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China’s global firms set to face challenges as advantages wane

By Li Qiaoyi (Global Times)

13:39, September 12, 2012

Some major Chinese firms that have been rapidly expanding their global footprint are set to embrace a more demanding future, as the key driving forces behind their successful stories may weaken amid a downturn in the economy, according to a report released Tuesday during the Summer Davos.

In the past, China's fast-growing companies in terms of expanding overseas presence have mostly relied on low costs, a huge domestic market as well as State support, but it might be time now to move beyond such advantages, Christoph Nettesheim, senior partner and managing director of Boston Consulting Group (BCG) in the Greater China region, said Tuesday.

The BCG report is based on an assessment of the country's 50 fast-growing companies, with annual sales ranging between $180 million and $300 billion. The report also reveals that 26 of them are State-owned enterprises while the rest are privately owned.

These companies in a variety of fields, including the nation's three oil giants as well as well-known private firms like Huawei and ZTE, could broadly represent the nation's economy which need to find their own unique ways to make a difference, Nettesheim said, pointing to a more complex environment facing these companies.

Sale growth of the 50 Chinese companies averaged 20 percent per year between 2001 and 2011, outperforming the S&P 500 averaging 9 percent during the same period, however these firms' profitability has been under pressure since the start of 2011, suggesting an "end of easy growth" period, according to the report.

Figures from a broader landscape also point to the same issue, with China's National Bureau of Statistics revealing in late August that during the first seven months of 2012, the nation's industrial sector continued to see a downward trend, with industrial profits edging down 2.7 percent from the previous year.

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