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Inside China’s most exclusive business club

When it was announced four years ago that the Chinese carmaker Geely was buying Swedish carmaker Volvo, the company drew plaudits worldwide for the daring and astuteness of its move.

But few people are aware of the months of preparation that went into planning the $1.8 billion (1.3 billion euros) deal and the role that about 20 of China’s richest and most powerful business people played in making it happen.

The man steering the ambitious plan was Li Shufu, Geely’s chairman and founder. He had set up the company in 1986 as a refrigerator parts maker and had gone on to turn it into a maker of motorcycles, vans and inexpensive cars.

But as the time came to decide whether to shift up another gear by buying Volvo from Ford Motor Co. of Detroit, Li’s enthusiasm began to give way to doubts about whether the purchase would be in the company’s best interests.

“Li was wavering before the deal was signed,” says Cheng Hong, secretary general of the China Entrepreneur Club, whose 46 members are some of China’s wealthiest people.

“He asked us to arrange a meeting at which we could get together to discuss whether it was feasible.”

In late November 2009, four months before the deal would eventually be announced, about 20 members of the club converged from all around China in the port of Ningbo, one of the country’s oldest cities, and where one of Geely’s production plants is located.

That night for over two hours in a conference room of the Marriott Hotel in the city center, the businesspeople debated the pros and cons of the deal.

Information about such deals is usually kept within a very tight circle of people, but such was Li’s confidence in his fellow members that he put all his cards on the table, Cheng says. This included telling them of the dealings he had had with Ford, research from consulting companies and the potential attitudes of various governments to such a deal.

After Li had outlined what was at stake, there were warnings that he should be very careful before proceeding. After all, Geely had its hands burned earlier when it was forced to shelve an attempt to market a car in the United States, and Li was contemplating buying a highly respected but ailing 82-year-old brand.

After serious questions began to be raised about the wisdom of going ahead with the deal, Li addressed the gathering, Cheng says. She quotes him as saying: “All my life my dream has been to have Chinese cars on the world’s roads. That’s what matters most to me. If I get bogged down in research and trying to build a brand from scratch, my dream may never come true. I have the chance to buy this thing, and that’s what I’m going to do.”

As Li’s fellow entrepreneurs realized how strongly he felt, the mood in the room changed, Cheng says, and they then started talking about how he could make the deal succeed.

They tossed around ideas about legal matters, management, branding and marketing, finding and retaining talent and labor issues.
Members of the China Entrepreneur Club pose after taking part in a seminar in the French Senate during their visit last year. (China Daily)
Members of the China Entrepreneur Club pose after taking part in a seminar in the French Senate during their visit last year. (China Daily)

One CEC member, Guo Guang­chang, founder and chairman of the industrial conglomerate Fosun High Technology Group, shared his overseas M&A experience, Cheng says.

Another, Liu Chuanzhi, founder and honorary chairman of China’s largest PC maker, Lenovo Group Ltd., recounted how he had bought IBM’s personal computer business.

“It was very moving,” Cheng says. “Everyone spoke and held back nothing. Li was aware of the risks and was willing to face them. The others understood what he wanted to do and gave him their wholehearted support.”

That meeting, pivotal to how Li proceeded, is just one of 25 member visits that CEC has organized since it was founded seven years ago. Each meeting is hosted at the location of one of the member companies, leading companies in their industry. Through proactive discussions, participants learn from each other and solve their crucial problems.

The combined annual revenue of CEC member companies represents much more than 2 trillion yuan ($320 billion), accounting for about 4 percent of China’s GDP last year and larger than the GDP of about 150 countries, including Denmark and Malaysia.

In addition to the entrepreneurs, there are eight academics and economists who act as advisers.

Yet it was figures of a far bleaker kind that brought the entrepreneurs together. In 2003, the SARS outbreak sparked a global health alert, and at least 800 people in 15 countries died after contracting the virus.

On Boxing Day the following year the Asian tsunami left more than 230,000 dead in 14 countries.

As the world mobilized relief efforts, some of the entrepreneurs who are now CEC members decided that they had a contribution to make and organized charity bazaars. That in turn raised their collective awareness of the valuable role they could play if they put their heads together.

