While China’s National People’s Congress in a rubberstamp legislature, its annual plenary session – which kicks off Friday – offers a good window into the thinking of the nontransparent Chinese Communist Party elite.

This year’s theme is the economy.  That in itself isn’t news, but the economic focus is shifting.  While the 2009 NPC harped on attaining an 8% growth, the priority for this year’s session is to ensure a more equitable distribution of national income.  In a talk with China’s netizens last week, Premier Wen Jiabao said “while it is the government’s responsibility to expand the ‘pie’ of national wealth, it is the government’s conscience to distribute it in adequate manner.”  Mr Wen warned that “if wealth in a society is concentrated in a minority of people, this society will be neither just nor stable.”

The use of the word “stable” is significant.  Apparently the Party is starting to worry that if income inequality grows too wide it could lead to greater disaffection with Party rule.  So while Beijing has talked about distributive justice since the mid-2000’s, the leadership under President Hu Jintao seems motivated by a higher sense of urgency this time.  In a recent speech , Mr Hu used the phrase “speed up” 50 times as he urged cadres to move faster on issues such as going up the technological chain, encouraging consumer spending and buttressing the income of workers and peasants.

Wall Street Journal – 3 March 2010

Chinese automobile dealer Zhongsheng Group Holdings Ltd has shelved its planned US$1 billion Hong Kong initial public offering due to volatile market conditions, a person familiar with the situation said Tuesday.

The switch is the latest blow to the Hong Kong market, which has seen a number of weak IPOs in recent weeks due to market saturation and – in some cases – uncertainty about the economic situation in the Chinese mainland.

Zhongsheng’s shelved offering would have been the largest IPO in Hong Kong since Russian aluminium company UC Rusal Ltd’s US$2.55 billion share sale in January.

The company, which focuses on luxury and mid-to-high-end automobile brandslike Mercedes-Benz, Lexus, Audi and Toyota was origonally scheduled to kick off order taking this week and likely to list at the end of the month, said the person familiar with the matter.  Company officials weren’t available for comment.

Wall Street Journal – 3 March 2010

China will target a higher budget deficit this year of more than one trillion yuan (S$205 billion), a senior lawmaker said yesterday.

Yin Zhongqinq, deputy head of the financial and economic committee of the National People’s Congress, China’s largely ceremonial parliament, also said that Beijing would again permit provincail governments to issue their own bonds this year.

The sum would be similar to the 200 billion yuan issued in 2009, Mr Yin told a forum.

China undershot its 2009 budget deficit target of 950 billion yuan.  The actual shortfall was about 740 billion yuan, or about 2.2 per cent of gross domestic product, according to Ministry of Finance figures.

“The fiscal deficit this year will be larger than last year, and will probably exceed one trillion yuan.”

Turning to the yuan, mr Yin said that China needed to change expections that the currency can head only higher.  He did not say how this could be done.

“So many years of one-way upward expectations have set China in a dilema in its foreign exchange policy, with very limited flexibility.” Mr Yin said.

Beijing has in effect re-pegged the yuan around 6.83 per US dollar since mid-2008 when the global financial crisis intensified.

The Business Times – 3rd March 2010

King Stone Energy Group, a chemical and optical products maker diversifying into coal mining, plans to grow its coal output capacity fivefold by developing existing mines and through acquisitions.

The company aims to spend 452.9 million yuan (US$ 66.4 million) to raise the capacity of its first mine near Ordos, Inner Mongolia Autonomous Region, to 6.5 million tonnes by the end of next year from 1.2 million tonnes now and four million tonnes by the year’s end.

Chief executive Wang Dayong yesterday said that the company was constructing a second mine next to the first one, with an initial capacity of 1.2 million tonnes.

The planned addition of a third mine, with a capacity of 1.2 million tonnes, would raise the company’s capacity to nine million tonnes by the end of 2012, he added.

King Stone is in talks with the local government to acquire mining rights for the third mine.

The company plans to make mine acquisitions this year and next year with a view to raising its coal output capacity to 20 million tonnes in the longer term.  ”Inner Mongolia will be our first target for acquisition, but given our management and advisers’ background, we will also look for opportunities in Shanxi and Shaanxi provinces,” Wang said.

