What are China's Top 500 companies' weaknesses?

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What are China's Top 500 companies' weaknesses?

(Xinhua) 14:21, September 06, 2013

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China has just unveiled its Top 500 enterprises. After years of rapid development, the total assets of China's top 500 enterprises reached 150 trillion yuan in 2012; the operating income scale have been equivalent to two thirds of U.S.’s Top 500.

Company lacks capability to respond to economic slowdown

In 2013, the overall scale of China’s top 500 enterprises continues to expand, with operating income amounting to 50 trillion yuan. This is also the first time for them to reach the 50 trillion yuan level, and the threshold for Top 500 has been lifted to about 20 billion yuan, an increase of 13.48 percent over last year.

Despite the overall scale expansion, the growth rate has slowed down. In 2013, the operating income of Top 500 Chinese enterprises grew by 11.41 percent, which fell sharply by 12.22 percent. Their total profit attributed to parent companies reached 2.2 trillion yuan, up by only 3.58 percent compared with the previous year. 43 of them suffered loss, 30 more from 2012.

Deputy Director of research with China Enterprise Confederation Miao Rong pointed out: “Majority of the Top 500 companies are traditional companies in industries of manufacturing and processing, resources, energy, financial. They have trouble in quickly responding to the restructuring and upgrading and are still accustomed to the patterns under the general rapid economic growth.”

According to reports, large enterprises in Europe and Americas have been accustomed to maintain the scale and efficiency of growth under the general economic growth of 1 to 3 percent. While most companies in China find it difficult to profit when China's economic growth rate is below 7 percent. This means that China's large enterprises still mainly rely on factor inputs and the rapid expansion of capacity of the market. Many companies still have not learned how to profit through improvement of productivity and management under the circumstances where the demand of the market has slowed down.

Long-term mechanism should be established

In 2013, the number of patents of Top 500 Chinese enterprises increased significantly to a total of 332,700 patents, an increase of 28.8 percent over last year. However, in the context of the economic downturn, China's investment in research has kept declining. Among the Top 500, 104 companies experienced negative growth in investment in research.

It is learned that large companies often determine the technical standards and industry development. 80 percent of world investment in research, 70 percent of the technological innovation, 60 percent of technology transfer are completed dominantly by the world's top 500 enterprises.　　

"Among our top 500 companies, only Huawei Technologies Co., Ltd., and ZTE Corporation have achieved R&D intensity above 10. More companies like them will provide strong support for innovation for Chinese economy," Miao said.

Edited and Translated by Li Xiang, People's Daily Online

Read the Chinese version: 五百强哪儿弱, source: People's Daily