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China's brand-management
lesson
By Francesco Sisci
BEIJING - Severe acute respiratory syndrome
(SARS) is a major challenge to China, posing a series of
new issues for the country to address. It may mark a new
era in Chinese relations with the outside world. At a
time when China is eager to opening up after its
accession to the World Trade Organization, the world is
worried about embracing this feverish country. It is a
whole new ball game with many variables. One could
summarize the main questions as:
The time needed to contain the disease.
The epidemic's influence on foreign trade.
The change in the outside world's perception of
China.
The long-term consequences.
The first two
issues are not yet settled and certainly they will
influence the remaining two. However, at this point one
can say that the duration of the epidemic and the
decrease of exports will influence the domestic economy
more than the Chinese image abroad. The damage to the
Chinese image abroad has already been done. This loss is
the most important in the present crisis. The image of a
country, like the image of a brand such as Coca-Cola, is
its most valuable asset. It is very difficult to build
it and very easy to squander.
Years after the
end of mad-cow disease in Europe, Europeans are still
reluctant to eat beef, and mad-cow disease was much less
threatening and widespread than SARS. Fourteen years
after Beijing's bloody crackdown on protesters in
Tiananmen Square, Westerners, especially Americans,
associate China's image with the Tiananmen incident. It
has been a long and very difficult job for Beijing to
improve that image.
The long-term impact is
further complicated by several issues. On Sunday the New
York Times published a long report detailing all the
instances when the World Health Organization (WHO)
pressed the Chinese government for information and it
was denied access to data crucial to understand the
disease and consequently devise measures to stop or
contain it. The report was in essence a blunt accusation
against the Chinese authorities of covering up and thus
aiding the spread of SARS. This casts a large shadow
over China, and in the meantime droves of migrant
workers have fled Beijing and some of them are spreading
the disease in the Chinese countryside.
Tough
measures of quarantine have been ordered all over the
country, but many instances of SARS in Hebei, the
province that surrounds Beijing, seem to indicate that
SARS might flare up again after the summer. By that time
the situation in Beijing could well be under control,
and cases on SARS in countryside might besiege the city.
In any case the shadow of SARS could accompany China at
least until next winter.
Meanwhile, as SARS
spreads all over the world posing a global threat to the
well-being of people in other countries, its negative
impact could exceed that of the memory of Tiananmen. The
memory of SARS, and of its handling especially at the
beginning, could thus taint China for many years.
But let's proceed in an orderly fashion.
Time
Time is not indifferent and can't
be underestimated. Since it (presumably) started in
Guangdong, SARS had been ravaging the province for about
six months. In the past month or so the number of new
people infected has not been so great, but the alarm is
far from off and the province with about 1,400 people
confirmed ill of SARS, is the most infected area in
China. In Guangdong, in the most optimistic scenario, it
will still take one or two months to contain the spread
of the disease fully.
In Beijing, where SARS
started only in March, there are now about 1,000
confirmed cases and another 1,000 suspected cases with a
rate of about 100 new ill people per day. The situation
appears to be worse than that of Guangdong, and thus we
can believe that it will take at least six months for
Beijing to bring the situation under control. This will
bring us to autumn, without considering the spread of
the disease in the countryside and in the inner
provinces. Many infected people have been turned away by
hospitals or have contracted it from hospitals, and
there are also hundreds of infections in Shanxi province
and Inner Mongolia. These facts suggest that SARS could
accompany us throughout this year and beyond, barring a
medical breakthrough.
Foreign
trade
Businessmen have canceled their trips to
China, foreign investment is dropping, and foreign
workers protest when they have to open parcels and touch
items coming from China out of fear of infection.
Chinese people are discriminated against and feared
worldwide and even Chinese restaurants abroad, which for
decades have served as virtual embassies of China, are
shunned by customers. Statistics will give numbers to
these perceptions, which tell the story of a collapse of
trust in China by the Western world, China's major
trading partner.
This drop in foreign trade,
which represents some 40 percent of China's gross
domestic product (GDP), could be somehow compensated.
More trading routes can be explored with Latin America
and Africa and more integration can be considered with
the rest of Asia. Domestically, the Ministry of Finance
can boost infrastructure spending to make up from orders
from abroad. Furthermore, the main world economies, the
United States, the European Union and Japan, are
experiencing economic problems. The aftermath of war in
Iraq has not boosted market confidence and many people
are still willing to hope in the growth of Asia.