Initially focussing on power station coal, King Stone will try and expand Shanxi Coking Coal Group, the mainland’s largest coking coal producer.

South China Morning Post – 2nd March 2010

More than 2,000 assembly line workers in Dongguan staged a three-day strike after state newspapers reported that authorities were considering raising the manufacturing heartland’s minimum wage amid a labour shortage.

Workers at Lacquer Craft Manufacturing in Daling Mountain town complained their Taiwanese employer had refused to pay them a reasonable wage even though nearby factories had raised workers’ base salaries by nearly 20 per cent.

Most workers walked out of the factory, but some were forced to stay after supervisors locked the door, the Guangzhou Daily reported yesterday.  A spokesman for the factory told the South China Morning Post yesterday afternoon that many workers had returned to work.

Dongguan is facing a severe labour shortage.  Although overseas orders have risen since the 2008 global financial crisis, many migrant workers dissatisfied with the low salaries and high cost of living planned to seek opportunities elsewhere after the Lunar New Year holiday.  Manufacturers are reportedly offering up to 600 yuan (US$ 88) to middlemen for each migrant worker they recruit.

But Lacquer Craft insisted that a pay rise would harm the industry, which it said had already been hit by rising production costs and paper thin margins.  ”No (manager) should make a concession at this stage…..otherwise, the domino effect of a pay rise would undermine other manufacturers,” a senior manager told the South Metropolis News.

Authorities blamed the strike on the newspaper reports, published a day earlier, which said the city proposed raising the monthly minimum wage from 770 yuan (US$ 115) to 1,000 yuan (US$ 150).

South China Morning Post – 2nd March 2010

Premier Wen Jiabao should be more upbeat than a year ago when he delivers China’s version of the state of the union address at the opening of the legislature’s annual session on Friday and then faces the media at its close.

Wen’s annual report to the nearly 3,000 national People’s Congress deputies will spell out this year’s broad economic, social and foreign policy goals.

He is expected to declare that China has become the first major economy to recover from the global economic downturn after withstanding its toughest test since the Asian financial crisis that began in 1997.  Last year the world’s third largest economy registered the world’s fastest growth, expanding by 8.7 per cent – and outpacing Wen’s 8 per cent target – as most countries slowly struggled along the road to recovery.

Despite concerns about the sustainabilty of the mainland recovery, louder voices hailed the country for overtaking the United States as the biggest car market, surpassing Germany as the No 1 exporter and potentially replacing Japan as the world’s second largest economy.

With the world dazed by banking and property collapses, China still has a purse full of money as the superlatives kept coming last year.  For the first time in history China has the richest banks in the world, the largest phone companies, the biggest internet population, the most nuclear power plants under construction and possibly the biggest middle class.

South China Morning Post – 2nd March 2010

A joint editorial in 13 mainland newspapers has called on the nation’s top legislative body to abolish the hukou system – strict population controls that have split the country into rural and urban areas for decades.

The editorial appeared in metropolitan newspapers from 11 provinces and areas yesterday on the eve of the annual meetings of the National People’s Congress beginning on Friday, and the Chinese People’s Political Consultative Conference, beginning tomorrow.

The papers include The Economic Observer in Beijing, the Chongqing Times, The Southern Metropolitan News in Guangdong, the Inner Mongolia Morning News, the Dahe Daily in Henan and the Southeast Express in Fujian.

The joint editorial said the hukou regulation was unconstitutional and a flagrant violation of human rights.

The hukou system was introduced in 1958 when the central government issued the first set of resident-registration regulations since the founding of the People’s Republic in 1949.  It put a lid on free migration flow, particularly from rural areas to cities.

But as the mainland has developed in recent decades, concerns have been expressed that the system may be doing more harm than good with the divide between the urban and rural populations growing into a chasm.

The editorial said the hukou system had led to unfair competition between urban and rural people and was a breeding ground for the corrupt sale of urban residence permits.

South China Morning Post – 2nd March

There is no singular company operating a nationwide bus service in China.  Instead, dozens of small companies ply the country’s highways.  However this segment of the country’s transport sector may prove to be an attractive investment target as the highway system expands, tourist numbers increase and rural Chinese continue migrating to urban areas.

