Moving up the corporate ladder

China overtakes Japan to bag second position in Fortune Global 500 list

China's growing status as the powerhouse of Asian economic growth got another shot in the arm this week when it overtook Japan as the nation with more companies on Fortune's Global 500 list of the world's top firms.

By snatching the second ranking from Japan as it did in the economic sweepstakes about two years ago, China has sent out clear signals that economic growth remains strong and looks poised for further gains, say experts.

Fortune magazine's annual ranking of the world's biggest companies by revenue lists 79 Chinese companies (69 are from the mainland), second only to the 132 from the US. Japan has dropped to the third place with 68 companies in the top 500 list.

China has improved its ranking with 12 new additions, making it the ninth successive year that the country has moved up the ladder and the 10th successive year that the number of US companies has fallen.

Giles Chance, visiting professor at the Guanghua School of Management of Peking University, says the nation's economic status and the huge market share enjoyed by State-owned enterprises across various sectors have helped many Chinese firms gain positions in the Fortune 500 rankings.

"The economic growth in China will continue, and some Chinese companies will grow outside China. With such strong trends in their favor, Chinese companies will continue to improve their rankings in the Fortune 500 list," says Chance, the author of China and the Credit Crisis: the emergence of a new world order.

Though China's economy has shown signs of slowing down, especially after the government reduced the annual growth rate target to 7.5 percent between 2011 and 2015, experts say the rise of the Chinese companies is something that cannot be slowed down.

John Ross, visiting professor at the Antai College of Economics and Management of Shanghai Jiao Tong University, says that rather than the speed of economic growth in China, it is more important to gauge the speed at which China can outpace other economies.

He says that the European economy is going backward, whereas the US economy is growing very slowly at around 2 percent. Comparatively, China is still the economic heavyweight that has displayed the strongest growth.

Ross says that what really concerns him is the huge gap between the top US firms and Chinese companies.

"The US GDP is about twice the size of China's, but the turnover of the top US companies is much more than twice the size of China's top companies. Even if China were to become as big as the economy of the United States, the Chinese companies will still not be as big as their American competitors," he says.

"The key challenge for Chinese companies is to gain more international experience. It is very difficult to establish a presence in the overseas markets, something that Chinese companies have just started to do," he says.

Wang Zhile, director of the Beijing-based Multinational Corporation Research Center at the Chinese Academy of International Trade and Economic Cooperation, also shares a similar view.

Wang says that despite the sluggish economy in the West over the past two years, the growth in total turnover of the top 500 companies has been in the double digits in that time.

"The key reason for this is that most of the companies are multinational companies, with most of their income coming from markets outside their home countries," Wang says.

He says that though some Chinese companies have surpassed traditional multinational companies in scale, they still cannot be considered global enterprises.

Ross says that China's economy will be as big as that of the US in five to seven years. But it will take more time for Chinese companies to reach the same level as their US counterparts.

"Chinese companies will need tens of thousands of experienced managers to explore the overseas markets. It is not possible to achieve this quickly."

mengjing@chinadaily.com.cn

(China Daily 07/13/2012 page3)