It will surely become one of the key battlegrounds for the future of the advertising world - sustained economic growth combined with rising living standards have made China an advertisers' dream as global giants line up to try and muscle their way into the market.

But for M&C Saatchi, China's reverse potential is equally, if not more, enticing: that is, the possibility of establishing Chinese brands in international markets. Or so says Lord Saatchi, the British advertising magnate and co-founder of ad agency M&C Saatchi.

"There is no shortage of multinationals looking at China, at the business opportunities and rate of GDP ...and they want to be part of that. China is always going to be an important element of the ad business, and one in which we are also interested, of course. But we have been struck by the reverse potential: we don't see any reason why Chinese brands cannot have the same impact in the US, as US brands have had in China," he says.

Lord Saatchi knows a thing or two about advertising. He and older brother Charles set up Saatchi & Saatchi in 1970, which they ran until 1995, when they were ousted from the board.

Forever associated with the 1979 UK general election campaign on behalf of Margaret Thatcher's Conservative Party, the company's catchphrase "Labour isn't working", struck a resounding chord with the British electorate. As the first agency to be appointed by a British political party to help win an election, the advertising firm was also credited with being the first to have played a decisive role in establishing a new government.

"We also see that the Chinese Government is very aware of the central input of brand development in developing a dynamic economy," says Saatchi. "Not as an adjunct, but as an economic necessity," he adds, with events such as the 2008 Beijing Olympics and Shanghai Expo 2010 making ideal opportunities for local companies to embark on brand building on the back of international events.

The thinking goes like this: in the same way that the emergence of Japanese electronics and automotive brands in the 1960s and Korean brands in the 1970s and 80s challenged established and often complacent firms in the West, the world should expect the same of China. Japanese motorbikes like Honda, Suzuki and Kawasaki almost destroyed British brands such as Triumph, unprepared as they were for the onslaught of superior Japanese technology and products that represented better value.

Indeed, for Saatchi himself, an economics graduate from the London School of Economics and Political Science, the laws of economics come into play in brand development.

"There is an economic inevitability to this process," says Saatchi. "In Stage One of a nation's economic development, a country manufactures products for others; in Stage Two, it manufactures products to its own specifications; during Stage Three, it manufactures its own specifications for its own brands.

"Chinese companies have a long way to go before they can develop their own Disney, Coco Cola or Microsoft," says Saatchi. "It won't happen overnight," he admits.

There are currently just 11 Chinese enterprises listed amongst the Fortune 500 companies - the majority of which are national monopolies in banking, electrical power and oil.

China's largest companies are still nationalized and whilst stock market listings have forced change, they remain, for the most part, slow to act. Persuading Chinese companies to spend big on ad campaigns and brand building will not be easy. Only an elite few Chinese companies have gone in for international branding in any meaningful way, but they do include forward-thinking firms like Hai'er, Lenovo and TCL.

Hai'er, a household-appliance company with its headquarters in Qingdao, broke the mould when it became the first Chinese enterprise to place a billboard advertisement on Ginza Avenue, in the heart of one of Tokyo's biggest retail districts. The company also bought the high-profile Greenwich Bank Building in Manhattan, New York, in March 2002 to serve as its North American Headquarters.

Meanwhile, Lenovo, formerly known as Legend, started life in 1984 with just 11 staff. It changed its brand name because the word "Legend" had already been registered in too many international markets. Today, it is the largest computer manufacturer on the mainland and one of the largest manufacturers of desktop computers in the world.

It is still early days for M&C Saatchi in China, but the Asia Pacific plays a key strategic role in the company. "M&C Saatchi began simultaneously with offices in London, Singapore, Hong Kong and New York in 1995 so the Asia-Pacific region has never been just an afterthought for us," says Saatchi, who stopped by Hong Kong on the way back from a board meeting in Shanghai.

Saatchi points out that the company's public offering on the London Stock Exchange in July of this year was to raise money to develop the Asia-Pacific market.

"We held the first board meeting in Shanghai to help our small Shanghai office, but also to send out a message that the Asia-Pacific is a priority, accounting as it does for 40 per cent of our revenues and profits."

With just a small office in Shanghai and looking to open another in Beijing, M&C Saatchi is by no means a heavyweight compared to the big 4As agencies in China. But Saatchi himself fires a word of warning to the competition.

"As we see it, there is definitely a danger of the advertising market turning into a commodities market. There used to be a number of networks with different philosophies, but they have been bought up by a limited number of global conglomerates, usually based in the US.

"This produces undifferentiated products, hence a commodities market," he says, "giving no space for smaller companies who 'think outside the box' to make their mark."

This is a turnaround coming from one of the co-founders of Saatchi & Saatchi, a company known as a rapacious buyer of other agencies in its day. But these days, rather than develop M&C Saatchi into the largest ad agency in the world, Saatchi is looking to make it the best and most sought after by clients.

Saatchi remains typically bullish. "China's growth is a phenomenon and so is M&C Saatchi's," he says, pointing to statistics showing the company's impressive growth. Nine years ago, M&C Saatchi began life with seven staff: now it boasts a 700-strong team with 500 million pounds in billings and revenues of 60 million pounds.

(HK Edition 10/22/2004 page16)