China’s intercity bus market is largely controlled by regional leaders like Shanghai Bashi and Beijing Public Transport Holdings, but deals have allowed foreign capital to gain a foothold.  Already 15 years on China’s roads, Spanish-based ALSA was the only foreign player in the local coach travel market until summer 2009 when Singapore’s Mass Rail Transit (SMRT), the city state’s largest transport operator, spent RMB 320 million on a 49% stake in ZONA, the Shenzhen subsidiary of National Express Transportation Group.

China International Business – Nov 2009

Former Google China President Kai Fu Lee cemented his career transition from manager to entrepreneur last September with his own early-stage investment fund and start-up incubator, Innovation Works.

Lee’s new company will provide angel funding for Chinese start-ups, unlike most funds in China which prefer to invest in mid- to- late-stage companies.  Lee plans to hire over 100 graduates from China’s top universities who are eager to build up their own businesses, giving them scope to develop projects from scratch to implementation and expansion.  Lee’s company has already attracted investment from many famous Chinese entrepreneurs including Steve Chen (co-founder of YouTube), Guo Taiming from Foxconn Technology Group, Liu Chuanzhi founder of Lenovo and New Oriental Education & Technology Group’s Yu Minhong.

Drawing on his strong background with Apple, Microsoft and Google, Lee aims to pursue three major directions for his company; e-commerce, cloud computing and mobile computing.  He believes that these businesses are at an inflection point in China and that now is the time to develop them further.

Lee joined Google four years ago after a highly publicised legal battle between the company and Microsoft, which later sued Google claiming that Lee violated his employment contract when he switched jobs.  He successfully built up a working team for Google China, despite Google only capturing a small share of the online search market from Baidu.  Confident in the success of Innovation Works, he maintains that he won’t snatch talent from Google China and that new talent will be offered enticing share options upon joining the new company.

China International Business – Nov 2009

The global economic crisis may have dampened enthusiasm for luxury cars in the West, but in China car sales, especially luxury models, have remained impressively strong.  Mercedes-Benz, one of the leaders in the Chinese luxury car market, saw its business grow by 50% in the first eight months of 2009.  The company introduced six new models to the market, in addition to new variants of popular designs like their S-Class luxury car.

Leading the company’s China sales and marketing efforts is Bjorn Hauber.  Below are some comments from an interview.

“The target audience for Mercedes-Benz is constantly extending.  At the start of 2009 we introduced the first B-Class – our first car below RMB 300,000.  We did that for various reasons, one being to attract a totally new clientele; young people , those that are just about to get married and moving out (of their family homes) for the first time.  These are people we have not yet had within our customer area before, and now with the B-Class we’re able to attract these young people.

The same is true for the Smart brand, which is a separate brand.

If we are talking in general, then the target group for Mercedes-Benz is entrepreneurs and senior executives in the companies – those who understand the value of Mercedes-Benz and are able to afford one of our cars.”

“The average of our customers is 40.  We have a very young customer base in China, which also partly explains why we have so many first-time buyers.”

“Chinese buyers are very different from those in other parts of the world.  First of all, everybody pays cash, so the product needs to be available when somebody walks into the dealership.  Brand plays an important role, but its also a bit fragile because this market is so young.

Brand building is important because the Chinese customers are not yet so familiar with our reputation and with the value that the brand stands for so they don’t yet have the same loyalty as they would in the more developed markets.”

“If you look at the way cars are equipped here in China, you will find the equipment standard is very high.  Chinese customers are very demanding when it comes to car equipment; they want to have everything inside the car.  A good example for us is the S-Class; we offer it in nine different versions compared to the US where the product portfolio is a lot thinner.

The Chinese are very demanding; they tend to go for a fully-equipped car.  There are still a high number of chauffeur-driven cars in China, so the rear seat area is much more important than in Europe where, of course, you are more often driving the car yourself.”

