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Business
Print Edition> Business
UPDATED: July 30, 2012 NO. 31 AUGUST 2, 2012
Joining the 500 Club
As China rises in prosperity, more domestic companies join the ranks of Fortune industry leaders
By Lan Xinzhen
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RUN FASTER: Cars roll off the production line of Zhejiang Geely Holding Group, a first-time Fortune Global 500 company this year (XINHUA)

Chinese companies are catching Fortune magazine readers' attention. This year, 79 enterprises from the Chinese mainland, Hong Kong and Taiwan have entered the Fortune Global 500 list, the second largest number behind only the United States with 132.

Li Jin, chief researcher at the China Business Management Academy, said the increase was due to the economic development of China, now the second largest economy in the world, and the proliferation of increasingly profitable businesses.

However, compared with U.S. companies on the list, most of their Chinese counterparts are big but far from strong and face various challenges as they establish their global presence.

Reflecting on growth

When Fortune published its first Global 500 list in 1995, China's mainland had three companies on the list: China Petrochemical Corp., China Cereals, Oils and Foodstuffs Group, and Bank of China. After its WTO entry in 2001, China's involvement in the world economy became more entrenched, allowing the Asian giant to reap handsome economic benefits.

Confronting the global financial crisis in 2008, the Chinese economy was the first to recover and achieved the fastest growth. In 2010 China overtook Japan as the world's second largest economy. During this period, Chinese companies grasped development opportunities and realized leap-frog development.

The Fortune Global 500 list shows that the Chinese financial sector is performing well compared to companies in the West. Among the Chinese companies on this year's list, rankings of Chinese banks improved significantly: Industrial and Commercial Bank of China rose in rank from 77th to 54th, China Construction Bank from 108th to 77th, Agricultural Bank of China from 127th to 84th, Bank of China from 132nd to 93rd, Bank of Communications from 398th to 326th, and China Merchants Bank enters the list for the first time, at 498th.

Industrial and Commercial Bank of China was the most profitable among Chinese businesses on the list, witnessing profits soar to 208.2 billion yuan ($32.89 billion).

Hu Chi, with the Research Center of the State-Owned Assets Supervision and Administration Commission, said the rapid increase in the number of Chinese companies on the list of Fortune Global 500 is closely related to the ultra-high growth speed of the economy and increasing expansion of the country's economic scale. The rule that the number of global 500 of a country is directly proportional to the country's economic scale also applies to the United States, Japan and the European Union. On this year's list of Fortune Global 500, the five countries with the most companies incorporated are the United States, China, Japan, Germany and France, with respective numbers hitting 132, 79, 68, 32 and 32. In 2011, the global top five GDP rankings are also the five countries.

Although the United States still has the most companies on the list, the number of incorporated U.S. companies is dropping. Ten years ago, the United States had 197 companies on the list, accounting for more than one third of the total.

Similar to the United States, the number of Japanese companies on the list is also decreasing. In 1995, there were 147 Japanese companies on the list, but this year, the figure sits at 68, largely due to a weak economy following a massive asset bubble burst in the 1990s.

If the Chinese economy can achieve its 7.5-percent growth target this year, there will be more Chinese companies on the list next year, and the number of companies from other countries will decrease correspondingly, Hu said.

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