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Highlights from the last week of China business news: Billionaires galore in two rich lists released this week; new major military postings, apparently with a conflict in Taiwan in mind.

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We were recently contacted by Ogilvy, which is responsible for Danone’s PR in China, seeking to clarify what it believed were misconceptions in Steven Dickinson’s article (which appeared in September’s CER) about the French company’s problem-hit joint venture with Chinese firm Wahaha. You can read Ogilvy’s full, unedited response, and Dickinson’s (of China Law Blog) analysis of the dispute between the two companies that appeared in September’s CER.

Highlights from the last week of China business news: Lenovo is badly outmaneuvered by rival Acer; German Chancellor Angela Merkel beats the human rights drum on a visit to China.

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July’s China Economic Review is now out. Read it online or peruse your physical, dead-tree copy in style and at your leisure.

This month’s cover story is on Hong Kong’s handover, 10 years on. Check out this piece on mainland companies listing in Hong Kong, and this long Q&A with Pearl River Delta expert Michael Enright on Hong Kong and the region’s future. We’ve also got bits on India in our ongoing series.

Some good ones this month from our stable of columnists (yes, we keep them right here on Huaihai Road, and we give them fresh hay daily). There’s Tom Doctoroff, marketing man-about-town, (see him hosting a web TV show here!) confirming our deepest suspicions — luxury brands in China are propped up by marketing dollars to stake-out market share, not to serve any real customer base. The Beijing Calling column discusses Blackstone, Bates Gill (you read that right), looks at US and Chinese pols and making dialog work, while Graeme Johnston dissects the anti-monopoly law.

There’s plenty more besides, including our MBA supplement, until the next issue.

We’ve been fans of Danwei FM, the sporadically produced web radio program on Danwei.org, for some time. The format is pretty minimal - one-on-one interviews with people who do business in China on their views and experiences - and it plain works.

Now, thanks to iTV-Asia, which in its about section calls itself “Asia’s first internet television network for business executives,” there is a fairly regular, similarly no-frills video webcast of business interviews. The company was originally Japan-based and -focused, but relaunched its website last month with an initial focus on China. There are already a number of interviews on file, with more to come. Here JWT China CEO and CER columnist Tom Doctoroff interviews Donald Chan of Leo Burnett China, and here Edward Gwinn of DE Global interviews Philip Branham of B&L Group. Check it out.

It appears the Chinese management merry-go-round is turning once again. Sinopec Chairman Chen Tonghai has resigned, citing “personal reasons,” which may or may not transpire to be “serious breaches of discipline.”

Meanwhile, China Banking Regulatory Commission employees Tang Shuangning and Xu Feng are to become chairman of China Everbright Group and president of Shanghai Pudong Development Bank respectively. Xiang Junbo, a deputy governor at the People’s Bank of China, is taking over as president of the Agricultural Bank of China.

No underhanded behavior tied to these last three personnel changes – they’re being made, well, because the government feels like it.

I wrote an article recently (for the upcoming July issue of CER) about the role of non-executive independent directors on the boards of listed Chinese companies. The appointment of senior executives cropped up because it is one area where – at state-owned enterprises, at least – independent directors can’t expect to have much of a say. On issues like this, the Communist Party delegates on the board rule the roost.

It makes for interesting situations in terms of governance.

First of all, it doesn’t do wonders for corporate transparency and serves as a reminder that, particularly in sensitive industries, policy is set by Beijing. One would like to think that an increasingly business-minded Beijing’s thinking is increasingly in tune with Western corporate philosophy, but there are no guarantees.

Secondly, who comes in as the replacement? The guy taking over from Chen at Sinopec is Su Shulin, a former vice-president at key rival PetroChina, which naturally leads to questions about strategy and relations within the top echelon of management.

People I spoke to for the article gave a range of responses. One foreign independent director on the boards of a number of Chinese firms argued that the state, as major shareholder, was entitled to have the main say on appointments. And this merry-go-round isn’t necessarily a bad thing at Chinese firms …

“Companies can become bureaucratic and stale over time. A change-around in leadership is not without its merits. You might come to one answer because it is the standard approach but look deeper and there might be some rationale there. You have to look at it on a case-by-case basis.”

A foreign banker, responsible for overseeing his employer’s investments in China, was more concerned about the unpredictability factor. He also had a horror story to tell:

“They [another foreign bank] heard rumblings that the chairman of the Chinese bank they had invested in was not getting full support and so flew to Beijing to speak to the bank and the regulators, saying ‘This is our guy’. They were given reassurances but then the chairman was sacked while they were on the plane going home.

“Senior management positions are not a real board issue in China.”