“If you look at the Chinese customers they develop their needs very fast, and the way they use their cars.  A couple of years back it was important to drive from A to B.  Today it’s more important how you drive from A to B, so there’s a weekend car; there’s a family car; there’s a business car.  They develop their scope, and that’s why we also continuously increase our product portfolio because this need has developed strongly over the past couple of years.”

China International Business – Nov 2009

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An IPO is often the quickest way to the top of the Rich List, and 2009 has seen several businessmen jump up the ranks with their company’s listings.  Liu Zhongtian of Zhongwang jumped up to number 10 on the list after he led his company to raise USD 1.3 billion in the world’s largest IPO in 2009.  The IPO’s of Baoli, American Dairy, Fujian Peak Group and Chigo Air Conditioners have respectively propelled Zhu Gongshan, Leng Youbin, Xu Jingnan and Li Xinghao up the list.

Two other business leaders pushed up the list, from their already high positions, with spin-off IPO’s.  Timothy Chen Tianqiao hit 34 on the list after Shanda Interactive rose USD 1 billion by spinning off a subsidiary onto NASDAQ, while Charles Zhang Chaoyang hit 176 when Sohu spun off its gaming subsidiary Changyou in April.

Over the next 12 months plenty more of China’s wealthy will be getting even richer from IPO’s.  Xu Jiayin of Evergrande, Xu Jiankang of Powerlong, Su Meng of Gold Tak Land, Li Hua and Li Xiaoping of Excellence and Huang Chaoyang of Zhongjun all have IPO’s in the pipeline, which, with friendly markets, could mean a nice paycheck for each.

China International Business – Nov 2009

Zijin Mining, in addition to being China’s largest producer of gold and one of its biggest producers of copper and ferrous metals, is responsible for the fortunes of no less than nine individuals on the Rich List 2009 (led by Chen Fashu at number 15).  These lucky nine benefitted from a price increase across all of those commodities in 2009, most notably gold which hit an all-time high of USD 1,043.77 an ounce in early October.  The Fujian-based company is publicly listed in Hong Kong, and its April 2008 debut nearly doubled and would have tripled by close if the regulator had not intervened to calm things down.  In early 2007 Zijin broke into the South American minerals market by buying 80% of Monterrico Metals.  Zijin saw 2008 sales of USD 2.478 billion and things are only likely to improve, especially since Zijin’s discovery in 2009 of an 80,000 ton copper and gold deposit in Fujian Province.

China International Business – Nov 2009

come back tomorrow for – China’s Rich List IPO to Riches!

#37 Rong Zhijian – Once he was chairman of CITIC Pacific.  Then he made a bad currency bet that left CITIC having to shore up CITIC Pacific with capital of USD 1.5 billion.  Fast forward to April and Rong found himself resigning as chairman of CITIC Pacific.  Fast forward again and now he’s down USD 1.3 billion from 2008 to USD 2.4 billion, lowering him to 37th place.

#41 Du Shanghua/Rizhao Steel – While fate has ben kind to NPC member Shen Wenrong of Sha Steel, things haven’t been quite so great for another steel man, Du Shuanghua.  Du, 44, lost USD 2.8 billion in 2009, which sent him careering from 2008’s second place to 2009’s 41st.  This is down to his bitter and losing battle with Shandong Steel, a newly formed group controlled by the Shandong provincial government, which forcibly consolidated his company in September.

#155 Peng Xiaofeng/LDK Solar – Evidently it’s only bold moves for Peng Xiaofeng.  First he was the fastest entrepreneur to make it onto the list from start-up, having founded his LDK Solar in 2005.  But now that the price of polysilicon, the main raw material used to make photovoltaic panels, has plummeted worldwide, and European governments are not subsidising solar as much as before, LDK Solar has lost 75% of its value.  For Peng that translates to a loss of USD 3.2 billion.  Now worth USD 800 million, he has plummeted from 4th in 2008 to 155th in 2009.

China International Business – Nov 2009

come back tomorrow for – China’s Rich List Company Zijin Mining

#17 Huang Guangyu/Gome – Last year’s richest man and the founder of home appliance chain Gome was arrested in December 2008 for business irregularities. and yet he still manages to hang onto 17th place in 2009 with wealth of USD 3.4 billion.  It might help that US private equity firm Bain Capital announced in July that it would invest HKD 4.8 billion (USD 630 million) in Gome – the largest investment from an American company in the Chinese mainland to date.  Huang was no doubt happy to hear the good news whilst awaiting sentencing.