At the time, forums for entrepreneurs to compare notes existed, but in 2006, Liu Donghua, chief editor of the magazine China Entrepreneur, refined the idea.

Why not pool the talent of the pioneering entrepreneurs who had built the first very successful businesses in China’s market economy? he asked himself.

“Their worth goes far beyond the value they have created for China’s GDP,” Liu says.

The entrepreneurs achieved their success by following the principles of a market economy and by innovation, he says, and the values and practices that helped them succeed needed to be recorded, analyzed and heard. He and Cheng then began contacting entrepreneurs, particularly those sharing the same will to repay society in some way.

At the end of 2006, CEC was founded with 31 business leaders, economists and diplomats, and its mission was simple: to promote entrepreneurship and sustainable ways of developing business.

Cheng says that while the entrepreneurs have certain things in common, there are also enough differences between them to make exchanges of information worthwhile.

“They’re pioneers in many different areas, including conglomerates, manufacturing, real estate, education, IT and financial investment. A lot of small companies try to learn from their example, but they, too, need to grow. So if they are to stay ahead of the pack it’s important for them to learn from one another.”

Jack Ma, founder of the e-commerce giant Alibaba Group, once told CEC members: “However big our businesses are, faced with the government, the public and the media, alone we are weak. Standing together we can express our views, advocate rights and show how business should be done honestly.”

Those views can sometimes be expressed in very forthright terms, and not necessarily just within the club and in China. In 2011, 35 CEC members embarked on a trip to the U.S., the following year they visited Britain and last year they visited Belgium and France.

In Brussels, Huang Nubo, chairman of the real estate developer Beijing Zhongkun Investment Group Co. Ltd., whose plans to buy a 300-square-kilometer chunk of Iceland had run into heavy opposition in the country, met European Commission President Jose Manuel Durao Barroso and said, “I’m a businessman. I invested in Iceland so my company would grow, which would also create jobs in Iceland and benefit its economy. But some people have turned it into a political issue. What exactly are they afraid of?”

In the U.S. they attended about 40 events in 12 days, meeting White House officials, Wall Street executives, Silicon Valley experts, thriving entrepreneurs and academics.

In Britain in 2012, their economic and political heft became all the more apparent when British Prime Minister David Cameron received them at 10 Downing Street. Last year French President Francois Hollande received them at the Elysee Palace.

However, Cheng is anxious to dispel the notion that CEC activities have no aim other than to advance its members’ self-interest. In fact, publicity about CEC has helped give the public a more-rounded picture of the entrepreneurs, she says.

“There are even some people who say it is refreshing to find a group that looks at things differently.”

Those people have realized that Chinese entrepreneurs are not unprincipled operators who will do anything to succeed and who don’t care about the environment, but that they believe in fair competition, she says.

Last year the group received unflattering publicity when comments made by Liu Chuanzhi of Lenovo Group Ltd. in a closed-door meeting became public.

Liu had urged his fellow members to play their roles as business people first, that is, to earn money. Whether the external conditions are good or bad, they should first make efforts toward the survival and growth of their companies.

Chen says some online critics misinterpreted this to mean the entrepreneurs should be concentrating solely on their businesses.

Liu and another club member, Michael Yu, chairman and CEO of the New Oriental Education & Technology Group Inc., underline how ordinary they are by relating how they got to where they are today.

Yu tells how he started his education empire by posting advertisements on lampposts, and Liu tells of how he once lost every penny he had but managed to recover.

Apart from member visits and international visits, CEC, which has a secretariat that employs 40 people, organizes overseas study programs for entrepreneurs, holds the China Green Companies Summit, an annual business forum that focuses on environmental sustainability in business. Members also take part in many charity activities, for example, one whose aim is to conserve water and another that opposes the purchase of shark fins.

“They are a group driven by dreams and by responsibility,” Cheng says.

“They have enough money, but they want to expand their empires to prove themselves and to win respect. CEC is not about wealth but a quest for things on a spiritual level,” she adds.

By Chen Yingqun and Ji Tao

(China Daily)