These days, it can be easy to forget that China remains one of the world’s biggest PR markets. For several years, the country functioned as the de facto engine powering Asia-Pacific industry growth, thanks to an attractive combination of buoyant domestic demand and multinational investment, to say nothing of technological innovation and optimism. 

Those trends had been slowing even before the pandemic hit, but the Covid-19 era effectively brought China’s growth story to a screeching halt. 18 months ago, I examined how an anticipated rebound had yet to take root within China’s PR sector. As we head into the second half of 2024, it remains pertinent to again ask the question: ‘How positive are China’s PR firms about the future?”

Unfortunately, few of the industry leaders contacted for this article report a significant rebound during the first half of this year, thanks to continued concerns about consumer confidence and broader economic malaise. “It’s a very challenging and complicated moment,” says the head of one of the country’s biggest international PR firms, on condition of anonymity. “Even more unusual than during the pandemic.”

According to this agency head, economists have shifted from expecting a V or W shaped recovery to something more akin to U or even L shaped progress. “It’s much slower and lower than people expected. People understand it couldn’t be worse, they just don’t know when it will start to get better.”

Confidence, an ephemeral metric that can be hard to gauge, appears to be the critical issue as far as PR heads are concerned. Darren Burns, the Golin Asia-Pacific president who spent a decade leading Weber Shandwick in China, notes that “we did not see a significant rebound this year as general ‘confidence’ metrics in the market are still depressed – this has been the case post 2022. Instead, some MNCs have cut budgets as their business performance is below target.”

The irony, perhaps, is that PR firms (among many sectors, to be clear) are suffering because of problems that they are specifically designed to address. “Rebuilding trust and confidence takes time,” admits Ruder Finn Asia and Greater China MD Elan Shou. “Currently everyone is holding their budget tight and watching. Wishing for the best but preparing for the worst is today’s mantra.”
"A tale of cautionary consumption" Despite this loss of faith, there is a keen interest in anything that might resemble the green shoots of a significant recovery. Sandpiper China deputy China GM Serena Cui notes that low consumer confidence continues to plague retail sales growth, but “measures to relax foreign ownership rules, improve regulation and transparency, and increase market access are having a positive impact in attracting international investment and rebuilding confidence.”

For PR firms, accordingly, a renewed focus on measurement and evaluation is crucial. “We see a trend in more companies investing in data analytics and research to help with targeting their marketing and PR efforts to areas where they can achieve the most impact,” notes Cui.

“The primary challenge is meeting more sophisticated client requirements while managing tightening budgets,” says SEC Newgate Shanghai head Victoria Guo. “Businesses increasingly require strategic communicators that can integrate public relations, branding, policy analysis and issues management. Measurement is also crucial. We are seeing growing demand from companies for corporate communications to directly contribute to their marketing and sales efforts.”

That trend also plays to China’s existing strengths as an e-commerce powerhouse, where content to conversion can be more easily tracked than outside the country, even if online sales are at the mercy of broader shifts in confidence.

“The PR market in China has further evolved into an online integrated consumer marketing communications market, driven by KPI, data, and key influencers,” explains Shou. “It’s closely linked with online shopping performance (Tmall and JD). The growth has been significant given the growth of e-commerce, but it also slows down when e-commerce slows down.”

Meanwhile, the maturing of China’s online economy also throws up other challenges, notably in terms of the tension between performance marketing and brand-focused initiatives. 

“Retail digitalization has made consumer marketing very performance-driven,” adds MSL China MD Liza Zhang. “Budgets moved from media to platforms, from branding to commerce. Now, as the traffic dividend disappears, brands must refocus and find new ways of growing in the Chinese market. I believe that it will shift back to brand building to achieve sustainable growth.”

With more Chinese consumers choosing to save rather than spend, the hope is that this will eventually translate to an outpouring of pent up demand. “However, at this year’s halfway point, the narrative is more a tale of cautionary consumption,” said The Orange Blowfish CEO Natalie Lowe. “Less saving isn’t translating into more purchasing. Consumers in China need a little more coaxing through PR activities and brand connection for them to fully loosen their purse strings. Hopefully, more certainty in the future will create a more relaxed and happy-to-spend attitude.”

Adapting to a ‘savings-first mentality’ is probably not something that comes naturally to the country’s PR firms. But, adapt they must, at least for now. “Value for money alternatives are hot in the market,” notes Shou, adding that this can provide opportunities for local brands.”

“Penetrating into the third- and fourth-tier markets has become a trend,” continues Shou. “There is a huge market there, but it requires different offerings and tailored communications approaches.”
“Global agencies have to transform and adapt” International PR firms have made varying progress in their efforts to build a sustainable domestic client base in the country, often preferring to focus their energies on Chinese brands going global. But China’s changing dynamics suggest that they may need to make a difficult choice: fully adapt to a domestic PR model, or accept that sustainable growth may remain elusive for the forseeable future.

“They can only accomplish this by very deep self transformation,” says the anonymous agency head. “Working with Chinese clients is very different. Pricing strategy, business model, scope of work. Global agencies are good at working for MNC brands, but you can’t deny the increasing revenue pool comes from Chinese brands. Global agencies have to transform and adapt.”

A few, of course, have managed to accomplish this transition. Yet, no one can pretend it is easy, and it may sometimes appear at odds with broader workplace trends across the rest of the world. “The team needs to work harder, move faster, react faster,” adds the agency head. “The scope of requests are usually much broader than those from MNCs. They are asking for many things. But once the team knows how to reach to this, in my experience, the team feels they have grown. They have stretched and can deliver more.”

Nor can global agencies expect this transition to be especially profitable in the short term, which is not necessarily the kind of thing that agency bean counters in New York are fond of hearing. “Financially, the rate card is much lower than working for MNCs,” explains the agency head. 

