Meteoric rise of China's companies
By John Ross |
June 20, 2011, Monday
|
Print Edition
Print Edition
JOHN Ross is currently visiting professor at Antai College of Economics and Management, Shanghai Jiao Tong University. He was consultant to Fortune Global 500 companies and from 2000 to 2008 London's director (currently equivalent to vice mayor) for economic and business policy. He has written on China's economy for 20 years.
The growing strength of China's large companies parallels the rise of China's economy - although, as would be expected, consolidation of China's company sector is somewhat behind the overall position of its economy.
It is well known that China now has leading world companies in a number of sectors. Haier is the world's largest producer of white goods such as refrigerators, washing machines. Huawei is the world's No. 2 producer of telecommunications equipment after Ericsson, and on present trends will gain the top spot either this year or next. The world's two largest banks by market capitalization are Chinese - the Industrial and Commercial Bank of China and China Construction Bank. PetroChina has the world's second-largest market capitalization after Exxon Mobil. By market capitalization, China Mobile is the world's largest telecommunications company.
But while study of individual companies is useful and important for both journalists and business schools, it can be misleading. For example, focus on genuinely world beating companies such as Apple or Google can create the impression that US companies are strengthening their overall international competitive position. But, as the table in this article shows, the opposite is occurring. US large companies have been losing market share and market valuation compared with competitors - the US share of revenue of the world's largest 2,000 companies fell from 38.9 percent to 29.9 percent between 2004 and 2010, while their market capitalization fell from 48.7 percent to 34 percent.
Loss of market share by US companies was not only vis-a-vis competitors from emerging markets such as China, India and Brazil - a trend which is relatively well known. It was also compared with European rivals. In 2010, the last year for which comprehensive company reports are available, for the first time the revenue of US large companies fell behind those of the European Union.
It is therefore similarly important to make a systematic evaluation of the competitive positions of China's companies rather than simply citing individual "stars." The table therefore shows revenue and market valuation for China's companies compared with those of the five largest developed economies - the US, Japan, Germany, France and the UK. The data is expressed as a percentage share of the Forbes Global 2000 - the world's 2,000 largest publicly listed companies. To indicate the comprehensiveness of the data, the revenue of these companies, marginally under US$30 trillion, is equivalent to half of world GDP.
Both the rise internationally of China's companies and its current limits are evident. In revenue terms, China's companies rose from only 0.8 percent of the total in 2004 to 4.9 percent in 2010. This is evidently far behind the 29.9 percent of the US, or 14.2 percent for Japan, but begins to approach, and on current dynamics will clearly soon exceed, Germany, France or the UK.
China's rise is more dramatic by market capitalization. China's companies now occupy second place in the world, at 9.7 percent of the total, having overtaken all countries except the US - although the lead of the US, at 34 percent, remains great.
A more detailed list would show China's greatest strengths are in oil, gas, mining, construction and financial services. Its weaknesses are in non-financial services and manufacturing - China may be the world's greatest manufacturing base but its own manufacturing companies remain comparatively small.
But the overall dynamic is clear. China's large companies already rival in size those of the UK, France and Germany. Only the US and Japan's companies clearly remain larger than China's.
In terms of overall trends, the successful Chinese economy and the internationally competitive Chinese company have already arrived.
The growing strength of China's large companies parallels the rise of China's economy - although, as would be expected, consolidation of China's company sector is somewhat behind the overall position of its economy.
It is well known that China now has leading world companies in a number of sectors. Haier is the world's largest producer of white goods such as refrigerators, washing machines. Huawei is the world's No. 2 producer of telecommunications equipment after Ericsson, and on present trends will gain the top spot either this year or next. The world's two largest banks by market capitalization are Chinese - the Industrial and Commercial Bank of China and China Construction Bank. PetroChina has the world's second-largest market capitalization after Exxon Mobil. By market capitalization, China Mobile is the world's largest telecommunications company.
But while study of individual companies is useful and important for both journalists and business schools, it can be misleading. For example, focus on genuinely world beating companies such as Apple or Google can create the impression that US companies are strengthening their overall international competitive position. But, as the table in this article shows, the opposite is occurring. US large companies have been losing market share and market valuation compared with competitors - the US share of revenue of the world's largest 2,000 companies fell from 38.9 percent to 29.9 percent between 2004 and 2010, while their market capitalization fell from 48.7 percent to 34 percent.
Loss of market share by US companies was not only vis-a-vis competitors from emerging markets such as China, India and Brazil - a trend which is relatively well known. It was also compared with European rivals. In 2010, the last year for which comprehensive company reports are available, for the first time the revenue of US large companies fell behind those of the European Union.
It is therefore similarly important to make a systematic evaluation of the competitive positions of China's companies rather than simply citing individual "stars." The table therefore shows revenue and market valuation for China's companies compared with those of the five largest developed economies - the US, Japan, Germany, France and the UK. The data is expressed as a percentage share of the Forbes Global 2000 - the world's 2,000 largest publicly listed companies. To indicate the comprehensiveness of the data, the revenue of these companies, marginally under US$30 trillion, is equivalent to half of world GDP.
Both the rise internationally of China's companies and its current limits are evident. In revenue terms, China's companies rose from only 0.8 percent of the total in 2004 to 4.9 percent in 2010. This is evidently far behind the 29.9 percent of the US, or 14.2 percent for Japan, but begins to approach, and on current dynamics will clearly soon exceed, Germany, France or the UK.
China's rise is more dramatic by market capitalization. China's companies now occupy second place in the world, at 9.7 percent of the total, having overtaken all countries except the US - although the lead of the US, at 34 percent, remains great.
A more detailed list would show China's greatest strengths are in oil, gas, mining, construction and financial services. Its weaknesses are in non-financial services and manufacturing - China may be the world's greatest manufacturing base but its own manufacturing companies remain comparatively small.
But the overall dynamic is clear. China's large companies already rival in size those of the UK, France and Germany. Only the US and Japan's companies clearly remain larger than China's.
In terms of overall trends, the successful Chinese economy and the internationally competitive Chinese company have already arrived.
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