inside it with the icy hand of the censor around my throat.

• Wired’s “Threat Level” blog on some of the considerations within Google (via @kaiserkuo).
• Full disclosure: Imagethief is a supporter of foreign Internet services operating in China. Elaboration in this comment, below, in response to a point from a reader.
• Isaac Mao’s open letter to Google (English), via Harvard’s “Difficult Problems in Cyberlaw” blog.
• Xinhua English report on the statement: “‘It is still hard to say whether Google will quit China or not. Nobody knows,’ the official said.”
• Gady Epstein’s column on Forbes.com: “Dreams of Internet openness in China appear to be a fantasy.” Indeed.
• Evgeny Morozov punctures the feelgood balloon at Foreign Policy: “If…you believe that [Google] did the right thing in China by offering their limited service (rather than no service at all), I don’t see how this move could make you feel good…”

As a general rule, Imagethief dislikes business books, especially instructional ones. I find them tedious and most of them age faster than caviar on a car dashboard. There are, however, exceptions. Most of these are either books based on journalistic reporting of business events, such as, say, Kurt Eichenwald’s “Conspiracy of Fools”, or on personal narratives of business conducted in extremis. Tim Clissold’s “Mr. China”, to this day the definitive “doing business in China” narrative and probably on the shelves of many Imagethief readers, is the defining example of the latter.

One of the magnificent things about China is that it seems to provide a bottomless well of business-in-extremis stories. Like many PR pros, I followed with some interest the great product quality scandals of 2007 and 2008, not least because it has a direct bearing on my work when companies discover that something they manufacture in China is [choose one] toxic/sharp/disintegrating/radioactive/manufactured by child slaves. (That list could be extended, but you get the point.) I was thus pleased when a copy of Paul Midler’s “Poorly Made in China” landed on my desk some months ago. However, it went into the long queue on my nightstand and didn’t actually get read for some months until after I received it. Considering my recently ended blog hiatus, this was perhaps for the best.

In fact, despite my interest in the topic, I was a little reluctant at first to get stuck into Mr. Midler’s book. From the subtitle, “An insider’s account of the tactics behind China’s production game,” and somewhat staid cover art I was expecting something didactic, in the style of the business books I tend not to like. Do not, as the old adage goes, judge a book by its cover. I was pleasantly surprised to find that “Poorly Made in China” is in fact a well told personal narrative of Mr. Midler’s own experiences helping foreign companies to arrange manufacturing relationships in South China. Once opened, I found it entertaining and enlightening (a rare combination also recently attained by Jonathan Fenby’s “Penguin History of Modern China”, one of the books ahead of Mr. Midler’s in my queue, which I recommend to all China expats not already versed in modern Chinese history).

Most of the story concerns Mr. Midler’s work with an American client manufacturing personal care products (e.g. soaps and shampoos) in China. What could go wrong with soap, you ask? Plenty, it turns out, and the story revolves around the struggle of Mr. Midler and his client to maintain quality standards (of the product, the packaging, the factory sanitation — you name it) in the teeth of entrenched Chinese business habits that seem to give rise to corner-cutting at every imaginable opportunity and a few unimaginable ones. From this main thread Mr. Midler branches off into other interesting stories and illustrations.

“So what?” you may be saying to yourself. Chinese manufacturers cut corners at every opportunity. What else is new? Even my Singaporean mother-in-law knows this. “Keep a hand on your wallet,” she warned me when I announced my intention to move myself and her daughter to China six years ago. Needless to say, my personal experience here has been much more positive than she expected, but much of the mainstream reporting on the product quality crises of the last couple of years took a similarly one-dimensional China-as-villain tone.

With that in mind, the value of Mr. Midler’s book is two-fold. First, Mr. Midler tells his story as someone who, despite all the frustrations and adventures, seems to never have lost his basic affection for China. He never falls back on the trope of villainy. “Sister”, the owner of the Chinese soap factory that figures in much of the book, is presented not as a criminal or predator, but as someone trying very hard to succeed in a particular business context. This leads to the second, and main value of “Poorly Made in China”: Mr. Midler does an excellent job of explaining in a readable way that context of Chinese business, and the social, cultural, and economic forces that have shaped the practices of people like Sister. He explains how western buyers and Chinese businesses have created a delicate and sometimes dangerous symbiosis in an environment of ruthless competition, price pressure and complex webs of relationships. The book is critical, but not judgmental, which I found refreshing.

