Chi­nese com­pa­nies

China Daily (Canada) - - ANALYSIS -

With Chi­nese enterprises rapidly evolv­ing into suc­cess­ful multi­na­tion­als, Western com­pa­nies no longer dom­i­nate the global mar­ket­place.

A record 110 Chi­nese com­pa­nies have squeezed onto the lat­est For­tune Global 500 list, with 12 mak­ing their de­but, in­clud­ing man­u­fac­tur­ing pow­er­house China Rail­way Rolling Stock Corp, e-com­merce jug­ger­naut, home ap­pli­ance maker Midea and prop­erty de­vel­oper Wanda Group.

Ex­perts say it is no sur­prise more Chi­nese com­pa­nies are mak­ing the rank­ing as the coun­try is mak­ing re­lent­less ef­forts to up­grade man­u­fac­tur­ing, boost in­no­va­tion and drive con­sump­tion.

“We’ll see the con­tin­ued rise of Chi­nese com­pa­nies to cap­ture the tremen­dous growth of the lo­cal econ­omy,” says Adam Xu, a part­ner at Strat­egy&, the strat­egy con­sult­ing busi­ness of Price­wa­ter­house­C­oop­ers.

As more tech­nol­ogy and com­merce com­pa­nies lever­age and ben­e­fit from China’s tremen­dous mar­ket po­ten­tial in e-com­merce, en­ter­tain­ment and real es­tate seg­ments, they will make the For­tune Global 500, he adds.

Three of the top five com­pa­nies on the list are from China. State Grid has risen to sec­ond place from sev­enth last year, sur­pass­ing state-owned en­ergy gi­ants China Na­tional Petroleum Corp and Sinopec Group.

Among the 12 debu­tants, ranks at 366, with rev­enue reach­ing $28.85 bil­lion last year.

“It’s not a sur­prise, given how quickly Chi­nese e-com­merce has been grow­ing and how ad­vanced China is for dig­i­tal and mo­bile com­merce,” Xu says.

China Rail­way Rolling Stock Corp, which ranks 266, has grown into a lead­ing global sup­plier of bul­let trains and sub­way cars.

It is widely ex­pected that China will be­come the largest e-com­merce and con­sump­tion mar­ket, and will nur­ture a new con­sumer-cen­tric ecosys­tem, Xu adds.

State-owned com­pa­nies topped the Chi­nese names on the list, as the rank­ing is based on rev­enue rather of prof­itabil­ity, ex­plains Han Xiaop­ing, an in­de­pen­dent en­ergy an­a­lyst.

“All state-owned en­ergy enterprises are large enough to com­pete from a global per­spec­tive,” he says. “But they are fac­ing huge pres­sure when it comes to fi­nan­cial per­for­mance amid fall­ing oil prices.”

China Vanke de­buts on the list at 356, with an­nual rev­enue of $29.33 bil­lion, fol­lowed by real es­tate gi­ants Wanda Group at 385 and Ever­grande Real Es­tate Group at 496.

Wanda, which is headed by one of China’s rich­est men, Wang Jian­lin, said af­ter the list was re­leased that this was the first time the con­glom­er­ate had regis­tered for the For­tune Global 500, even though it could have se­cured a place ear­lier.

Chi­nese com­pa­nies have been grab­bing head­lines more of­ten re­cently, and the deals they are mak­ing have grow­ing in­ter­na­tional in­flu­ence.

Midea Group, China’s big­gest home have squeezed onto the lat­est For­tune Global 500 list, with 12 mak­ing their de­but ap­pli­ances maker, said in July it had ac­quired an ad­di­tional 72.18 per­cent of the shares in Kuka AG, a global sup­plier of in­tel­li­gent au­to­ma­tion so­lu­tions. Paul Fang, chair­man and CEO of the Chi­nese com­pany, says the larger hold­ing will help grow Kuka’s busi­ness and in­crease its foot­print, es­pe­cially in China.

The num­ber of Kuka shares in the takeover of­fer, plus the 13.51 per­cent that Midea had in­di­rectly held pre­vi­ously, gives the com­pany 85.69 per­cent of the is­sued share cap­i­tal and ex­ist­ing vot­ing rights of Kuka.

Shanghai Fo­sun Phar­ma­ceu­ti­cal (Group) Co an­nounced re­cently that it will ac­quire an 86.08 per­cent stake in In­dian phar­ma­ceu­ti­cal en­ter­prise Gland Pharma for $1.26 bil­lion, the largest overseas ac­qui­si­tion by a Chi­nese phar­ma­ceu­ti­cal com­pany.

State-owned China Na­tional Chem­i­cal Corp of­fered Swiss agro­chem­i­cal and seed pro­ducer Syn­genta AG more than $43 bil­lion to ac­quire its en­tire stake, mak­ing it the big­gest ac­qui­si­tion deal by a Chi­nese com­pany.

