Top Firms Success Sees Ups and DownsEconomic statistics of China's 100 top industrial enterprises during the Ninth Five-Year Plan period (1996-2000) reveal that successes coexist with problems, said an article in Economic Daily.Their growth rate increased rapidly and they expanded in size continually. But they still faced many problems, such as decreasing profits and imbalance in distribution of enterprises across the industrial spectrum. But, on the whole, the leading companies in Chinese industry improved in performance over the past five years, the article said. The total assets increased by 46.7 per cent over the five-year period, to reach 1.8 trillion yuan (US$216.9 billion); tax revenue rose to 100.8 billion yuan (US$12.1 billion) in the final year, an increase of 12.0 per cent; and they registered a 15.6 per cent increase in profits over the entire period. They showed a general expansion in size over the period, the article said.The average rate of expansion was 46.7 per cent and their sales volume averaged an increase of 29.4 per cent over the entire period. The leader of the top 100 was the Daqing Petroleum Corp in Northeast China's Heilongjiang Province, whose total assets increased by 21.39 per cent over the period, the article said. As the backbone of China's industry, the top 100 played an increasingly pivotal role through the past five-year period, the article said. Their total assets accounted for 15.1 per cent of the country's total industrial assets for 1999, an increase of nearly 2 percentage points from 1996. Their employees made up 6.47 per cent of the total industrial labour force, an increase of 1.2 percentage points over the figure for 1996. The rise indicates that large-scale enterprises can play a significant role in job markets, the article pointed out. From 1996 to 1999, the number of employees in the top 100 companies decreased from 3.4 million to 2.9 million while its ratio to the industrial total increased by 1.2 percentage points. This signifies that employment figures for the top 100 conglomerates dropped slower than those of other, smaller enterprises. The small and medium-sized enterprises have been counted as the major force shouldering the task of creating more jobs. The statistics indicated, however, that large-scale enterprises can also contribute a lot to employment increment. The article attributed the high growth rate of the top 100 to market competition. Their growth can in part be attributed to the preferential policies granted to them by the State. But the major reason behind their rapid development is the intensified market competition in recent years, the article said. The traditional seller's market has gradually evolved into a buyer's market with supply exceeding demand. Taking advantage of size and more favourable access to financing, the industrial giants could easily survive the competition and gain an upper hand over small businesses, the article said. When competing with international giants, however, the top 100 felt the strain, the article said. Although they achieved rapid growth and expanded in size, they still need to improve their efficiency. From 1996 to 1999, the major economic indices of the top 100, except productivity, slid. Their per capita productivity was raised from 229,000 yuan (US$27,600) to 351,000 yuan (US$42,290). But their assets turnover, which is the ratio of sales value to total assets, has fallen from 64.7 per cent to 57.0 per cent, the article said. Compared with other industrial enterprises, the top 100 have seen slumping profits and tax contributions. In 1996, their profits accounted for 39.2 per cent of the industrial total; the ratio dropped to 29.5 per cent in 2000. Their tax contribution has dropped from 22.9 per cent of the industrial total in 1996 to last year's 16.3 per cent. That their improvement in efficiency falls far short of their expansion in size indicates that they will have trouble achieving sustainable growth, the article warned. In an opened-up economy, technical innovation has become the vital factor for enterprises' success. Given this circumstance, China's industrial giants must move from large scale development towards innovation-oriented intensive development to improve their efficiency and competitiveness, the article urged. Imbalance in distribution over the industrial spectrum of the top 100 enterprises constitutes another problem of the leading industrial group. Most of them are in the petrochemical and petroleum, telecommunications, metallurgical and power sectors. Regionally, the enterprises are mainly concentrated in the better-off eastern areas, such as Guangdong, Shandong and Jiangsu provinces and Shanghai Municipality and this is a trend that is becoming more and more obvious. At the same time, the number of these enterprises located in the middle and western areas has shrunk over the past few years. Reforms in the management mechanisms of the eastern enterprises is a leading factor behind their better competitiveness, the article said. The eastern provinces were the pioneers that initiated economic reforms and opening up to the outside world in the early 1980s. The reforms enhanced their awareness of competition and made them more adaptable to market changes. And thanks to the opening up policy and geographic advantages, the eastern firms have had more opportunities to make use of international resources and conduct economic exchanges with overseas businesses. The landlocked middle and western areas, on the other hand, have not enjoyed as many privileges as their eastern counterparts and have been put at a disadvantage, making it harder for them to improve their record, the article said Source: China Daily |
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