SHANGHAI • When evaporating profit margins prompted China's Zhejiang Willing Foreign Trading to launch its own brand of yoga wear last year, it spurned home-grown talent and turned to a French freelance designer.
"Chinese designers just don't have good taste for foreign markets," said Mr Zhang Tao, assistant manager at the Hangzhou-based company.
"Chinese businesses have been good at manufacturing, but now we have to change our mindset.
"Brands are the future."
After years of rising wages eroded its position as the world's bargain manufacturer, China is striving to build its own brands and improve product quality and design.
Those advances are crucial to maintaining the high growth needed to make the leap from middle- to high-income status - a jump only five economies have managed, including Taiwan, Hong Kong and Singapore, according to Nobel laureate Michael Spence.
"The expertise coming out of China's university system is still mostly in engineering and the hard sciences," said Mr James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology in Sydney.
He added: "This is well-suited to the technical challenge of upgrading Chinese industry, but not to the marketing challenge of selling it.
"Chinese production innovation married with foreign marketing savvy is a natural fit."
Mr Zhang's move to tap on foreign skills has paid off.
When he unveiled Willing's new YinGo yoga clothing brand at the Canton Fair this month, he was so busy on the first day that he did not get to eat lunch.
The company targets sales of US$5 million (S$7 million) to US$10 million annually within two years, he said.
He is not alone in turning to overseas designers, a visit to the fair in Guangzhou showed.
Dongguan Shijin Industrial in the southern province of Guangdong has hired foreign designers to help build its Jordan & Judy homeware brand.
Another is Shanghai-based Oriental Recreational Products Shanghai, which uses a team of overseas designers to shape its Aqua Marina and Silver Marine brands for paddle boards.
The Canton Fair claims to be the world's largest trade gathering, bringing together more than 24,000 exporters and 196,000 buyers, mostly foreign. They ink deals in an exhibition space equivalent to 2,500 basketball courts.
Turnover reached more than US$30 billion during three sessions from mid-April to early this month, according to its website.
China's swelling middle class is becoming increasingly sophisticated even as profits from manufacturing products for foreign brands are squeezed by rising wages and materials costs.
Dongguan Shijin's branded products helped sales surge 50 per cent last year to about 150 million yuan (S$30.3 million), driven by a contract to supply fashion retailer Miniso, according to salesman Frank Zhou.
It launched bags and luggage brand Pisidia in 2013 and home furnishings label Creadys last year.
Mr Zhou said the company is targeting sales of 400 million yuan this year and wants to become China's version of Muji, the Japanese retailer famous for minimalist products.
"We probably won't make much money at the beginning, but when we've established the brands, we're looking at a profit margin of 30 per cent to 50 per cent," he said.
There may be a brighter future for home-grown designers though, said Mr Jeffrey Towson, a professor of investment at Guanghua School of Management at Peking University.
China has invested heavily in art and design schools and that is bearing fruit, with more than a million art and design students graduating every year since 2009, he noted.
"They don't have the experience yet, but they have the talent.
"Fifteen years ago, nobody hired Chinese engineers. Now, every Fortune 500 company builds R&D centres in China.
"It's going to be the same with designers."
BLOOMBERG
