Chinese firms to rival US companies on Fortune list

Gains reflect ‘fast growth of China’s economy’

Chinese companies might rival their US counterparts in 2019 in terms of the number of companies in the Fortune Global Top 500 list, but they must improve a lot to match US companies in terms of strength, experts said on Friday.

Fortune released its latest Global Top 500 on Thursday, and 120 Chinese companies (including those from Hong Kong and the island of Taiwan) made the list, closing in with the number of US companies, which leads with 126.

The number of Global Top 500 companies from China is far ahead of those from Japan, which ranks 3rd with 52.

A report by domestic news portal people.com.cn said the increase in Chinese Global Top 500 companies is one of the fastest from any country since 1995, and the improvement in ranking reflects the fast growth of the Chinese economy, now the world’s second largest.

Li Jin, an expert on State-owned enterprise reforms, told the Global Times on Friday that the number of Chinese companies on the list has been growing for 15 years, and he believes China will overtake the US in 2019.

Based on annual revenue, Chinese utility firm State Grid Corp, Sinopec and China National Petroleum Corp made the top 10, occupying the 2nd, 3rd and 4th spot, with revenue of $348.9 billion, $326.9 billion and $326 billion, respectively.

Feng Liguo, a research fellow at China Minsheng Bank’s research center, said that while some Chinese firms are making gains in terms of innovation and diversification, there is still a long way to go before Chinese companies can truly be called great companies.

“Many of the Chinese companies are still profiting based on material prices and China’s financial sector is posting better results than the manufacturing and services sectors,” Feng said, noting that the pattern reflects China’s developmental stage within the industrial period, in contrast to the US’ post-industrial state.

By sector, Chinese companies are concentrated in heavy and chemical industries, real estate, engineering and the metals sectors. In contrast, many Top 500 from the US and Japan come from the internet, healthcare and food industries.

Meanwhile, State-owned firms still account for two-thirds of Chinese companies on the list. That means mixed-ownership reforms still have room, Feng said.

In terms of profitability, four Chinese State-owned banks, including the Industrial and Commercial Bank of China and China Construction Bank, are among the top 10. Among the 12 Chinese companies in the most profitable 50 list, only Ping An Insurance, Tencent, and Alibaba are not State-owned companies.

Thirteen Chinese companies made their debut on the list, including China Merchants Group, mining company Yankuang Group and home appliance giant Haier.

China conglomerate HNA, Anbang Insurance and the Wanda Group, which were previously on the list, fell out as their revenue shrank.

The average return on equity (ROE) of Chinese companies on the 2015 list was 10.7 percent, but that figure slid to 8.9 percent in 2017, Li said.

State-owned companies performed poorly, and telecommunications giant Huawei, home appliance maker Midea, Tencent, automaker Geely and property firm Vanke led Chinese companies in terms of ROE, Li said.

Many of China’s top firms continue to rely heavily on the domestic market compared to their American and Japanese counterparts.