A longer term view, however, suggests more favourable returns, thanks to the broader scope of work that domestic clients often demand. “It will generate new revenue sources, which is not necessarily the case when you serve MNC clients. You need to keep a close eye on the cash flow to ensure you don’t run a big financial risk. After one year or two, it works and the profitability will not be lower than MNC clients. It will generate bigger revenues.”
“The rising tide no longer floats all boats” Concerns about confidence are not limited to Chinese consumers alone. Multinational corporations, many of whom have invested heavily in China’s economic emergence, appear unconvinced of the country’s current environment as a business destination.

“Many had hoped China would pick up again by now but as we know hope is not a great strategy,”  explains Burns. “But I would say that those MNCs that are invested in China are still spending. For many MNCs, China is still a top three market. 

“Those more ‘fly by night’ agencies and indeed MNCs looking at minimum investment for a quick buck, have evaporated into the ether. As in other markets, commitment and smarts are needed to prosper. The analogy might be a disappearance of speculators in favour of long-term investors — or the rising tide no longer floats all boats as it did to a degree pre-Covid.”

Neither can we avoid the influence of geopolitical tensions, which are forcing companies to reconsider their engagement with China as the country itself takes a more insular tack. “MNCs, particularly in more strategic industries, have to walk a tightrope between stakeholders at home and those in China,” continues Burns. “This has been a marked shift in the last three years.”

However, every PR consultant worth their salt should be aware by now that this state of affairs can also bring opportunity — particularly in terms of geopolitical, public affairs and corporate counsel.

“For multinationals doing business in China, it is essential they build strong relationships and establish two-way communications with Chinese government officials at all levels,” says SEC Newgate Greater China managing partner James Hill. “Further, they need to analyse government work reports and addresses so that they can align their development plans with government blueprints, create robust communication mechanisms and channels, engage in initiatives that can contribute to economic and societal development, and leverage the influence of industry associations.”

All of which requires a level of insight and agility that can make for a compelling corporate communications opportunity, even if the rules of engagement have changed. “Understanding how Chinese people are thinking is critical, as it changes fast, and becomes more sophisticated and polarized,” notes Shou. “For MNCs, balancing their image in China and in the other parts of the world is not easy. It’s different from past years when China was always given priority. Today, PR in China needs to work very closely with global HQ to ensure balanced positioning in answering some of the most sensitive questions that are of global concern.”

Geopolitical tensions, of course, cut both ways. One crucial consequence is that Chinese companies are now adopting a more pragmatic approach towards their global brand building efforts. Which means that they are increasingly eschewing high-profile Western destinations in favour of more economically hospitable markets.

“Things are speeding up. It’s different from a decade ago, because they realise that the US/Europe is a much bigger risk,” states the agency head. “The second wave is focused on Southeast Asia, the Middle East, Africa and Latin America, where they think their product and competitiveness is easier and safer for them. This presents an opportunity for PR industry.”
“The new Chinese style” Few expect a significant rebound in the second half of 2024. Instead, it appears that a reset is underway in terms of what international PR firms expect from China. An unpredictable regulatory approach, typified by raids on US management consultancies, does not engender the kind of predictability that businesses often crave.

Agencies may prefer, for example, to direct their investment towards Southeast Asia, the Middle East, India or Japan — all regions that appear to offer better immediate returns. But no one can deny the immense long-term opportunities in China — illustrated, for example, by the country’s technology and healthcare revolution. 

“Technology is the biggest for demand,” says the agency head. “There’s new money flowing in, particularly driven by AI. EVs are also another one. They are aggressively expanding to other markets.”

Others, notably Burns and Cui, report similar trends, even if challenges persist in terms of China’s global technology story. Healthcare is cited as another sector to watch, given China’s focus on creating a more equitable health environment. 

A new generation may also offer opportunity, helping the emergence of local brands at the expense of global players. “Things are changing fast,” says Shou. “The young generation is serving the young generation. Each generation has different KOLs, platforms (Little Red Book), slang, and AI tools.”

Once again, these trends may require agencies to rethink their traditional approach to the market. “New skills are required – IMC, AI and data analysis,” explains Shou. “There is a strong demand for AI and data analysis, but those skills are in short supply. PR professionals not only need to understand the Chinese brand landscape, but also the world outside. The ‘new Chinese style’ does not fly very high outside, but most of the well-known Chinese brands are now focused on it.”

“In many ways, what determines success now has always been the case,” adds Burns. “Those that are hyper-local and close to culture, yet connected strongly to regional and global teams will have the best chance of success.”

For Lowe, who works closely with retail and hospitality brands, “the PR industry has become a blurred line in China.” 

“Content creators, influencers and brands are trying to be in more control of how consumers view and interact with their brands,” she explains. “This is becoming increasingly challenging for traditional PR agencies to showcase their value. We’re seeing many PR agencies branching out to the creative world, and creatives doing more content creation and community building. Micro-influencers, greater localisation of international brands seeking traction in China, and tangible offline branding experiences created by collaborative agencies are going to become more prescient. The ones to pivot their businesses to meet the changing landscape in China will undoubtedly be the last ones standing.” 

Even allowing for many of the complexities that are unique to China, these broader trends do not necessarily sound all that different from other major PR economies across the globe. “The main challenges will not apply to only China,” notes Zhang. “Every PR practitioner must still work harder and smarter to show how PR can be strategic to client businesses rather than tactical support.”

“China is still the biggest market in APAC for most agencies — and indeed most brands and corporates,” adds Burns. “That’s sometimes overlooked in the zeitgeist. There are still many opportunities, and we see growth in those MNCs that are ‘all in’ on China. After all, as someone once said, the next China, is still China.”