China's richest enterprises feeling the pinch

Although the top 500 Chinese companies have seen their income swell over the years, the room for growth has contracted, especially after the global financial crisis, a news report said on Aug 24.

According to the 2015 China Top 500 Enterprise List, the threshold, sales revenue and total assets of the companies covered by the survey have hit a record low. The total sales revenue of the shortlisted companies reached 59.5 trillion yuan ($9.3 trillion; 8.2 trillion euros), up 4.94 percent year-on-year, which is the lowest growth rate since the China Enterprise Confederation and China Enterprise Directors Association started to draft the ranking 13 years ago.

The threshold for entering the list has been raised by 750 million yuan to 23.61 billion yuan. This is, however, the narrowest increase in five years. The total assets of this year's finalists reached 197.6 trillion yuan, up 12 percent year-on-year, which is once again the lowest growth rate within the decade.

What is worse, a total of 57 companies have reported losses of 80.38 billion yuan this year, of which 14 are encountering the problem for the first time. Also, 94 companies have reported negative growth in sales revenue this year, whereas it was just 50 last year.

Merger and acquisition activities have slumped to a five-year low. Among the 500 companies, 140 carried out 690 mergers and acquisitions last year, compared with 811 deals in 2013.

Miao Rong, deputy director of the research department at the China Enterprise Confederation, said companies that do not fit into the economic "new normal" are likely to be eliminated. It is now crucial for the leading Chinese companies to accelerate their own reform and seize the opportunities both at home and abroad.

China Petrochemcial Corp, better known as Sinopec Group, crowned the list for the 11th consecutive year with a total sales revenue of 2.89 trillion yuan. The companies moving up the list are the same as last year, namely China National Petroleum Corp, State Grid Corp of China, Industrial and Commercial Bank of China Ltd and China Construction Bank Corp.

However, the ability of some Chinese giants to make profits has been a concern for a long time. A quick look at the Fortune 500 ranking, released in late July, reveals that Exxon Mobil Corp's sales revenue was much smaller than Sinopec's, but its profit is at least six times that of the latter.

Among the Fortune 500 companies, the world's most profitable companies are from the construction and agricultural engineering industries, with companies in these industries averaging profit of at least $16.5 billion, which is way higher than that of the Chinese banking industry. The average profit of the clothing companies included in this year's Fortune 500 list has even outperformed Sinopec.

In the Fortune 500's sub-list of the most profitable companies, 21 of them are from the United States, while 13 of the 50 finalists were from China, most of which are from the banking industry.

"Although Chinese companies have overtaken their peers in Japan, France, Germany and the United Kingdom in terms of the ability to make profits, there is still a long way for Chinese enterprises to catch up with the leading US companies," says Li Jianming, vice-president of the China Enterprise Confederation.

shijing@chinadaily.com.cn

(China Daily European Weekly 08/28/2015 page19)