Productivity, innovation, internationalization need improvement: experts
The latest list of China's top 500 enterprises shows positive changes in the nation's industrial structure and research and development work, but experts said that these companies also need to improve their productivity, innovate more and become more international to compete with large cross-border enterprises.
The Top 500 Enterprises in China for 2016 was unveiled on Saturday by the China Enterprise Confederation and the China Enterprises Directors Association in Changsha, capital of Central China's Hunan Province, the Xinhua News Agency reported on Sunday.
The State-owned enterprise (SOE) State Grid ranked top with revenue of 2.07 trillion yuan ($310.29 billion), followed by China National Petroleum Corp (1.88 trillion yuan) and China Petrochemical Corp (1.85 trillion yuan).
According to the list, 295 enterprises are SOEs, accounting for 59 percent of the total of top 500.
"Private companies account for only 41 percent of the top 500 companies in China. In general, they account for 86 percent of all Chinese companies and contribute more than 60 percent of GDP, 50 percent of tax revenue and 90 percent of new employment," He Weiwen, an executive council member at the China Society for WTO Studies, told the Global Times on Sunday.
"Private companies made a huge leap forward in the past 15 years, as only about 100 were among the nation's top 500 companies 15 years ago," Feng Liguo, an expert at the Beijing-based China Enterprise Confederation, told the Global Times on Sunday.
However, private companies lag far behind SOEs in terms of enterprise scale, assets and profits, he said.
There are 84 central government-owned enterprises on the list, accounting for only 16.8 percent of the top 500 enterprises, but their revenue, net profit, assets and other metrics account for 50 to 70 percent of that of all the top 500 enterprises, noted the Xinhua report.
Another change was that the combined revenue of the top 500 companies dropped for the first time in the past 15 years. Revenue stood at 59.46 trillion yuan, sliding 0.07 percent from the previous year, showed the list.
"This indicates that domestic companies face a shortage of demand, and that the downward economic trend continues," He said.
However, Feng said the drop reflects China's achievements in adjusting its economic structure and achieving industrial upgrading, as indicated by the fact that companies in the heavy industrial sector involving iron and steel, coal and construction materials saw the largest drops.
Revenues in the services sector rose to 40.5 percent of the total, exceeding the manufacturing industry's 39.2 percent for the first time.
Heavy industry has always been a crucial part of the list, but enterprises in the modern services and strategic emerging sectors are increasing as part of China's economic new normal, Feng noted.
The 500 companies put an average of 1.48 percent of their revenues into research and development, up 0.19 percentage point from the 2015 survey, the People's Daily reported on Sunday.
Internet giant Baidu Inc and telecommunications giant Huawei Technologies Co spent 15.9 percent and 15.1 percent in this manner, according to Xinhua.
A total of 110 Chinese enterprises entered the Fortune Global 500 in 2016, following the U.S. with 134 companies, according to a statement on fortune.com.
But large enterprises in China lag behind those in the U.S. and Fortune Global 500 in terms of their industrial structure, innovation and internationalization, Feng said, noting that situation leads to low profits.
Around 72 of China's top 500 enterprises recorded losses, compared with 55 in the U.S., said the People's Daily.
Meanwhile, Chinese companies have low levels of internationalization compared with the U.S. top 500 enterprises and Fortune Global 500, Feng said.
For example, large SOEs like State Grid have tremendous assets overseas but their returns on equity are lower and most of their mergers and acquisitions have failed, he explained.
"Domestic enterprises should improve their productivity, create core technologies and strengthen internationalization to compete," He noted.
