A jointly released China Enterprise Confederation (CEC) and China Enterprise Directors Association report shows that business scales of China's 2009 top 500 companies have further expanded, with their business performance measuring close to that of the world's top 500. The list of top 500 Chinese enterprises was announced in Hangzhou, Zhejiang Province, on September 5.

Net profits for China's top 500 companies amounted to 1.21 trillion yuan ($177.16 billion). Affected by the financial crisis, U.S. top 500 companies only gained $98.9 billion in net profits, decreasing 84.67 percent year on year and representing the worst record over the past 55 years. The rate of return on equity for China's top 500 companies is 8.92 percent, while that for the world's top 500 is 8.23 percent. Equity for the top 500 U.S. companies is 2.3 percent.

New characteristics

Compared to previous years, three characteristics remain constant in the development of China's 2009 top 500 companies, said Miao Rong, a senior researcher at the Department of Research of the CEC.

According to Miao, the growth momentum of business revenue has slowed down and the threshold has increased slowly. The total revenue generated by the 2009 China top 500 reached 2.6 trillion yuan ($380.67 billion), up 19.7 percent over the previous year. The growth is 5.3 percentage points lower than a year ago. The threshold of this year's top 500 Chinese companies has increased from last year's 9.31 billion yuan ($1.36 billion) to 10.54 billion yuan ($1.54 billion) in revenue, up 13.21 percent year on year. The growth rate is 15.69 percentage points lower than the previous year.

Although business scales of this year's top 500 have expanded, their net profits have been going down, a turn of events greatly different from last year's fast profit growth, Miao said. Total net profits generated by China's 2009 top 500 companies stands at 1.21 trillion yuan ($177.16 billion), a decline of 13.23 percent year on year, which is 87.43 percentage points lower than the growth rate seen last year. The rate of return on equity is 8.92 percent, down 3.28 percentage points.

The 2009 China top 500 have seen an increase in both capital and productivity since last year. Their assets per employee stand at 2.84 million yuan ($415,813), an increase of 395,000 yuan ($57,833) over the previous year. In terms of productivity, their per-capita sales revenue is 982,000 yuan ($143,777), growing 91,000 yuan ($13,324) over the previous year.

To be stronger

While this year's top 500 list is both exciting and impressive, experts point out that the ranks of China's top 500 lack hi-tech and new energy companies, and even fewer of the top 500 have internationally recognized brands. There are also few transnational groups in the list.

Hu Chi, Deputy Director of the Research Department of the CEC, said that most of the top 500 are "big" instead of "strong." The "explosive" growth of the top 500 has been benefiting from the rapid growth of the macro-economy. Development of most top 500 companies is closely related to the macro-economic cycle, he said. The inherent capacity of growth has not improved, resulting in a lack of core competitiveness and a vulnerability to economic fluctuations.

Wang Jiming, CEC Vice President, said although the business data showed that the Chinese companies were less affected by the global financial crisis than their U.S. counterparts, it did not mean they have made substantial improvements in comprehensive competitiveness.

In the list of the 2009 China top 500, there are 16 railway bureaus, of which 12 are losing money, as the railway transportation industry in general suffers total losses of 19.3 billion yuan ($2.83 billion). Six companies of the civil aviation industry have made the top 500 list, but only Hainan Airlines and Shenzhen Airlines are recording profits. The aviation industry as a whole has lost 14.5 billion yuan ($2.12 billion). The power generating industry has 10 companies incorporated into the top 500 list, but the largest five are all suffering losses, while the whole industry has recorded losses of 24 billion yuan ($3.51 billion).

China's top 500 also fall short in their international operation capabilities. According to Hu, 220 companies of this year's top 500 compiled data of "overseas income." The average level of internationalization (ratio of overseas revenue against total sales revenue) among the top 100 is 35.2 percent, but the ratio differentiates notably among companies. Only 9 percent of the companies see their level of internationalization between 50-100 percent, while 86 percent of the companies have the level just below 30 percent, a clear indication that the target market of most Chinese companies is in China, Hu said.

On the list of this year's top 500, more than 60 percent are state-owned or state-holding companies. Rapid growth of many top 500 is the result from the beneficial situation of resources and policies, not their management capability.

Despite their rise, Chinese companies still lag behind the world's leading enterprises in resource allocation, innovation, international presence, business modeling and corporate culture, Wang noted.