#395 Zhang Wenzhong/Wu Mart – Though Zhang has actually risen on the Hurun Rich List in 2009 from 479 to 395, his sentencing in October 2008 to 18 years for fraud, bribery and embezzlement can’t be good for business.  At the time Wu-Mart, one of Beijing’s largest supermarket chains, had more than 30% of the total market share.  The company was also, however plagued with capital shortages and management problems – time will tell if the company can last without its founder.

China International Business – Nov 2009

come back tomorrow for – China’s Rich List fallen favourites!

#112 Huang Rulun/Jinyuann Hotel Group – Huang, 58, chairman of the Jinyuan Hotel Group, is constantly making it into the top of China’s philanthropy lists, but even for him last year was exceptional – he donated USD 120 million in 2008 alone towards the snowstorm and Sichuan earthquake recovery efforts, education, poverty allieviation and health care.  Even so, he still clocked in at #112 on the Hurun Rich List, with assets of USD 1.03 billion.  Huang ascribes his success, as well as his philanthropy, to his belief in Confucianism, with the belief system having apparently played an important part in his family for generations.

#432 Yu Pengnian/Pengnian Industries – The chairman of Shenzhen based trade and property group Pengnian is number 432 on the Rich List, with a net worth of USD 370 million, but has been number one on the Hurun Philanthropy List for the fourth year running.  By now he has given more than USD 420 million to charity, much of it to his cataract foundation (he himself suffers from the condition).  The 87-year old is also one of the earliest entrants on the Rich List, having “jumped into the sea of business” during the sixties.

#598 Jet Li – In 2004 Li (ranked at #598) and his family experienced a life-changing brush with death in the Asian Tsunami.  Soon afterLi donated HKD 500,000 towards tsunami relief and ever since – has made significant contributions from his personal fortune, while dedicating himself to not only giving away his personal fortune but creating a culture of philanthropy in a country where giving makes up just 0.35% of GDP (compared to 2.1% in the US).  His high-profile Jet Li Foundation has so far contributed RMB 78 million towards Sichuan earthquake relief and reconstruction efforts and, through training and its mantra that every person should donate as little as RMB 1 per month, is promoting the notion of charity througout the country.

China International Business – Nov 2009

come back tomorrow for - China’s Rich List corporate convicts!

Zong Qinghou/Wahaha – Wahaha founder Zong Qinghou started his beverage company as a mini-grocery in school in 1987 and has been a delegate to the National People’s Congress (NPC) since 2002.  He’ll need all the friends he can get this year after Caijing reported last April that Zong, 63, was being investigated for evading some RMB 300 million in taxes.  This follows his notorious high-profile contract dispute with joint-venture partner Group Danone of France.  Despite these troubles, he and his family still have a net worth of USD 4 billion, putting them at number 13 on the list.

Shen Wenrong/Sha Steel – This former steelworker is a member of the NPC, which perhaps sheds light on how why Sha Steel, China’s largest private steelmaker and the only private company on the Fortune 500 list. has seen steady profits this year and is making plans for expansion while its competitors are downsizing.  Sha Steel is most famous for having bought and shipped an entire steel plant from Germany.  It also acquired an Australian mining company early 2009.  These bold moves, and more, have put Shen, 63, at number 43 on the Rich List, with a wealth of USD 2.2 billion.

China International Businesss – Nov 2009

come back tomorrow for - China’s Rich List benevolent businessmen!

#17 Chen Lihua/Fu Wah International – Chen’s is a classic rags-to riches story.  Number 17 on the list with USD 23 billion Chen, 68, was born into a poor family and started out with a small furniture repair shop in 1976.  With the money she earned she began pursuing real estate and trade in Hong Kong throughout the 80’s, before returning to her hometown of Beijing to create high-end property group Fu Wah, which mainly focuses on residential complexes, many of them clustered on Beijing’s pricey Jinbao Street.  In 1995 she also founded the elite Chang An club, a private business club.  A CPPCC member, in 1999 she invested RMB 200 million to build the state-level China Red Sandalwood Museum, contributing RMB 25 million to the preservation of rare art and furniture and the promotion of Chinese culture and history.

