Numbers of the Week

958.8 billion yuan

China's software industry generated 958.8 billion yuan ($149.8 billion) in revenues for the first seven months of 2011, soaring nearly 30 percent year on year, according to the Ministry of Industry and Information Technology.

57.6%

The purchasing managers index for the non-manufacturing sector, an indicator for economic activities in the service industry and other non-manufacturing businesses, fell to 57.6 percent in August from 59.6 percent in July, according to the China Federation of Logistics and Purchasing.

TO THE POINT: State-owned enterprises dominate the 2011 China top 500 list, igniting worries about the strength of private businesses. Chinese companies are accelerating the pace of global expansion. Initial public offerings of Chinese companies have shrunk as clouds gather over the outlook of global stock markets. Liang Wengen, a heavy machinery tycoon, tops the 2011 Hurun Rich List. The Boston Consulting Group expects China's consumer lending market to triple by 2015.

Private Woes

The China Enterprise Confederation (CEC) and the China Enterprise Directors Association jointly released the list of top 500 Chinese enterprises in 2011, providing a snapshot of China's corporate landscape.

Topping the ranking was Sinopec, China's largest oil refiner, which generated revenues of 1.97 trillion yuan ($307.7 billion) last year. It was followed by 1.72 trillion yuan ($268.9 billion) of PetroChina and 1.53 trillion yuan ($238.9 billion) of the State Grid.

The listed 500 companies listed raked in combined profits of 2.08 trillion yuan ($325 billion), up 38.7 percent from a year ago, while their total assets increased 18.4 percent to 108.1 trillion yuan ($16.9 billion). The threshold for entering the list was 14.2 billion yuan ($2.2 billion) of revenue, up 28.1 percent year on year.

Despite the torrid growth, worries abound about prospects for private firms. A total of 184 privately owned enterprises entered the list this year, but their combined profits were less than half of the top 10 companies, which are all state-owned enterprises (SOEs). Huawei, the telecom equipment manufacturer, ranked 39th, the highest position among private firms. But its revenues stood at 185.1 billion yuan ($28.9 billion), barely 10 percent of Sinopec.

The enormous divide is a serious concern for China as private firms create more than 80 percent of jobs in the country and account for more than half of the country's GDP.

The SOEs have received greater government support and enjoyed easier access to resources than their private counterparts, said Li Jianming, CEC Vice President.

"The most urgent task is to remove the financing bottleneck choking development of private businesses," said Liu Yonghao, President of New Hope Group, a private agricultural company based in southwestern Sichuan Province.

Venturing Abroad

With deep pockets and ambitions to become global players, Chinese companies are extending their reach beyond China's borders.

The country's outbound direct investment (ODI) hit $68.81 billion in 2010, soaring 21.7 percent from 2009, said the Ministry of Commerce (MOFCOM).

China's ODI accounted for 5.2 percent of global capital flows last year, and China exceed Japan and the United Kingdom for the first time to become the fifth largest source of ODI in the world.

By the end of 2010, Chinese enterprises had established 16,000 overseas companies in 178 countries and regions. The commercial service sector has been the most coveted area for Chinese investment, followed by the finance, wholesale, retail and mining industries.

Meanwhile, merger and acquisition (M&A) became a convenient route for China to step onto the world stage. The MOFCOM said Chinese companies were responsible for $29.7 billion worth of overseas M&A deals last year, up 54.7 percent.

"M&A activities will continue to grow because Chinese companies have become more adept and sophisticated at acquiring assets overseas, even in the face of market turbulence," said a recent report of the accounting firm Deloitte.

"Not only state-owned enterprises, but also privately owned companies are showing an increased willingness to invest abroad, driven by the need to secure raw materials from overseas and to escape from the overly crowded domestic market," said Shen Danyang, a spokesman of the MOFCOM.

Lackluster IPOs

Initial public offerings (IPOs) of Chinese companies are declining to a trickle due to global stock market gloom.

The number of IPOs by Chinese companies fell to a two-year low of 26 in August,according to a recent report by China Venture, a Beijing-based investment consulting firm.

Nasdaq-listed online video company Tudou was the only Chinese firm that went public overseas in August, raising $170 million while the other 25 firms chose to debut on their home stock markets.

The total amount from the IPOs in August shrank 45.6 percent year on year to 27.24 billion yuan ($4.3 billion), also the lowest in two years.

This was a substantial turnaround from the market buoyancy earlier this year. In the first half of 2011, Chinese firms were responsible for around 60 percent of global IPOs.

"It shows foreign financial institutions are not really interested in Chinese players any more," said the report, adding that this is a result of accounting scandals that affected some U.S.-listed Chinese firms this year.

Moreover, worries over the debt crisis in Europe and the United States have also eroded financial institutions' interests, it said.

Wealth Surge

Liang Wengen, Chairman of Sany Group, a heavy machinery manufacturer based in central Hunan Province, became the richest man in China on the 2011 Hurun Rich List with a personal fortune of 70 billion yuan ($11 billion), jumping from the fourth place last year.

Liang has made Sany Group into China's leading machinery maker with net profits reaching nearly 6 billion yuan ($937.5 million) in the first half of this year, jumping 107 percent from last year.

Last year's No. 1 Zong Qinghou, General Manager of Hangzhou Wahaha Group Co. Ltd., saw his wealth shrink around 10 percent, placing him in second place on the list with 68 billion yuan ($10.6 billion). Despite an increase in sales, Wahaha experienced a 20-percent drop in profits last year due to serious cost inflation and growing marketing expenses.

Despite gloomy stock and real estate markets, the richest Chinese have seen their fortunes grow rapidly—the average wealth of the Hurun top 1,000 grew 20 percent from one year earlier to 5.9 billion yuan ($921.9 million).

Consumer Lending Spree

China's consumer lending market is expected to triple to 21 trillion yuan ($3.3 trillion) by 2015, said the global consulting firm Boston Consulting Group (BCG) in a recent report.

The balance of consumer lending, including home mortgages, credit card balances, automobile loans and unsecured personal loans, will grow at an average annual rate of 24 percent over the next five years, driven by rising personal incomes and government support, the report said.

China has been encouraging the development of consumer loans as part of efforts to stimulate domestic demand. The China Banking Regulatory Commission launched a pilot program in 2009, allowing the Bank of China, Bank of Beijing and Bank of Chengdu to set up consumer finance companies in Shanghai, Beijing and Chengdu, capital of Sichuan Province.

"Consumer lending in China started almost from scratch a decade or two ago," said Richard Huang, partner and managing director at BCG.

The country's consumer loans accounted for just 18 percent of GDP in 2009, still far lower than other more developed Asian markets, such as South Korea and Malaysia, where the comparable penetration reaches 40 to 50 percent, he said.

Home mortgages are now the dominant category in this sector, accounting for 84 percent of the total consumer loans in 2010. Yet that share may fall to 75 percent in five years due to tightening in the property market. The credit card business will maintain robust growth in the coming years, rising 41 percent annually. Consumer finance is expected to increase 45 percent annually, said BCG.