The Chinese Enterprise Confederation has published a report (h/t China Daily) that says the top 500 Chinese enterprises account for over three quarters of GDP, but that they still lag the global Fortune 500 in terms of competitiveness and other indicators such as investment in R&D and energy efficiency. The China Daily report noted:
• The top 500 “generated 14.1 trillion yuan (US$1.8 trillion) in revenues, which made up 77.6 per cent of the gross domestic product”.
• Sinopec was the number one company “with an operating revenue of 823 billion yuan (US$102.9 billion) and a profit of 21.9 billion yuan (US$2.7 billion), up about 30 per cent and 108 per cent over 2004. The company also led the table the previous year.”
• Other leading companies were “The State Grid, China National Petroleum Corporation, Industrial and Commercial Bank of China and China Mobile” (at places two through five).
• 23 of the top 500 “qualify for the Fortune Global 500 in terms of revenues…Nineteen of them applied and were listed in Fortune magazine’s ranking for 2006.”
• The companies are mainly from the “petroleum, petrochemical, automobile, banking, telecom and metallurgy sectors”, while “Most of the global top 500 companies are in competitive sectors like the automobile industry and services.”
The Financial Express adds that just 84 firms accounted for 85 percent of the group’s profits, and that 349 of the companies are state-owned, and that they accounted for about 70 percent of the total profits and 95 percent of total assets.
“It showed that state-owned economy remained dominant and controls the leading industries in the national economy. “
It is clear that the state sector still rules at the top of the market but, even here, there are voices in high places calling for changes in the way they operate. The China Daily quotes some interesting ones:
• Liu Jisheng (professor at Tsinghua University’s school of economics): “Investment in R&D by 411 of China’s top 500 enterprises accounts for only 1.45 per cent of their gross sales revenue, much lower than the 5 per cent international standard, Liu said”.
• Yang Du (professor from Renmin University of China): “[Yang said that] Unlike global majors, which make profits through technology and IPR licensing, Chinese firms mainly rely on sales of products, resources and services”.
• Liao Xiaoqi (vice-minister of commerce): “[Liao] urged companies to adopt innovation as the key component of their development….Another strategy to become more powerful is to compete internationally, said Liao.”
• Ma Kai (minister of the State Development and Reform Commission SDRC): “said that that low energy efficiency continues to bedevil Chinese companies, limiting their competitiveness and returns.”
The leadership seems to be giving the message, consistent with their aim to move Chinese industry up the value chain and into international markets, that the state sector should not get too comfortable. While protection is still offered (e.g. in terms of financing, new foreign M&A restrictions, and the introduction of the anti-monopoly law) it will be interesting to see whether these messages are acted on, or whether we will see more of the same in the years to come.
See news sources:
Net Profit of 540 Listed Firms Up 8.6%
Top 500 firms account for nearly 78% of China’s GDP
For more on profits at listed firms in China see here.