Syn­genta said in July that talks with US reg­u­la­tory au­thor­i­ties to win ap­proval for the deal have been con­struc­tive and the Swiss com­pany is con­fi­dent the trans­ac­tion can be closed on time.

“China, sep­a­rate from the rest of Asia, fo­cuses on big and de­vel­oped mar­kets. They are not con­strained by mar­kets close to home and look at the Euro­pean Union and United States,” says Gavin Watkins, an Asi­aPa­cific di­rec­tor at Wil­lis Tow­ers Wat­son, the global risk man­age­ment and ad­vi­sory com­pany. “It’s not that they are ex­clud­ing Asia. They are more con­fi­dent and have enough money to tar­get US and Euro­pean oper­a­tions.”

The wave of Chi­nese ex­pan­sion started in 1992, when the cen­tral gov­ern­ment first urged do­mes­tic com­pa­nies to ex­pand overseas to strengthen China’s pres­ence in the in­ter­na­tional mar­ket. An­other turn­ing point came in 2008, when the EU and US were hit by the global fi­nan­cial cri­sis.

That year, China’s for­eign di­rect in­vest­ment nearly dou­bled from the pre­vi­ous year. The coun­try has been the third-largest out­bound in­vestor af­ter the US and Ja­pan since 2012.

Flex­ing their mus­cles, Chi­nese main­land com­pa­nies are mak­ing a point that they are no longer play­ing sec­ond fid­dle to their Western peers.

Watkins says that 10 years ago, Chi­nese com­pa­nies as­pired to be like Western multi­na­tional cor­po­ra­tions. “Now, (Chi­nese com­pa­nies) do not only have money, but also have reached a cer­tain level of ma­tu­rity. They are happy to take ad­vice from ex­ter­nal com­pa­nies, such as fi­nance ad­vice and hu­man re­source ad­vice from com­pa­nies like us.” Asian growth While China’s multi­na­tion­als tend to at­tract most of the at­ten­tion, their peers else­where in Asia are also en­ter­ing the pub­lic spot­light.

About 200 Asian multi­na­tion­als are now in the For­tune Global 500 list, ac­cord­ing to a Wil­lis Tow­ers Wat­son re­port. Through or­ganic ex­pan­sion, merg­ers, part­ner­ships or ac­qui­si­tions, they are tap­ping into new mar­kets, of­ten tak­ing sur­pris­ing turns.

Com­pa­nies like Philip­pine prop­erty con­glom­er­ate SM Prime Hold­ings, South Korean au­tomaker Hyundai and Thai feed pro­ducer C.P. Pokp­hand are all gain­ing global trac­tion.

“Many say that what Asian com­pa­nies are do­ing is just sim­ply ad hoc,” Watkins says. “From what I’ve ob­served, I don’t see it be­ing ran­dom at all. They are very fo­cused. It is strate­gic plays in the busi­nesses they want to ac­quire.”

SM Prime is one of the pi­o­neers in this global push. The com­pany ex­panded into the Chi­nese main­land in the late 1990s.

Alexander D. Po­mento, the com­pany’s vice-pres­i­dent for in­vestor re­la­tions, says: “It was the Asian fi­nan­cial cri­sis back then. The Philip­pines was suf­fer­ing from neg­a­tive growth, and we saw China show­ing the prom­ise of sus­tained GDP growth.

“We fi­nally made up our minds to step out, as we learned that there were gov­ern­ment poli­cies en­cour­ag­ing for­eign in­vest­ment com­ing to the coun­try. We chose to start our lay­out there grad­u­ally.”

SM Prime will open its sev­enth mall in China this year in the city of Tian­jin. Al­to­gether, the prop­er­ties cover more than 8 square kilo­me­ters.

Ac­cord­ing to a Wil­lis Tow­ers Wat­son sur­vey be­tween March and Septem­ber last year, com­pa­nies head­quar­tered in the Asia-Pa­cific ac­counted for 40 per­cent of the For­tune Global 500. By com­par­i­son, Euro­pean firms ac­counted for 30 per­cent and North Amer­i­can firms 20 per­cent.

“Asian multi­na­tion­als are boom­ing along with the re­gion’s eco­nomic growth,” says Har­sha Bas­nayake, head of trans­ac­tions for Sin­ga­pore and the As­so­ci­a­tion of South­east Asian Nations at global con­sul­tancy EY. “There is a more af­flu­ent mid­dle class in Asia, who have strong con­sump­tion power and can drive up the con­sumer sec­tor.”

De­spite down­ward pres­sure from a gloomy global eco­nomic out­look and con­cerns over the slow­down in China, the largest con­trib­u­tor to the re­gion’s eco­nomic growth, Asia re­mains the en­gine of the global econ­omy.

Economies in the Asia-Pa­cific are ex­pected to grow about 5.3 per­cent in 2016 and 2017, ac­cord­ing to the lat­est out­look from the In­ter­na­tional Mone­tary Fund, re­leased in April.

Con­tact­thewrit­er­sthrough cheny­ingqun@chi­


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