Revenue vs Market Cap

• large Chinese coporations are not listed on stocks or only a bit of their shares
• thus revenue / market cap is very different measures

Role of State-Owned Enterprises

1. almost 40 years after market reforms, China’s state-owned enterprises still have a large role
2. state owned enterprises are called on to support economic growth for China/deliver aid/satisfy industrial policies

Problems with SOEs

• lots of debt
• pushed down future productive growth and pushes up public debt
• current policies not tackling SOE performance

Private firms is contributing to about half of economic exports

Lack of Multi-Nationals

China lack multi-national corporations: mostly domestic, so making home continent growth.

State Sector Features

• large SOE are integral to national power—kind of branches of government
• executives are appointed by CCP Organization Department
• party officials in national hierarchy
• will rotate in / out of government posts

China’s largest companies are remarkably less profitable (high taxes, etc.).

What about the low financial returns?

Two views—

1. As companies: SOEs are flawed, wasteful of state resources
2. As branches of government: self-funding government companies that persue national policy

China’s large corporations grow fast

• 2008: China had 26 firms in fortune top 500
• 2023: China had 133, 70% are SOES

Hence these companies can grow very fast.

Why this rapid rise in foretune 500

1. post-288 credit-driven infrastructure drive to make growth better
2. massive foreign policy reserves
3. state-directed mergers of SOEs to maket hem bigger

As a result, China’s largest firms is related to infrastructure and manufacturing.

state financing in foreign investment

state finances a lot of foreign investment

Global 500

China’s tech sector, consumer sector, and health sector is much lower; its very much construction based. This is very different than Japan.

Some Mergers

Baushan Steel was 4th largest steel company; Wuhan iron and steel 10th largers, but financilaly troubled.

Thus, government merged Baoshan steel and Wuhan steel to make Baowu steel. This company kept merging steel companies.