Therefore it is possible that trade with China will pick
up as soon as the disease shows sign of receding or even
before then. Trading with China keeps US prices low. The
United States, despite SARS, could ill afford a rise in
inflation by commissioning shoes or microchips from more
expensive manufacturers.
On the whole then,
China might have to brave a drop in export and domestic
demand, but it could well be managed within tolerable
boundaries. This has happened before, after Tiananmen
and during the 1997 Asian crisis.
Change of
perception
The biggest problem, the issue that
demands urgent attention, is the perception of China
abroad. Fourteen years after Tiananmen, China had just
managed to put that episode in the past. Most of world
public opinion was willing to think that today's China
was different from the China that used tanks to crack
down on unarmed students. There were concerns regarding
the handling of the Falungong, and about the veracity of
Chinese economic statistics, but the mood was on the
upswing, even conceding that human rights were improving
in the country.
In just a few months, though,
SARS managed to destroy years of post-Tiananmen
image-building.
A deep distrust of China has
emerged. Certainly the sacking of the health minister
and the Beijing mayor have at least slightly improved
the situation, but only slightly. The general idea is
not that someone in particular is at fault in this
situation: the blame falls on the system, which has
reacted very slowly, underestimating the dangers of SARS
for months.
The ongoing debate whether SARS will
become for China what Chernobyl was for Mikhail
Gorbachev confuses many the issues (see China: SARS spurs structural reform,
April 26). However, it is interesting because it tells
us that the world blames the Chinese political system
for the SARS coverup and expects major changes there to
return the lost confidence. These expectations will not
necessarily be fulfilled - China can't do what others
want it to do. But the concern must be addressed because
it threatens China's "brand name".
In other
words, China's image has suddenly turned darker. China
appears ruled by a cumbersome system that is willing to
put anybody's life at risk because of its tardiness (at
the best) or because of its resistance to sudden
decisions. Its decision-making is murky, which was
already known, but now it is clear that because of it
many concrete problems could arise and spill abroad,
like SARS. SARS came unexpectedly, it was impossible to
forecast and anticipate it, as with the US spy-plane
incident in 2001. There will be more such episodes in
the future. China will need quick-reaction capabilities
and transparency to account for possible mistakes,
otherwise the world might feel directly endangered by
Chinese bureaucracy.
Lasting
consequences
In this predicament there is more to
bury China that any of its enemies could have ever
wished, and it is all China's making. Nobody told China
to hide the situation or underestimate it, not to take
drastic preventive measures against the spread of SARS.
China did it on its own, against the best advice of
concerned foreigners who pressed the government for more
transparency and stronger prevention.
Those who
wish to harm China, put it on the spot, can relay the
story of its handling of SARS to prove that China
is a pariah of the international community and
must be dealt with accordingly. These attacks have not
started yet - now there is no use for them, as the
country is mired in its own troubles, but this
ammunition can be used any time in the coming months as
soon as the cloud of SARS starts to vanish. The dangers
here can be huge because they can impact the economy.
Any time when the West may feel its economy is doing
well, and could do without China or by putting pressure
on China, it can whip up SARS and the fears it has spun
worldwide to claim that China must be contained. And
even without any spinning the SARS panic will mark the
beginning of this century, overshadowing the fear of
AIDS. China and its system will be blamed for all of
this. If the disease is not stopped, and it becomes
endemic in China, stretches out to the countryside, sets
foot in India, Pakistan and, God forbid, in AIDS-plagued
Africa, how will China's image suffer?
These are
future risks, which might not occur for a number of
reasons, but they might well happen, and with SARS it is
better to prepare for the worst.
The worst-case
scenario would be: SARS will become endemic worldwide,
maybe mix up with AIDS and kill millions of
AIDS-infected people. It will invade the US, Europe and
Japan and bring to a halt their economies with wide and
far-reaching consequences such as global depression, war
and heightened hatred among religious groups and
continental interests.
Of course, this is the
worst scenario, but even less-scary perspectives can be
quite dangerous. With Canada's numerous SARS infections,
it is possible that the neighboring United States will
soon have people killed by SARS, which would further
depress its economy, already strained by the war and the
many problems in Iraq. If the US loses concentration on
Iraq because of its domestic plague, the Middle East
could blow up again, et cetera.
And China will
be the one that started all this, because of its system.
(©2003 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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