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China's top 500 enterprises still lack core competitiveness

By Lu Yanan (People's Daily Overseas Edition)

15:57, September 06, 2011

Edited and Translated by People's Daily Online

The China Summit of Large-Scale Enterprises was held in Chengdu on Sept. 3 and Sept. 4, and the 2011 list of China's top 500 enterprises was published. The per capita business income of the China's top 500 enterprises in 2011 accounts for only 45.6 percent and 45.7 percent of that of the world’s top 500 enterprises and U.S. top 500 enterprises, respectively, and the top 500 enterprises of China still lack core competitiveness.

In 2011, the Chinese mainland had 58 enterprises listed on the top 500 world enterprises

Compared to 2010, the annual business income standard for selecting the top 500 Chinese enterprises has become much higher in 2011. In 2010, the standard was a little more than 11 billion yuan, but in 2011, it is a little more than 14 billion yuan.

The number of Chinese mainland enterprises among the top 500 world enterprises has made a historic breakthrough, and their ranks have greatly risen too. In 2011, the top 500 world enterprises included 69 Chinese enterprises, of which 58 are on Chinese mainland, eight in the Taiwan province of China, and three in the Hong Kong Special Administrative Region.

The year 2011 is the 10th year that the China Enterprise Confederation (CEC) has published the annual list of the top 500 Chinese enterprises. Reviewing the lists over the past 10 years, one can see that the status of China's large enterprises among the world's large enterprises has greatly risen. Between 2002 and 2011, the annual business income growth rate of the top 500 Chinese enterprises was 22 percent on average, much higher than the 7 percent of the top 500 world enterprises and 4 percent of the top 500 U.S. enterprises.

"From the average levels of the recent 10 years, it could be seen that China's large enterprises are not worse than U.S. large enterprises," the director of the CEC Wang Zhongyu said. "China's large enterprises have become an important pillar in the world's large enterprises."
  
Poor performance in competitive industries shows that China's major enterprises lack core competitiveness

Despite outstanding operating results, China's top 500 enterprises have yet to make substantial progress in narrowing their gaps with multinational companies.

First, the distribution of China’s major enterprises among various industries is evidently abnormal. The top 10 industries with the most companies among the top 500 Chinese enterprises for 2011 are characterized by resource monopolies and economies of scale. About a half of them either come from monopolized industries or have monopolized the exploration and utilization of natural resources.

Second, the profitability of China's major enterprises mainly depends on their monopolies on natural resources, large scale operations and low costs. The top 10 enterprises on the list of the top 500 Chinese enterprises for 2011 all come from state-owned financial or monopolized industries, while the top 10 companies on the list of U.S. top 500 enterprises for 2011 are mostly from technology-intensive industries, such as medicine, PC, office equipment and software.

"The lack of China's major enterprises in competitive industries has exposed their low competitiveness," said Miao Rong, vice director of the Research Department of the China Enterprises Confederation.

Major enterprises have generally dominated the development directions of technological standards and industries because 80 percent of the world’s investments in research and development, 70 percent of technological innovations and 60 percent of technology transfer are conducted by the top 500 global enterprises.

However, the average proportion of the investments in research and development by China's top 500 enterprises to their operating revenues stands above only 1.4 percent; the research and development intensity for only 17.8 percent of them is above 3 percent.

“The growth in the operating revenues of China’s top 500 enterprises is mostly not driven by technological progress,” Miao said.
 
Over the past 10 years, about two-thirds of China's top 500 enterprises have been state-owned enterprises and the remaining one-third have been private enterprises. Obviously, there remains a considerable gap between the country's state-owned and private enterprises.

Chinese enterprises should enhance innovation capability for better development


Major Chinese enterprises should first make efforts to enhance their innovation capability in order to achieve better development. They should make innovations not only in the research and development of core technologies and products but also in the corporate marketing and management model.

Furthermore, they should make full use of both domestic and foreign markets and resources, pay close attention to the overseas investment climate and strengthen cooperation with business partners in upstream, midstream and downstream sectors.

The Chinese government has been treating state-owned and private enterprises differently and certain structural problems hindering the development of private enterprises have remained unsolved for many years. Many private enterprises on the 2011 list of China's top 500 enterprises suggested that government agencies should eliminate artificial market access barriers in oligopolistic sectors, accelerate industrial restructuring to boost resource flows between state-owned and private enterprises, regularly examine enterprise-related laws and regulations and establish a sound supervision mechanism, in order to create a fair political and legal environment for the development of private enterprises.

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