Business
Going Up Global Ladder
China rises on the 2019 Fortune Global 500 list with a record 129 companies
By Li Xiaoyang  ·  2019-08-05  ·   Source: NO. 32 AUGUST 8, 2019
Customers check out Xiaomi products in the company's first brick-and-mortar store in Romania on April 20 Local employees of China's oil giant Sinopec Group work at a construction site in Kuwait on April 7 (XINHUA)

China has surpassed the United States on this year's Fortune Global 500 list, accounting for the highest number of companies in the ranking for the first time.

The Fortune Global 500 is an annual ranking of the top 500 corporations worldwide measured by revenue by U.S. business magazine Fortune. The list this year has 129 Chinese companies, compared to 121 from the U.S. Six of the top 10 firms with the fastest ranking growth are also from China, Fortune said on July 22. Also, 77 Chinese companies have improved their ranking from the previous year.

This year, 13 new Chinese companies have made it to the Global 500, including Gree Electric Appliances and Xiaomi Corp., accounting for half of the 25 new companies that debuted on the list.

In 2018, there were 120 Chinese enterprises on the list while the U.S. had 126. Liang Guoyong, an economic affairs official at the United Nations Conference on Trade and Development, told Economic Information Daily that the changes this year show the expanding scale and improved strength of Chinese enterprises.

The growth can be attributed to the rising domestic demand, restructuring of Chinese enterprises and more funding in recent years, said Wang Zhile, head of Beijing New Century Academy on Transnational Corporations, an organization that focuses on developing Chinese companies' compliance capacity.

Turning the tide

Chinese companies have reversed the downward trend in recent years in both equity returns and sales returns, which are the main gauges of business performance. The sales and asset size of the domestic enterprises among the Global 500 have become increasingly close to those of their listed counterparts from traditional major economies such as Japan and Germany, Fortune China said on its website.

Among the top five companies on the list there are three Chinese ones, all in the field of natural resources and energy—the Sinopec Group, China National Petroleum Corp. (CNPC) and State Grid Corp. of China. While U.S. retailer Walmart tops the ranking with its 2018 revenue of $514.41 billion, Sinopec, China's largest state-owned oil and gas company, is second. Sinopec saw a 26.8-percent growth in revenue to $414.65 billion and profits of $5.85 billion that climbed 280.1 percent year on year in 2018.

CNPC clinched fourth place with a revenue of $392.98 billion last year, followed by State Grid with $387.06 billion. The strong growth was greatly driven by the robust domestic demand for gas and chemical products, Fortune China said.

All the property enterprises that made it to the list are from China and they have all improved their position. Country Garden, a property development company based in Guangdong Province, south China, jumped from 353rd place last year to 177th this year, showing the fastest ranking growth among all companies. Its profits reached $5.2 billion in 2018. Another real estate giant, the conglomerate Evergrande Group, also saw prominent ranking growth as it jumped 92 spots to 138.

With the boom in the new economy sectors in China driven by technological progress and upgrades in people's lifestyle, Internet and hi-tech-based companies have shown impressive performance. With a revenue of $69.85 billion in 2018, giant online retailer JD.com reached the 139th spot, leading Chinese Internet-based companies on the list. Alibaba, Tencent and Suning were among the 10 companies with the fastest ranking growth.

Telecommunications giant Huawei grabbed the 61st spot this year, climbing up 11 places from last year's with a 22-percent year-on-year increase in sales volume at $109 billion and 27.5-percent growth of profits at $9 billion.

Debutant Xiaomi, established in 2010, is the youngest among the 500 companies, occupying the 468th place on the list. According to Xiaomi, it saw a revenue of $26.4 billion last year, up 55.9 percent year on year.

Staff of China's oil giant Sinopec Group work at a construction site in Kuwait on April 7 (XINHUA)

Still a long way to go

In recent years, China's economic growth has remained stable as the focus shifts toward high-quality development from speed. With measures such as tax cuts and reduction of the administrative fees enterprises have to pay as well as the launch of a science and technology innovation board at the Shanghai Stock Exchange, the business environment at home has improved, bringing more opportunities for enterprises.

Companies in new economy sectors such as hi-tech manufacturing, new energy and Internet-based services have seen robust growth momentum. According to the National Bureau of Statistics, the sectors contributed 16.1 percent to China's GDP last year, up from 15.8 percent in 2017.

However, Liang highlighted that many Chinese enterprises are large in scale but weak in competitiveness, especially those in the high-end fields of research and development, design and brand building.

Compared with global transnational companies that have pooled resources and extended their value chains across the globe, Chinese companies are still in the initial phase of going global, Wang said. While 35 enterprises among the top 100 of the Global 500 companies are from the U.S., China has 24.

Chinese enterprises need to improve their profit-making capacity. The average profit of the other Global 500 companies is $4.3 billion, while Chinese companies on the list have a lower-than-average profit of $3.5 billion.

Wang said 11 Chinese banks are among the Global 500 this year. Their total profit, over $200 billion, accounts for almost half of the total profit of all listed companies from the Chinese mainland and Hong Kong. If the banks' profit is excluded, the average profit of the remaining Chinese companies on the list would be substantially reduced. The average profit of the 113 listed U.S. companies with banks excluded, on the other hand, still touches $5.28 billion, nearly three times the profit of their Chinese counterparts.

The list of China's top 500 public companies released by Fortune China earlier in July showed that the operating revenue of the top 500 companies in China amounted to 45.5 trillion yuan ($6.63 trillion) in 2018, up 14.8 percent year on year. However, the net profit of the companies grew only 4.21 percent year on year to 3.63 trillion yuan ($527 billion). The growth rate was 24.24 percent in 2017.

Chinese companies need to explore blue ocean industries. Miu Rong, a researcher with the China Enterprise Confederation, told People's Daily that the Chinese enterprises on the list are largely working in sectors like energy and property and many still rely on expansion for growth. However, they need to explore new industries. On the other hand, enterprises from advanced economies that are also on the list in contrast cover a wider range of industries and their strong competitiveness has been developed by forming complete supply chains.

As the Fortune website indicates, many U.S. companies on the list are focusing on industries related to health, medical care and other daily needs. However, there are only two Chinese pharmaceutical companies in the Global 500. Many of the listed Chinese companies are engaged in manufacturing, energy and property.

With an expanding middle-income group and aging population, China is expected to see a rising demand for services for high-quality life, such as healthcare and entertainment. As Wang emphasized, domestic enterprises need to tap the potential of such new industries to develop sustainable competitiveness.

Copyedited by Sudeshna Sarkar

Comments to lixiaoyang@bjreview.com

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