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Analysis on Top 500 2010: Bigger and Stronger

The Analysis On Top 500 Chinese Private Enterprises shows that the enterprises have maintained a steady growth momentum in both corporate size and profit, upgraded and readjusted their industrial structures, improved their management styles, and made greater contributions to the society, with outstanding progress in all of their major business indices in 2009.

While the country"s economic growth suffered its hardest time in a decade, the Chinese society maintained stable and relatively fast development. Private enterprises made significant progress, with rapid rebounds in revenues, assets and profits, as well as major contributions to employment and taxation, thanks to the government"s stimulative policies and the enterprises" proactive measures. According to the report, delivered by ACFIC Vice Secretary-General Ouyang Xiaoming in Beijing on August 29,the top 500 shared the following characteristics:

Firstly, despite the negative impact of the global financial crisis, they put up a strong defense and made rapid recovery. Their business indices rose faster than enterprises of other ownerships, and they overtook enterprises owned by the central government in terms of growths of business revenues, gross assets and net profits as well as the net profit margins from assets.

The threshold of business revenues for the top 500jumped 23.27 percent from 2.97 billion yuan in 2008 to 3.66 billion yuan in 2009. Their combined revenues totalled 4.7 trillion yuan, or 9.47 billion yuan on average per enterprise, up by 15.24 percent. Of the 500, 126 enterprises hit or surpassed the 10 billion yuan mark in terms of business revenues and four of them earned more than50 billion yuan. Jiangsu Shagang Group, Suning Appliance, and Legend Holdings ranked the top three, with 146.3 billion yuan, 117.0 billion yuan and 106.4 billion yuan, respectively.

Thanks to the government"s relatively loose monetary policy, the combined assets of the top 500 totalled about 3.9 trillion yuan, or about 7.8 billion yuan on average per enterprise, up by almost 38 percent, beating the growths of their business revenues and net assets. The number of enterprises with total assets of over 10 billion yuan increased from 65 in 2008 to 95 in 2009.

Thanks to the government"s stimulus packages and the rapid self-readjustment of the private enterprises, their profits and efficiency both improved.Their net profits totalled almost 218 billion yuan, up by 32.8 percent; their sales margins rose 0.61 percentage points to 4.6 percent; net assets margins climbed 1.61 percentage points to 17.9 percent; per capita productivity increased 5.26 percent to almost 1.1 million yuan.

However, due to the relatively loose monetary policy, the top 500"s total assets turnover fell 13.1 percentage points to about 140.9 percent, while their assets debt ratio increased 2.31 percentage points to 64.72 percent.

The research, which was done in questionaires, showed that many enterprises have made rapid recovery from the financial crisis by readjusting their product structures, expanding market shares, improving corporate management, and intensifying research and development.

Secondly, the top 500 made outstanding contributions to creating new jobs and raising tax revenues. They contributed more than 177.6 billion yuan in combined taxes, or 355 million yuan on average per enterprise, up over 19.6 percent. Altogether 377 enterprises paid over 100 million yuanin taxes and Suning came on top with over 3.9 billion yuan.

The top 500 created altogether about 4.53 million new jobs last year, or 9,049 on average per enterprise, up 9.48 percent. With the creation of over 162,803 new jobs last year, BYD Auto ranked the first. Meanwhile, labor unions were established in about 90 percent of the enterprises; about 93.4 percent of the enterprises signed working contracts with over 90 percent of their employees;at least80 percent coverage of old-age, medical and unemployment insurances were realized in almost 80 percent of the enterprises, up almost 10 percentage points.

Thirdly, a vast majority of the top 500 are located in the country"s east and engaged in the manufacturing industry, with an increasing number of them entering the emerging strategic sectors. Altogether 405 enterprises lie in the eastern region, with 180 in Zhejiang Province and 129 in Jiangsu Province, 17 in the Northeast, 44 in Central China, and 34 in the West.

However, the research found that with the implementation of the country"s West Development Strategy, the competitiveness of the private enterprises in the West is on the rise too. Despite the drop in their total number, those that did made the top 500 list took bigger shares in their combined revenues and assets, while their sales margins rose to 6.07 percent from 4.06 percent in 2008.