#29 Zhu Linyao/Huabao International – Though known as the “Fragrance Queen” in Hong Kong, the 39-year old chairwoman of Huabao keeps a low public profile.  After graduating university, Zhu set up her own fragrance trade company in Beijing, and then expanded into Shanghai in 1996.  The company’s main business today is producing and selling tobacco and food flavourings, and fine fragrances used in cosmetics and household products.  It made a back-door listing on the Hong Kong stock exchange in 2006.  The Sichuan native is number 29 on the Rich List and worth USD 2.7 billion.

China international Business – Nov 2009

come back tomorrow for - China’s Rich List official operatives!

After the arrest of last year’s richest individual, and the takeover of number two, seven new faces appeared in the 2009 Rich List top 10.  As well as Wang Chuanfu and Zhang Yin the list includes:

#5 Huang Wei & Li Ping/Sinhoo – Former teacher Huang Wei started out in the early 90’s selling eyewear in Hangzhou, got involved next in the nascent stock and commodities markets, and today with husband Li Ping holds a 71% share of Shanghai-listed property developer Sinhoo.  That puts their net worth at USD 4.4 billion, an increase of USD 2.5 billion over 2008, and makes them number five on the Rich List.

#5 Lu Zhiqiang/China Oceanwide – Also ranked five on the China Rich List with a net worth of USD 4.4 billion, Lu’s fortune increased by USD 2.1 billion in 2009.  His wealth is mainly due to a series of smart personal investments, particularly in Minsheng Bank and Haitong Securities.  Just Septenber 2009, the 57-year old announced that he would spend USD 404 million on a 29% stake in Lenovo.

#9 Wang Jianlin/Dalian Wanda Group – It’s been a banner year for real estate developer Dalian Wanda, which currently operates 21 Wanda Plaza complexes in China and is building up 30 more, including a RMB 7 billion one in Wuhan (the city’s third).  Chairman Wang Jianlin has said that this year will see the company’s greatest expansion and investment.  Earlier in the year Wanda Group raised over RMB 4 billion (USD 586 million) from private equity, so Wang leaped up the Rich List from 20th to 9th place with a wealth increase of USD 1.9 billion.  And if Wanda launches a planned IPO in 2010, who knows how high he could go?

#10 Liu Zhingtian & family/Zhongwang Group – Zhongwang, which makes aluminium products for machinery  equipment, transportation and infrastructure sectors made headlines when it raised USD 1.3 billion in an IPO last May – the largest in the world thus far.  Liu, who ranks number ten on the list, saw his wealth increase by USD 1.6 billion to USD 4.1 billion.

#10 Yan Bin/Reignwood Group – Yan’s 57th place in 2008 was nothing to sneeze at , but a revaluation of his assets has made him USD 2.9 billion richer, putting him jointly at number ten with a net worth of USD 4.1 billion.  Yan started his fortune in Thailand, where he is known as Chanchai Ruayrungruang, before returning to China in1995.  He owns the Pine Valley Golf Resort and Country Club in Beijing and the China franchise for the popular energy drink Red Bull.

China International Business – Nov 2009

come back tomorrow for - China’s Rich List wealthiest women!

#1 Wang Chuanfu/BYD - In 2008 43 year-old Wang Chuanfu was a lowly number 103 on the rich list but now, thanks to a 30% growth in Chinese car industry and what rich list founder Rupert Hoogewerf calls the “Warren Buffet midas touch”, Wang has shot up to number one.  Buffet paid HKD 1.8 billion (USD 120 million) last year for a 10% stake in Wang’s Hong Kong listed BYD, which sent the company’s shares rising 90% the next day.  Wang, who holds 27.8% of the company, now has a net worth of USD 5.1 billion, up USD 4.1 billion from last year.  Just 14 years ago BYD was a mere maker of rechargeable cell phone batteries, yet today it has become the first manufacturer in China to sell a plugin electric hybrid car, unveiling its e6 to great fanfare at the Detroit Auto Show in January 2009 and putting its American competitors to shame. 