Even if you’re not in manufacturing or dealing with the consequences of manufacturing problems (as we PR people sometimes do), you may find the book interesting as a study in the forces that have shaped Chines business over thirty years of turbocharged economic growth. Many of these forces that have shaped Chinese manufacturers may be at work in your industry as well. They’re certainly at work in mine. Against this reality, efforts such as the following, while admirable for the move toward international public communication, seem modest indeed.

Disclaimer: The publisher and author provided Imagethief with a complementary review copy of “Poorly Made in China”. Make of that what you will. Imagethief gladly accepts review copies, but cannot guarantee that he will read or like books furnished.

Note: Title of this post with apologies to the marketing team for the film “Fight Club”.

I have been trying to find finely-parsed and academic way of stating a basic truth, and it hasn’t worked out. So here it is in plain language: If you’re a large foreign firm taking over a Chinese firm, prepare to be flogged in public. And prepare for it before you announce your acquisition.

Here is a basic PR lesson to go along with that: Part of selling any acquisition is convincing stakeholders of the value that the acquisition will bring in terms that make sense to them. That last part is the detail that often gets lost. In a perfect capitalist world (if you don’t see that as oxymoronic) it would be easy to explain the value of an acquisition to the key stakeholders on all sides of the deal. “Dollars” and a business case would do the trick.

However the real world is messy, not every stakeholder is interested in the share price premium, and I think we can all agree that China is a long way from being a perfect capitalist world. Some of its complexities are nicely captured in a summary of the unwritten rules guiding foreign acquisitions assembled by Dan and Steve at China Law Blog and included in the post linked above:

Foreigners are permitted to purchase large, state-owned enterprises that suffer from financial difficulty, provided the foreign investor agrees to restructure the purchased company.

Foreigners are permitted to purchase non-majority interests in strong, successful Chinese companies, but only if there is some added benefit, such as transfer of technology, advanced management or access to foreign markets.

Foreigners are not permitted to purchase a majority interest in a large and financially successful Chinese company. Even smaller companies are off the table if they are financially sound and work in a core technology field or have created a strong or historically important brand.

I’m a PR man, so I am compelled by some mystical force to reduce these rules to something I can work with: Perception. When you understand how you are perceived by different audiences, you can begin to figure how to communicate and act in way that will reinforce those perceptions if they are good, or change them if they are bad. So here is what China Law Blog’s rules say to me about how foreign companies and foreign acquisitions are perceived in China:

• The government and a loud and influential slice of the grass roots automatically perceives the motives of foreign companies as suspect
• The state perceives foreign acquisitions of Chinese companies as value-destroying by default, even if they’re good for shareholders, therefore it perceives value differently than shareholders do
• A foreign acquisition can be perceived to add value if there is explicit upside with regard to national priorities

This lays out the difficult communication challenge for any company in Coke’s position. Note the really small role of “what’s good for shareholders” in the above. Therefore, in communicating about a major planned acquisition in China, and knowing that both government and popular backlash are likely, leading with shareholder value might not be the ideal approach. But here is Coke’s statement of September 3rd (it’s the same in Chinese):

“This acquisition will deliver value to our shareholders and provide a unique opportunity to strengthen our business in China, especially since the juice segment is so dynamic and fast growing in China. It is also further evidence of our deep commitment to China and to providing Chinese consumers with the beverage choices that meet their needs,” Mr Kent said.

If successful with the offers, the Company will use its expertise as a global beverage company to further develop the Huiyuan brand to address the evolving needs of consumers. There are anticipated synergies that will drive operational efficiencies, particularly in the Huiyuan business’ production footprint and in Coca-Cola’s distribution and raw material purchasing capabilities.

When I read that, here is the order of priorities I see in the messaging:

1. Coke shareholders
2. Coke’s business in China
3. Chinese consumers
4. Huiyuan’s success

That’s a perfectly good set of messages for Coke’s investors and stakeholders back home. But I might reverse that list if I was writing this for Chinese audiences. I also see a message on how Coke’s global experience will benefit Huiyuan. Viewed one way, that seems wonderful and constructive. Viewed through a nationalist looking-glass, which is how many foreign acquisitions are seen, it could seem paternalistic.

