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Champions from China
2006-08-22
China Daily
China's rise as a world economic power is largely powered by the emergence of Chinese champion enterprises.
There are currently 19 Chinese enterprises among the Fortune 500, up from three in 1995, demonstrating the growing strength of China Inc. Sinopec, China's largest company, is No 23 on this year's list.
With a minimum core business revenue of 3.73 billion yuan (US$466 million), China's top 500 manufacturing powers generated about one-third of the country's 250,000 enterprises' total revenues and capital, with annual incomes exceeding 5 million yuan (US$625,000), according to new figures from the National Bureau of Statistics.
Clearly, these large enterprises, many State-owned, have formed the bulk of champions in each of their industries.
Nevertheless, when trying to understand the dynamics of the Chinese economy, it is necessary to examine many other Chinese enterprises, small but promising, mostly from the private sector.
Such companies constitute a group of "stealth" champions that not only contribute significantly to the ongoing expansion of the Chinese economy but also will sustain China's rise as a global growth engine in the future.
Currently, small and middle-sized enterprises account for 99.6 per cent of all Chinese enterprises, creating about 60 per cent of the nation's output and 75 per cent of new jobs.
Over the past quarter century, some have developed from scratch to leading manufacturers in the world market.
In sharp contrast with their seizure of market shares, few Chinese champions have succeeded in brand building. For instance, none of the top 100 global brands is from China.
However, in view of their growth potential, it is fairly reasonable to expect that this may change.
Three reasons, in particular, explain why.
First, and most obviously, Chinese enterprises will continue to enjoy the country's comparative advantage of cheap labour cost. Though allegations of dumping have dogged Chinese manufacturers, few can deny their innate capacity for cutting cost.
But champion enterprises cannot rely excessively on this advantage, as other developing countries like India and Viet Nam will soon undercut China on labour cost.
Second, China's market-oriented reforms have tremendously lowered institutional costs for domestic enterprises, improved the business environment and raised economic efficiency overall. As China presses ahead with its banking, financial and other key economic reforms, more small and mid-sized enterprises will get the chance to grow into new champions.
Finally, the least visible but perhaps most important reason is the upward-turning learning curve for Chinese enterprises.
Lack of research and development has long been blamed for Chinese manufacturers' inability to grow, but more than two decades of opening up and market competition have largely enhanced domestic enterprises' learning capacity. And with the country's new innovation-based development strategy, Chinese enterprises are poised to rise still further.
Statistics indicate that small and medium-sized enterprises have filed 65 per cent of patents, completed 75 per cent of technological innovations and developed 80 per cent of new products since China began its reforms more than two decades ago.
Hence, it will not be surprising if more new champions emerge from China's small businesses.
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