China's new cultural revolution (cont.)

By Sheridan Prasso, Fortune contributing editor

Embracing the national culture

The origins of Chineseness lie in a belief in the validity of Chinese tradition, much of which was suppressed or forgotten after 1949. There is growing sentiment in China that 5,000 years of civilization has created superior ways of doing things that have only to be revived today. History shows are popular on TV. And groups dedicated to promoting Han culture have tens of thousands of adherents. With the ideological influence of communism waning, the search for tradition has resonance.

That's different from what happened in Japan. Even after 50 years of postwar development, Japanese remain Western-oriented and modernist in their tastes. Products designed by Sony (Charts), Panasonic and Toshiba look a lot like those designed by Philips, Siemens and Dell.

In China, by contrast, Huawei has a popular line of mobile phones incorporating the design of a Chinese sword that, it says, "calls back the time of warriors, when courage and strength prevailed." Aigo, a rapidly growing consumer electronics company whose name in Chinese means "person who loves his country," claims a leading market share with its MP3 players that display karaoke verses in Chinese.

Tracy Zhang, a 31-year-old advertising agency founder, wants to buy an Aigo camera when she replaces her Sony Cybershot this year. Aigo is not necessarily better than Sony, she says, but it's comparable. And most foreign products are made in China anyway, so what's the difference? Her gated home in suburban Beijing already has two refrigerators, a washing machine and a water heater, all made by Haier. No problems. Her TV is made by China's TCL. It works fine.

"In the past 'Made in China' meant poor quality, but now there's no problem at all," she says. "So why shouldn't I buy a Chinese brand instead?" What really makes a difference, she says, is after-sale service. And in that area, according to a 2005 survey by China Quality Promotion, a consumer group, domestic brands scored 11 percentage points higher than foreign rivals.

There are few such practical considerations when it comes to fashion, which is increasingly taking a page from the past and eschewing the Western designs that have dominated since people stopped wearing drab Mao suits. "I like to wear Chinese-style clothes, like the qipao, so I really like these designs," says Huang Ruimin, browsing through $3,000 hand-stitched mandarin-collar dresses at the elegant Shanghai boutique of Shiatzy Chen, a designer often called China's Chanel.

The qipao, a dress with a fitted, high-necked bodice and slit thigh, originated in Shanghai in the 1920s, when Chinese women, imitating the tunics of Qing dynasty mandarins, narrowed them to fit their forms, then cut slits to dance the jitterbug. Now it's back in fashion, sometimes in zebra prints or other new patterns. Huang, who with her husband owns a factory in Zhejiang province, is a repeat customer.

It's not unusual, Chen says, for a wealthy woman from the provinces to come to Shanghai for the day and buy every skirt in her size - spending tens of thousands of dollars in a single spree. Such profligacy propelled Chen to open a store in the northeastern city of Qingdao last year and make plans to open six more this year, bringing her total in China to 12, plus a dozen in Taiwan and one on Paris's Rue St. Honoré.

"More Chinese have an interest in wearing Chinese-design clothes," says Chen, a Taiwanese who entered the mainland market in 2003. She recently opened a flagship store at No. 9 on the Bund, a piece of prime real estate whose landlords told her they were pleased to offer such prominence for "a brand that would make China proud" - unlike Armani and other foreign shops nearby.

"It used to be that only international designers did a good job on quality," Chen explains. "At first the newly rich will be interested in famous designer brands, but after some time they start to purchase their own culture." Chen finds inspiration in the Song dynasty: "My desire is to take these beautiful things from history and blend them with the modern in a way that's suitable for the present."

Capitalizing on this is Ordifen International, a Shanghai lingerie company started by Wang Wen Tsung, who also comes from Taiwan. "If women are wearing a qipao, they feel they need to have the harmony of wearing Chinese-style undergarments too," Wang says. "When they wear it, there's a feeling of going back where you belong."

After researching the dudou, a silk triangle that women tied like a bib under their clothes in ancient times, Wang launched a limited-edition Chinese Red lingerie series in 2004. Ordifen increases public awareness of China's history by sponsoring an annual design contest in which the models receive wide national coverage and the winning design is put into production. "The Chinese left Chinese characteristics behind for so long," Wang says. "They're learning now how to accept them back."

A new aesthetic

There's a desire to find a new Chinese aesthetic and sense of design that neither Western nor Chinese companies have discovered yet, says Zhou Yi, founder of the Shanghai firm S-point Design, which has done design-adaptation work for Nike, Siemens, and Chivas.

"The younger generation is putting a Chinese flag on their T-shirts," says Zhou. "It doesn't mean they want to return to Mao times, but they want to find themselves. Yao Ming and the Olympics make them proud to be Chinese." And they want products to reflect those tastes. It's naive to think it can be done with just dragons and China's national colors, Zhou says. In fact, while Western manufacturers offer mobile phones, laptops and small electronic products in red or gold in the hope of catching a buzz with consumers, the bestselling colors in China, as elsewhere in the world, are black and silver.

Savvy companies are changing the way products are utilized, replacing keyboards, for example, with screens that use a stylus for Chinese handwriting. Motorola's $400 Motoming sold two million in six months. The company is advertising the Crazr in China "with a much more local approach" than a year ago, says Ian Chapman-Banks, head of Motorola (Charts, Fortune 500) marketing in Beijing. He's using a well-known actress in glamorous poses wearing Tang dynasty, Ming dynasty and 1920s Shanghai costumes and hairstyles.

Sony, which noticed that Chinese homes have more wall space than Japanese, designed a thinner flat-screen TV to hang "like a scroll," says Katsumi Yamatogi, head of Sony's R&D center in Shanghai.

There's no clearer example of adapting to Chineseness than Yum Brands (Charts, Fortune 500), the owner of KFC, Taco Bell and Pizza Hut. Sam Su, president of Yum's China division, came up with the idea of fast-food Chinese restaurants and now has seven in Shanghai. "The sense we want to give people is that finally we have our own fast food," Su says. The name, East Dawning, comes from a Song dynasty poem that most Chinese recognize, and the décor incorporates Chinese design elements such as a round moon window. Dishes include pork, rice and tea-boiled egg ($2.25).

Su says the rollout has been slow because Chinese food is difficult to standardize, with its steaming, frying, baking, braising, boiling and various sauces. But once the process is down pat, he expects a nationwide - and possibly global - expansion. "Ultimately it should be an even bigger brand than KFC," says Su. "We have the biggest market in the world."

Su insists that Yum has no plans to slow the growth of KFC outlets in China, seeing a potential market for 15,000, compared with more than 1,800 now. In the 1990s, he says, "there was a tremendous interest in everything foreign. Chinese welcomed all these brands with open arms. That's not to say that people reject that now. They just want other things, other choices."

The challenge for Western companies, then, is to figure out how to stay in this game, offering products that appeal to China's growing sense of Chineseness - to its nationalist pride and strength of tradition. Brand consultant Roll agrees that the future for Western brands in China won't mean a rejection of things Western, but companies will have to be quicker to keep up with the accelerating pace of Chinese innovation. "It's getting more sophisticated," he says, "and people will be mixing and matching." And waiting for companies - both Western and Chinese - to catch up.

Reporter associates Wang Ting and Zhang Dan contributed to this article. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.