This statement was just the initial announcement and one slice of all the communication that took place, and by most measures it is fine (although “commitment to China” messages are such a pro-forma recitation as to have become essentially meaningless). But it’s an interesting glimpse into the formula that often guides MNC communication in these situations.

Huiyuan didn’t post a statement of their own on the day the deal was announced, but two days later they published on their site a congratulatory note from the government of Wanrong county, where they are headquartered. This is also formulaic, but in a locally relevant way. The fact that it’s a local government statement — a third-party endorsement — is a bit of communication in itself. The first two paragraphs are congratulations and a recap of Huiyuan’s history. The last paragraph reads (in loose translation):

The successful merger of Coca Cola, the world’s largest beverage company, with Huiyuan Group will inevitably foster a win-win situation and create more excellent social and economic benefits. We will create an excellent environment for the development of business creativity and promote the common progress of both sides.

There’s plenty of pro-forma recitation in this statement as well, but it’s recitation that speaks directly to local priorities. Coke’s statement, on the other hand, reads like a communique primarily to Coke’s shareholders, who were probably the one stakeholder group that was on-board with the plan from the beginning.

But other stakeholder groups were driving the outcome. Just a day or so before the deal was spiked a further glimpse into the process was afforded by a Reuters article optimistically titled, “Coke expected to get OK for China Huiyuan deal“. The lede is interesting, because it ties Coke’s prospects for success directly to a fortuitously-timed package of new China investments announced earlier this month:

Chinese authorities are expected to grant a conditional approval soon to Coca-Cola Co (KO.N) for its $2.5 billion purchase of Huiyuan Juice after the world’s largest soft drinks maker pledged to invest another $2 billion in China over the next three years.

But the telling stuff is further down in the article:

Beijing’s influential Caijing magazine reported last month the MOC held a closed-door hearing on December 26 to seek advice and hear from Huiyuan’s domestic rivals and drinks industry groups.

Some participants objected to the deal, citing protection of Huiyuan as a national brand as well as concerns about Coca-Cola’s growing monopoly power in China’s soft drink markets where small local juice makers may be hurt.

***

Lawyers and bankers close to the process say the political pressures on the government over this deal have been significant.

While Beijing wants to signal that China is open to foreign investment, it does not want to be seen as easily surrendering national interests and brands, said the sources.

***

“Beijing decided to give the deal a serious and tough review after it saw growing concerns and objections from Huiyuan’s local rivals and some pro-nationalism marketwatchers,” said [an anonymous source].

Again, it’s not the individual statements themselves that are important, but more the overall approaches and priorities they suggest. In the end, only Coke and Huiyan know exactly what steps they took to communicate about the deal to the public and to regulators and other people in the government with an interest in the outcome. Coke has been doing business globally since forever and in China since 1979, and I have no doubt they worked multiple channels very hard. But they still seemed surprised by the backlash.

A friend of Imagethief’s who follows these things reports that Coke PR people at a recent conference had the point of view that they were acting within the law, and that China’s netizens thus had nothing to complain about (this is second-hand, so take it as such). This might be true at a strictly rational level. But rationality is relative, especially in matters of national pride. And, as any parent knows, not having anything to complain about has never stopped anyone from complaining.

If I boil all of the above down into one rule for such situations, this is what ends up stuck to the bottom of the pot: Foreign companies making significant acquisitions in China should assume that the default starting communications position is “in trouble”, and plan appropriately. In fairness, Chinese companies making major acquisitions in the US should probably make the same assumption. In his post linked above, David Wolf writes:

Any acquisition of a local firm by a foreign company demands a communications effort directed at both the general public and the policy making elite that makes a logical, intelligent, and sensitive case for the purchase. The bigger the buy, the better you need to be at the communications.

So true. And this was the biggest buy of all, so far.

See also:

• Coca-Cola, juice maker Huiyuan both “respect” Chinese gov’t rejection of purchase bid (Xinhua)

And several posts from the Wall Street Journal’s “China Journal” blog, which followed the deal closely:

• Mixed opinions on Coke’s failed china deal (March 23)
• All technique: How China rejected the Coke-Huiyuan deal (March 18)
• Coke-Huiyuan’s Chinese media battle (September 10)

"Mother doesn't consent."