The first decades of the 20th century saw a gradual rise of foreign advertising agencies in China — by 1937, about a quarter of the country's ad agencies were foreign-owned.
With the founding of the People's Republic in 1949, the advertising industry was sharply restricted, with only advertisements aligned with Communist Party ideology permitted — a situation that only tightened further during the Cultural Revolution.
Modern advertising law in China dates back to 1979, when state regulation and control began to gradually liberalize. As of January 1, 2006, that liberalization reached the point where foreign advertising agencies could establish a relatively free presence in the market.
China is undoubtedly an attractive market for foreign advertising agencies — thanks to its population size, its affinity for brand names, and its thriving economy. China is the world's fourth-largest advertising market, and some experts expected it to overtake Japan before 2010. At the time, mainland China published more than 2,000 newspapers and operated over 1,000 TV channels and 300 radio stations, figures that were trending upward, especially following the country's WTO accession and ahead of the 2008 Beijing Olympics.
Despite these promising numbers, foreign entrants need to understand — not just acknowledge — the particular character of the Chinese market and its commercial law, both when entering the market and when trying to defend market share.
First, the Chinese market is far from uniform. Geographically, the north and south are exposed to different outside influences (whether from Hong Kong or Japan), and the gap in purchasing power between the coastal regions and the west of the country makes a single nationwide strategy impractical.
Thorough market research is strongly advised, with every campaign tailored to the specific characteristics of the target audience in that particular sector and region.
Second, Chinese advertising law is stricter than in many other countries and clearly tends to favor consumer protection. As one example: an ad depicting someone eating while walking would be censored in China, since that behavior is considered unhealthy.
The advertising law enacted in February 2005 is considered somewhat incomplete and ambiguous in places, but its stated aim is explicitly to ensure truthfulness and accuracy in advertised claims. Prohibited are exaggerated claims (like "the best beer in the world"), superstitious suggestions, and pornographic content.
In March 2004, China's Ministry of Commerce published new measures on foreign investment in the advertising sector. Under this reform, wholly foreign-owned advertising agencies have been permitted to establish in China from January 1 of that year.
The new rules brought more transparency to setting up new agencies, eased communication with local authorities (leading directly to shorter waiting times), and made it easier for foreign firms to integrate into the sector.
Another important aspect is the role of censorship: advertising law requires every advertisement to be subject to review and possible censorship by the relevant authorities, and all advertising activity is expected to align with the goals of building a socialist society.
The Chinese government views advertising as a critical tool in building an economic system guided by an ethical and moral code, intended also to serve the humane development of the people participating in that system — an ideal that remains an important part of China's broader development strategy.
In short, foreign agencies can approach the Chinese advertising market with cautious optimism, while keeping in mind that these rules were still quite new. Whether modern legislation and clearer procedures can restore greater transparency may determine whether China once again becomes the world's largest advertising market.
