The latest Fortune Global 500 list was just released.China, the worldís second largest economy, saw 100 companies entering the list, marking the 11th year straight that the number of Chinese Global 500 companies has increased. Zhang Yugui, Dean of School of Economics and Finance, Shanghai International Studies University, believed that China should reflect on its unsustainable growth model and the lack of international competitiveness of its companies. Excerpts of his views follow:
Thelatest Fortune Global 500 list was just released. What's encouraging is that the profits of this year's top 500 companies totaled $1.96 trillion, a rise of 27 percent compared with last year, indicating that multinationals, the barometer of the global economy, are riding out the financial crisis. Meanwhile,China, the world's second largest economy, saw 100 companies entering the list, 91 of which come from the mainland, marking the 11th year straight that the number of Chinese Global 500 companies has increased.
In contrast, from 2002 to 2012, theUnited Statessaw the number of its companies on the list dwindle. This year, a total of 132 U.S.companies are included, four less than that in 2013. China's increase and theU.S.decrease in the number of Global 500 companies indicate an irreversible momentum inChina's efforts to catch up in economic strength. While China has secured the No.2 place in the number of companies on the Fortune Global 500 list, continuous expansion in sales revenue can never prop up its attempt to become a real economic power.
While there is no denying that Chinese enterprises have made stupendous progress in the past few years, they are still lagging far behind their American counterparts with regard to some specific indicators. For instance, the average profit of American companies on the list stands at $6.24 billion, twice that of Chinese companies, but the number of employees taken on by Chinese companies is 50 percent higher than those hired stateside. Chinese companies on the list still have a long way to go in catching up withU.S.companies in terms of profit per capita.
Among the 91 listed Chinese mainland companies, 11 are engaged in the coal industry, and if thermal power companies are counted, this number rises to 16. Despite the important role they have played inChina's economic rise, these companies are of no strategic importance in regard to their limited gains in the global value chain. A similar case in point is Chinese carmakers, which are still original equipment manufacturers, although they often appear on the Fortune Global 500 list.
The only strategically valuable Chinese company worthy of mention is Huawei, a Shenzhen-headquartered networking and telecommunications equipment and services company. Since its establishment in 1987, Huawei has set a good example for others to follow. In 2013, its revenue hit $38.8 billion, 65 percent of which was generated by its overseas business, with revenue from European countries totaling $5.23 billion. Last year, the company invested 30.7 billion yuan ($4.92 billion) in research and development, accounting for 12.8 percent of its sales revenue, reaching the level of leading international scientific and technical corporations.
Despite an increased presence on the Fortune Global 500 list,China should reflect on its unsustainable growth model and the lack of international competitiveness of its companies. The sheer size of companies and their global rankings can't accurately measure a country's international competitiveness. As a manufacturing giant, China should focus on the ferocious challenges awaiting its companies in the global division of financial resources, the cultivation of strategic industries, and the pricing and creative design of products. Without gaining a say in the global financial value chain and improving competitiveness, the companies' market value will not ascend, even if more of them nudge onto the list.
