PUBLICIS is spearheading a push by Western advertising groups to gain more market share in China by exploiting a relaxation of regulations.
The French advertising group is trying to buy out its joint venture partners in China as part of new rules permitting foreign advertising agencies to set up wholly owned subsidiaries, The Times has learnt.
The new rules for advertising groups, which came into force at the end of last year, could open up the Chinese market to smaller advertising and marketing groups and allow larger groups with established businesses to increase their profits.
Maurice Levy, chief executive of Publicis, said: “We have talked to them [the Chinese joint venture partners] and asked if they want to be bought out. They will get back to us . . . We are very happy for them to stay, if they choose to.”
M Levy added that he had been very impressed by the “bright, young talent” in China and would continue to recruit in the country.
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With the Chinese economy booming, its advertising market has become increasingly important. The estimated advertising expenditure of the Chinese market last year was $19 billion (£11 billion).
Many foreign advertising agencies have staked out large shares of the Chinese advertising market through their joint ventures. China’s biggest brands in terms of advertising expenditure in 2004 included international labels such as Olay, Head & Shoulders, Colgate and Crest.
The China Advertising Association, the Chinese advertising body, has concerns about the competition that Chinese advertising agencies will face in the light of the market opening up further to multinationals, but an official said: “When foreign companies enter the Chinese market, competition will certainly be fiercer. But Chinese firms still have their own opportunities. Big foreign companies will work in first-tier cities like Beijing, Shanghai and Guangzhou [Canton], and they will serve big clients.
“But China is a huge market and there are thousands of second-tier and third-tier cities that won’t be infiltrated by foreign firms. Chinese companies will have room if they serve smaller clients and improve the quality of their service.”
Sir Martin Sorrell, chief executive of the advertising giant WPP, said that he has no plans to buy out its joint venture partners in China, where his group has an estimated 15 per cent market share and a presence in 12 cities.
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China has gradually opened its advertising service market since 2001, when it entered the World Trade Organisation (WTO). According to its WTO commitments, within four years after China’s accession advertising groups could set up wholly foreign-owned subsidiaries. The four years expired at the end of 2005.
CHINA’S BIGGEST BRANDS
. . . by advertising expenditure (2004)
Olay (P&G)
Gaizhonggai Rejoice (P&G)
China Mobile Crest (P&G)
Huangjindadang vitamins
Head & Shoulders (P&G)
Sanjing Pharmaceuticals
Colgate
Naobaijin Pharm