Chinese Multinational Companies Are Not Trusted Abroad, Especially In Developed Nations, For Lack Of Familiarity And State Involvement: Study

China’s multinational companies, despite enjoying relatively high domestic levels of consumer confidence, face a trust gap abroad. Consumers in developed nations are especially distrustful when it comes to Chinese corporations, owing to the lack of brand familiarity and concerns about the Chinese government's involvement.

The global public relations firm, Edelman, surveyed 5,400 “informed online respondents” in nine developed and emerging nations. The results showed China’s multinationals have an 83 percent trust rate in the domestic market, a 50 percent trust rate in other emerging markets, and just 24 percent trust rate among respondents in developed markets, the China Daily reported Thursday.

In contrast, 31 percent of the respondents in developed nations trust corporations based in South Africa, and 28 percent trust companies from India.

China-based companies were rated especially low in Germany, with just a 19 percent trust rate, and little better, 22 percent, in France. In the United States, 26 percent of the respondents trusted Chinese corporations.

The trust deficiency speaks mainly to the lack of brand familiarity, and concerns over the involvement of the government. Respondents in developed nations believe that companies from China and other emerging markets have close ties with the state, and they are increasingly nervous about Chinese companies entering their markets, said Richard Edelman, president and CEO of Edelman.

Overall, respondents from developed nations showed a 50 percent trust rate for listed companies, but only 37 percent for state-owned corporations. About one-third are willing to see a Chinese company buy one in their country, and only 38 percent wanted Chinese companies to get access to their markets at all.

The common perception of Chinese corporations is that they lack transparency and openness.

"This is a big problem.’Branding China' is not helping if Chinese companies want to go global," Edelman said, according to the China Daily.

Most Chinese multinationals have thus far struggled to gain a foothold in the global market. Building true global brands will be a challenge faced by many of them in the coming years.

A few Chinese corporations managed to rise to the top in terms of brand familiarity and approval outside China. Lenovo Group Limited (HKG:0992) earned a 72 percent consumer awareness level in the U.S., and Air China Ltd. (HKG:0753) 63 percent, much higher than other corporations based in emerging countries.

Some Chinese companies, like Dalian Wanda Group, have already successfully moved into overseas markets despite the lack of trust. Wanda acquired the American cinema chain ACM Entertainment last year. The trust issue had not been a problem in the purchase, said Wang Jianlin, chairman of Wanda and the richest man in China, at a conference in the northeastern Chinese city of Dalian.

The trust deficit is “normal,” according to Wang, because corporations in China and other emerging markets are still in the early stages of development. Others, are more alarmed by the deficiency.

“Trust is money,” said David Brain, Edelman Asia-Pacific president and chief executive officer, warning that companies will pay the price if they fail to respect employee rights and protect intellectual property rights, according to the China Daily. “Low trust among customers will surely lead to artificially low valuations in initial public offerings, or delays or failures in overseas acquisition.”