The always delightful to read Peter Hessler (author of River Town and Oracle Bones) has a nice long article up on the National Geographic site on the Wenzhou entrepreneurial spirit, the factories that sprout up and get torn down with equal speed, and … bra parts. One choice bit:

After its arrival on the mainland, where production costs are much cheaper, “the Machine” essentially minted money. The boss got rich, and then a worker named Liu Hongwei got an idea. Despite his lack of formal education, Liu was a skilled mechanic, who worked closely with the Machine. Meticulously, he memorized the assembly line, piece by piece, and in secret he sketched out blueprints. When the plans were complete, he contacted a second boss at a company called Shangang Keji, in the city of Shantou.

In 1998, Boss Number Two hired Liu and took the blueprints to Qingsui Machinery Manufacture Company, in Guangzhou, which custom-built the assembly line. Initially, the new Machine didn’t work—nobody’s memory is perfect, after all—but two months of adjustments solved the problems. Shangang Keji began producing bra rings, but then Liu found Boss Number Three, at a company called Jinde. Every time Liu jumped, he demanded money for his blueprints and expertise; some believe he made as much as $20,000.

Without knowing it, the man was following a path blazed by other societies that had also experienced sudden manufacturing booms. In 1810, a wealthy American named Francis Cabot Lowell traveled to England, where he used his connections to tour the world’s premier textile mills. British law forbade the export of machinery or blueprints, but Lowell had an excellent memory. He returned to the United States, where, in the words of his business partner, he re-invented the Cartwright loom. Lowell became an American hero, with a Massachusetts factory town named in his honor.

This is the sixth in a series of entries Alfred Romann will post from India in the coming weeks.

Few cities in the world do extremes like Mumbai.

Home to one of the oldest stock exchanges in the world, started by a group of 22 traders under a Banyan tree more than a 150 years ago, Mumbai is a city of high flying finance.

It is also home to the largest urban slum in Asia, the residence of poor migrants and urban dwellers who haven’t yet read the news that India is undergoing an economic boom.

This is not much of a secret. Politicians and businesspeople know the wealth gap is there and they know that closing it will not be easy. Just look at China, where they’ve been working at it for almost 30 years and, despite remarkable progress, it remains an uphill battle.

Mumbai is to Shanghai what Delhi is to Beijing and the similarities between the two pairs are striking.

Both Delhi and Beijing are imposing cities, dusty and generally unwelcoming to the pedestrian. There is green, but it is found in concentrated spots between huge chunks of city. People in both are obsessed with politics.

Mumbai and Shanghai are, on the surface, nicer. They boast trees (well, in parts) and streets that can be walked. Both have cosmopolitan communities, top notch restaurants of every cuisine imaginable and, at least in their architecture, an obvious blend of local and European. (While Shanghai is home to buildings of French, English and Japanese design, the foreign flavor of Mumbai is purely that left behind by the British colonialists.)

The people also come in many varieties. In a single day, it is possible - in fact likely - to meet a fund manager looking to place US$100 million in Asia, a driver hoping to earn 500 rupees for the day (a little more than US$10), a Bollywood star or producer, a Japanese tourist and a street merchant selling juice.

Walk around the semi-circular Bombay Stock Exchange building in downtown Mumbai and the contrasts are even more apparent. Inside, billions are traded every day. Outside, homeless people look for a spot to lie down and sleep covered by old onion sacks.

With some luck and a lot of work, the spread of the world’s second fastest growing economy will reach them soon.

A couple of us attended a fascinating and eye-opening talk last night given by Arthur Kroeber of China Economic Quarterly and Paul French of Access Asia.

The seminar, titled “China’s Emerging Middle Class: Miracle or Myth?”, set about deconstructing the numbers published by the Chinese government, as well as the exuberant projections of investment banks, on the size of the “middle class” and the value of the national retail market.

Mr Kroeber made an excellent point when he said that he prefers not to use the term “middle class” when speaking of China, because, as he puts it, “There is no Chinese middle class. It doesn’t exist.” What he means is that the traditional Western idea of a middle-class family, one that might “take the SUV to the mall on Saturday and have dinner at TGI Friday’s,” is a completely unknown entity here. That very family dinner, he points out, would cost the same as the average Chinese family spends on food in an entire month (~US$100).

Instead, Mr Kroeber prefers to divide the citizenry into two categories: “surviving China” and “consuming China”. Out of 1.3 billion people, he contends, about 1.2 billion constitute Surviving China - those who make enough to get by and save for the future, but who, as far as foreign (and to a certain extent, domestic) retailers are concerned, basically don’t count, because they simply don’t have the disposable income to spend at Wal-Mart. The other hundred million or so are well-off enough to spend a bit of discretionary income on fashion items, movie tickets, etc. These are the ones businesses should be focused on selling to.

Overall, both men portrayed the way that the Chinese market is consistently overestimated. Mr French is the author, most recently, of a book on Carl Crow, the original “China hand”, whose own book, 400 Million Customers, exploded the myth of easy fortunes to be made in China back in 1937. Although Mr French did not bring up Carl Crow, those in the audience who know him were certainly making the connection.

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