#2 Zhang Yin & family/Nine Dragons Paper - No one on the list has seen a wilder ride in the past two years than China’s “Paper Queen”, who’s fate as an importer of waste paper and manufacturer of packaging products, is inextricably tied-up with China’s export industry.  Once occupying the top spot in the list, 52-year old Zhang saw her net worth plummet to USD 350 million last year, putting her at 18th place, and then climb back to her current USD 4.9 billion, landing her at number two.  That’s a wealth increase of USD 2.2 billion in just one year.  Shares of Nine Dragons Paper went from HKD 0.72 October 2008 to HKD 12 in September 2009.  Together with her husband and brother, Zhang owns 72.25% of the company.

#3 Xu Rongmao/Shoimao Property – The 59-year old founder and chairman of luxury real estate developer Shimao Properties is famously reticent, but we do know that he was born poor in Fujian Province, worked in the countryside as a barefoot doctor and spent time in Hong Kong in the 70’s as a textile worker.  Friends say he got lucky in stocks and then the story goes that he invested RMB 1.2 million in a knitting factory in his home town, while, in truth building a hotel though such investments were forbidden at the time.  The rules then changed and Xu became the owner of the first private three-star hotel in China.  After that it seems like its been nothing but one smart forward-looking investment after another.  What Wu would say about all this remains a mystery, but his net worth of USD 4.7 billion speaks volumes on its own.

China International Business – Nov 2009

come back tomorrow for - China’s Rich List new to the top ten!

The onset of the global financial crisis sent fortunes plummeting across the globe.  Not surprising, then, that the Hainan Clearwater Bay 2009 Hurun Rich List, an annual ranking of the richest individals in China released last month, shows more – and more dramatic – changes than any year in thre list’s history.

However it turns out that China’s richest have weathered the crisis far better than elsewhere.  There are now 130 USD billionaires, compared to just three in 2004, with an average wealth of those on the list up 30% from USD 439 billionto USD 571 billion.  And 180 new faces made it into the list for the first time.  And of those that have fallen, few are for reasons having to do with the credit crunch.  The cut-off for entry into the list also rose, from USD 50 million in 2008 to USD 150 million in 2009.

Interestingly 10.2% of the list is female.  The country’s wealthiest are young as well, with 94 people below the age of 40.  The average age of those listed is 50.2 years old – a whole 15 years younger than their equivalents in the West, and nearly all of China’s rich are self-made, with less than 1% of the list having inherited their wealth.  Compare that to 25% in the UK and 35% in the US.

China International Business – Nov 2009

come back tomorrow - more details of China’s richest will follow over next few days!

While CCTV was broadcasting the country’s 60th aniversary parade, the State Administration of Radio Film and Television announced restrictions on commercial breaks on Chinese TV stations.  According to the regulation, commercial breaks during primetime may not last for more than one minute, while television shopping advertisments are forbidden to be shown between 6pm and 12pm.  As a result, the advertising revenue of Chinese TV stations will be reduced by around RMB 10 billion in 2010.  TV stations are starting to increase advertising prices, but this is not a good approach, rather these TV stations need to seek new advertising methods to cover the losses.

Chinese Business Journal – Nov 2009

China’s two largest state-owned oil companies, CNPC and Sinopec, have been ranked no 9 and no 13 in the Fortune 500 list for 2009.  Under the countries new oil pricing mechanism, CNPC has seen net profits of RMB 50.5 billion (USD 7.4 billion) in the first half of 2009, making it the second most profitable producer in the world, while Sinopec has seen net profits of RMB 33.25 billion (USD 4.87 billion) over the same period, up 300% compared to the first half of 2008.  A state-sanctioned monolopy gives CNPC and Sinopec an overwhelming advantage to extend their distribution and industry frameworks and purchase overseas petroleum resources.

