US Firms Walk PR Tightrope As China Clamps Down
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US Firms Walk PR Tightrope As China Clamps Down

Even if PR agencies may yet be spared, the change in China's climate is unnerving their clients, especially major tech players.

Arun Sudhaman

US Firms Walk PR Tightrope As China Clamps Down

It was a headline that gave more than one China agency head reason to pause. On Sunday, the FT reported that China was clamping down on US consulting companies, the latest move in a low-simmering conflict that saw the US government last week indict five Chinese PLO officers on charges of cyber-espionage.

US PR consultancies have grown substantially in China over the past two decades, led by the likes of Ogilvy PR, Hill+Knowlton, Burson-Marsteller, Edelman and FleishmanHillard. The FT pointed specifically to consulting companies such as McKinsey and Bain, and their lucrative contracts with China’s state-owned enterprises.

Yet it also noted that the government will vet foreign products and services in other areas of “public interest”, the kind of language that could concievably implicate PR and public affairs agencies. As the China head of one large US PR agency told me, “we are being very cautious.”

“There will be some impact for agencies,” said Oscar Zhao, CEO of China’s largest communications group, BlueFocus. “Maybe next will be APCO or Brunswick,” he added, pointing to two firms that typically operate at the nexus of politics, regulatory affairs and media relations. “It is not a short term policy; the total environment is changing now.”

As disturbing as it was, the development will not have surprised many in the country. A welcoming environment has turned progressively more hostile for foreign companies in China, particularly those operating in the technology sector. "I cannot remember a more difficult time," APCO China CEO James McGregor told the Holmes Report.

“There’s always been this goal of replacing US technology,” said McGregor. “Snowden has accelerated it. There really has been a psychological shift in the government here: the foreigners need China more than China needs foreigners.”

Yet McGregor is not overly concerned about his own firm’s business, largely because few foreign PR agencies work for SOEs within China. The market remains dominated by MNC PR spend, even if domestic private companies — such as Huawei, Haier and Li Ning — have become more important in recent years.

Even if agencies may yet be spared, the change in climate is certainly unnerving their clients, especially major tech players such as Intel, IBM, Cisco and Microsoft. "We're counselling them to show the value they really bring, to tell a different story and change the conversation,” explained McGregor.

"Most of them have kept their heads down and tried not to attract attention,” stated McGregor. "Now they have to stand up and talk about their contribution. The story that's being told is the foreigners are in here and are exploiting the market."

Other agency heads agreed, noting that their clients had little to gain from sitting on the sidelines. "With this kind of trend, our suggestion is to identify the ways to partner with government initiatives,” said MSLGroup China MD Daisy Zhu. "Identify the areas in which government cares, and prove your value to the country.”

For example, air pollution and food safety are two high-profile areas in which the Chinese government is aiming to improve standards. The thinking is that if foreign companies can help solve these challenges, it will help them build stronger political relationships. That kind of approach, many agreed, will prove more powerful than simply turning up and trying to arrange a meeting with a senior political figure.

"Our clients should pay more attention and effort to being a friendly company in China,” said Zhao. "You don't need a very close relationship with government, but you should do the right things, you should be prepared for these changes."

For agencies, these developments could spell more business. McGregor admits that there has been an upturn in crisis communications and government relations work. Zhao is more forthright: "For foreign brands, it's a huge opportunity for us, because they will need more help. Also for SOEs, they need agency support inside and outside China.”

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