(BRAND) FACED WITH A STEEP LEARNING CURVE

At 7ft 1in and 325 pounds, Shaquille O'Neal is one of the most recognised figures in world sport, a 13-time choice for basketball's All-Star game. For the past six months, the American athlete has also been promoting Li-Ning, the Chinese footwear retailer.

Li Ning is locked in a battle with Nike and Adidas for the fast-growing Chinese footwear market and the Chinese group is determined to keep up with the heavy-spending multinationals.

Since Yao Ming, the 7ft 6in Houston Rockets player and the best-known Chinese athlete in the world, uses Reebok (part of Adidas) and Nike has signed gold-medal hurdler Liu Xiang, Li-Ning has taken an imaginative approach – a five-deal deal with Mr O'Neal to sell his Dunkman brand of shoes in China.

Li-Ning, founded by the former Chinese gymnast who won three golds at the 1984 Olympics, started out selling cheap running shoes in smaller Chinese cities, while Adidas and Nike were moving into Shanghai and Beijing.

The company realises that to compete with big international groups – and charge the prices they do – it must develop a coherent brand that appeals to aspirational young Chinese.

Only a couple of years ago, China was associated solely with low-cost manufacturing. But now the listing includes three Chinese brands in the Top 100, with China Mobile ranked number 5.

Li-Ning's ambitious advertising – it has also signed the Cleveland Cavaliers' Damon Jones – demonstrates the rapid strides some Chinese companies are making to build up their own brands.

A frontrunner in efforts to move beyond cheap manufacturing is Lenovo, the computer maker that two years ago bought IBM's personal computer business. The deal was part of a grand plan to turn Lenovo into a global brand, which also involves the group sponsoring of the Turin Winter Olympics and Beijing Olympics. It has to move quickly: in four years, it will not be allowed to use the IBM name.

A new generation of Chinese entrepreneurs is full of confidence about the international potential of their businesses. "A quarter of the world's population is in China, so any brand that wins loyalty here is likely to become a global brand," says Zhou Chengjian, founder of the MetersBonwe shops, one of the biggest fashion chains in mainland China with 1,800 stores. "We need to remain strong in China but we will definitely try to take our brand overseas."

Some Chinese entrepreneurs have tried to resurrect traditional brands and build modern companies round them – such as the Quanjude, the Beijing roast duck restaurant that has expanded to Shanghai and Hong Kong, or YongJiu (Forever) bicycles, which has launched its own scooters.

Yet, while companies realise the need to invest in developing their brands, a number of factors still hold them back.

Despite China's manufacturing prowess, quality can be a problem. In some sectors, consumers in China will buy products that might not be considered acceptable in the US or Europe. The car industry, in particular, is facing this issue at the moment.

Two years ago, several Chinese manufacturers announced plans to export vehicles to the US and Europe from 2008, hoping to reproduce the success that some have had in their home market.

However, in recent months some of those companies have delayed their export plans as they strive to achieve the reliability levels that US consumers demand.

"We have to get it right at home before we go outside of China," says Phil Murtaugh, the former GM executive brought in by Shanghai Auto to lead its international operations. "I do not know when we will start exporting."

Finding the right executives who can lead international marketing initiatives is also a huge challenge. In a much-cited 2005 report about the looming "war for talent" in China, McKinsey found that only 10 per cent of Chinese engineering graduates had the English language and team-working skills necessary to work in a multinational.

And for local companies seeking to tap the relatively small pool of Chinese executives with international experience, they are competing against a growing array of multinationals wanting to hire the very same people.

Chinese companies are also only just beginning to think about the social issues that go with launching international brands – the sorts of topics that are sometimes referred to as "corporate social responsibility".

Multinationals that manufacture in China and other developing countries have become used to regular inspections of working conditions at their factories, investigations into whether their supply chains use child labour and constant media and NGO scrutiny. The new Chinese consumer brands will have to learn to cope with these demands.

Politics could also play a role. The more Chinese brands try to go abroad, the more they will face questions about where their funding really comes from or what their connections are with the Chinese government.

Such questions helped kill CNOOC's bid in 2005 for Unocal, the US oil and gas group. And Lenovo faced these problems when members of the US Congress queried the State Department's purchase of Lenovo PCs.

Whether such questioning has any basis, or whether it is an opportunistic strategy by anxious rivals, Chinese brands will need to develop ways of responding. They face a steep learning curve.