The Economic Observer – Nov 2009

Rizhao, a small city in southern Shandong Province, is attracting global attention for its stellar environmental practices.  According to the Rizhao municipal government 99% of the city’s residents are using solar water heaters, which became popular in the 1980’s thanks to the city’s estimated 260 sunny days every year.  With neither a large-scale solar energy factory nor a research centre, the popularity of solar heaters in Rizhao is due primarily to convenience and not government or industrial incentives.  As China’s new green star, the city has to devise a solar energy development plan to help further push environment protection rather than let it grow organically.

Nanfang Weekend – Nov 2009

Nowadays it is not surprising to see a Chinese businessman flying his own plane. In 1997 Zhang Yue, chairman of Chinese central air conditioning producer Yuanda Group, became the first businessman in the country to obtain an aviation licence and subsequently bought an American Cessna jet plane for RMB 70 million (USD 10.3 million). China’s private plane market has been posting annual growth of 10% and, according to the world’s leading private plane manufacturer Diamond Aircraft, there will be demand for thousands of private planes in the next five to ten years. However China’s strict control on airspace at low altitudes and the high maintenance cost of private planes pose challenges to the private plane sector.

Global Entrepreneur – Nov 2009

Ma Huateng, CEO of Tencent, has over the past ten years built instant messenger QQ into a comprehensive internet giant. Tencent is now China’s largest internet company, with a market value of HKD 230 billion (USD 29.7 billion). The company has 448 million active user accounts and has seen sales revenue of RMB 5.4 billion (USD 791 million) in the first half of 2009. Along with rivals Baidu and Alibaba it is one of the most important internet companies in China, and business diversity  is the key to Tencent’s future success. The company has moved into broader businesses including online games, internet social networks, email, search engines, electronic commerce, downloading tools, as well as online music and video, making Tencent the real internet giant.

China Entrepreneur – Nov 2009

In a bid to provide a new channel to help finance  small and medium sized enterprises (SMEs), China is establishing a Growth Enterprise Market (GEM). The GEM is expected to be a main force in China’s economic development in the coming years and 29 Chinese SMEs have obtained the green light to become the first ones listed in the GEM. Some of these companies have great potential in their respective sectors, although it is not easy for them to become the equivilent of Microsoft on the NASDAQ. For investors, the main risks related to the GEM are high IPO prices and Price to Earnings ratios. In addition, the GEM needs to avoid becoming a part of the bubble developing in China’s finance sector.

Sanlian Life Weekly – Nov 2009

Two Hong Kong-listed companies, Primus Financial Holdings and China Strategic, will jointly purchase a 97.57% stake in AIG unit Nanshan Life, the lagest insurer by book value in Taiwan. At USD 2.15 billion, the acquisition will be the largest insurance deal on the island to date. Nanshan Life, founded in 1963, has total assets of more than USD 46 billion. The deal will be conducted by Primus Nan-Shan Holdings, owned by China Strategic and Primus Financial Holdings, which respectively hold stakes of 80% and 20%.

China International Business – Nov 2009

Fangda Industrial Group, a Liaoning-based private company, has purchased a 5.797% stake in Nanchang Steel from Jiangxi Metallurgical Group for RMB 910 million (USD 133 million). Fangda, a carbon materials producer, will become the largest shareholder of Nanchang Steel and the controller of Changli Iron & Steel, a Shanghai-listed unit of the steel company. The deal is expected to help Fangda expand into the iron and steel sector in China, and compete with its local rival state-owned Valin Steel.

China International Business Nov 2009

Chen Fashu, chairman of Fujian-based New Hua Du Industrial Group and the province’s richest man, bought 65.81 million shares in China’s top pharmacuetical company Yunnan Baiyao Group last month, for RMB 2.2 billion (USD 322.3 million), from Hongta Group, the country’s largest tobacco producer. Chen Fashu will become the second largest shareholder of Yunnan Baiyao.

China International Business Nov 2009

Turnover in 2008

1. Sinopec RMB 1.462.44 billion

2. CNPC RMB 1.273 billion

3. State Grid RMB 1,140.74 billion

4. ICBC RMB 490 billion

5. China Mobile RMB 451.85 billion

6. CCB RMB 402.94 billion

7. China Life RMB 379.01

8. BOC RMB 352.28 billion

9. ABC RMB 334.04 billion

10. Sinochem RMB 308.98 billion

China International Business Nov 2009