With 67, 63, 51, 44 and 35 enterprises on the list, the top five sectors were construction; black metal and metalurgical smelting and pressing; wholesale and retailing; electronic machinery and equipment, cable manufacturing, instrument and devices manufacturing; and textiles and chemical fibre manufacturing.

There were 308 enterprises in manufacturing, 13 less than 2008; 26 in real estate, 10 more; 36 enterprises in bio-pharmaceutical products; 26 in new energy including products related to solar energy and wind power generation, as well as new-generation batteries.

Fourthly, private enterprises are attaching greater importance to improving their own calibre and focusing on technology, management and branding as a way to increasing profits.

Their management structure is being improved. Major decision-making lies with the meetings of the share-holders and board of directors; equity rights are increasingly diversified with the corporate shares on the rise; almost 90 percent of the enterprises have established party organizations and labor unions.

The development strategy of the top 500 is changing from growing bigger to stronger with a tendency to focus on their pillar industries rather than make divesified investment.Manuafacturing, real estate, services, energy and finance are the top investment destinations for large-sized private enterprises.

An increasing umber of enterprises have passed ISO9000,ISO14000,OHSAS18000 and other international ratification standards and used such information management systems as OA, ERP and HRM. Most enterprises have established diversified incentive mechanisms to entice and encourage human resources. In 29.6 percent of the enterprises, over 30 percent of the employees hold a bachelor"s or a higher degree. In 24 percent of the enterprises, technical staff account for more than 30 percent of the employees.

Of the top 500, 172 own Famous Chinese Trade Marks, 14 more than 2008, while an absolute majority of them have their own trade marks out of which they have made money. High-tech enterprises account for 46.4 percent of the top 500; 314 of them have a total of 29,037 valid patents under their belts, up 1.1 percent over 2008. The core technologies of 344 enterprises, or 68.8 percent of the top 500, are based on self-initiated development and research, a rise of 4.8 percentage points over 2008.

Fifthly, the top 500 are stepping up their overseas endeavors and strengthening their international competitiveness.

In 2009, 117 enterprises made a total investment of about 225.3 million US dollars overseas and owned 481 companies and projects in various parts of the world. They have shifted their investment strategy from the establishment of sales markets to investment, acquisitions and mergers, and establishment of research and development institutions as well as exploration of resources.

Regarding problems and difficulties, the research shows that the financial crisis remains the top hindrance to the development of the top 500 despite their quick recovery in its wake. In addition to price fluctuations of raw materials and financing difficulties, the shortage of experts and lack of market demand remain outstanding. Land use restrictions and complicated approval procedures pose serious challenges to their investment.

ACFIC Chairman Huang Mengfu said that it is of great significance to publicize the achievement of the private economic sector, analyze its development trends and disucuss the opportunies and challenges it faces.

Huang said ACFIC compiled the Top 500 list based on its annual investigation and research on the private enterprises of certain scales since 1999. "The result of the research has laid down a quantative foundation for an objective recognition of the functions of and contributions by the private economy, while providing data support for policy-making by the party and government leaderships at various levels regarding the development of private economic development," he said.

Numbering more than 7.5 million, private enterprises account for over 70 percent of China"s corporate legal entities, produce over half of its GDP, create over 80 percent of the new jobs in cities and urban townships, and supply about 70 percent of the country"s technological innovations, 65 percent of patents of inventions and over 80 percent of the new products.

Huang stressed that reality shows that an area"s economic vitality and its people"s living standards are closely related to the prosperity of its private economic sector; the sectors that open to private enterprises and allow for sufficient competition will gain a notch in terms of global competiveness, technological innovation, and product and service pricing.

Huang said that private enterprises have grown up and stronger in the market economy and some of them have become the leaders in their sectors with strong global competivity. However, the big private enterprises have the obligation of not only changing their own patterns of growth, but leading and helping the medium- and small-sized enteprises in this regard.

While encouraging the big enterprises to take up more social responsibilities, Huang also urged the government to support them and create better access for them.

Related Story: ACFIC Unveils2010 Top 500 Private Biz and 100 Manufacturers

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