A decade dissected

Ranking highlights upgrade of China’s economy


Top of the pile in Hurun ranking

The Hurun Research Institute’s inaugural report on China’s 500 most valuable private sector companies gives a snapshot of how China is changing. The top 10 companies are all instantly familiar names inside China and many have become global brand names too: Alibaba, Tencent, Ping An, Huawei, Ant Financial, Meituan Dianping, Bytedance, Jiangsu Hengrui Medicine, Midea and Didi Chuxing.

But what the report demonstrates above all is the wealth creation of China’s private sector. Collectively, the 500 are worth $5.22 trillion, equal to about 40% of Chinese GDP.

Helpfully, Hurun has also published comparative figures for five and 10 years ago. These show how the tech industry has swept all else aside. Seven of the current top 10 are outright technology companies. Of the remainder, Midea – a white goods giant – has staked its future on robotics (via its purchase of German firm Kuka) and Ping An – notionally a financial services firm – owes much of it market value to the ‘unicorn’ tech investments it has incubated in its ecosystem.

A decade ago Ping An would have been the most valuable company in the Hurun ranking with a Rmb400 billion ($57.96 billion) market capitalisation. Today it is Alibaba on Rmb3.8 trillion.

In terms of the world’s top 10 listed companies, it is a US firm that has enjoyed the biggest expansion in market capitalisation. Amazon – which broke through the milestone valuation mark of $1 trillion in September 2018 – has the bragging rights, its value up over 16.5 times.

Alibaba wasn’t listed back in 2009, although Tencent was in the public market. The Shenzhen firm’s value has risen just over 12 times in the past 10 years. Of course, some of the other Chinese tech giants haven’t fared nearly as well. The Hurun data shows that Baidu – the third company in the BAT troika – has not had the same explosive ride, instead falling to 15th in the ranking.

Other industries are no longer as prominent as well. Real estate is still second overall as a sector (with 68 companies), but its biggest entities have fallen down the rankings. The largest, Evergrande, was tenth a decade ago. Today it ranks in twentieth place.

More appearances from firms in advanced manufacturing (73 companies) demonstrate how China is marching up the value chain. Nine Dragons Paper – which made a fortune a decade ago recycling all the paper and packaging used to export goods to the US – has plummeted from the top 10 to 208th. Its slot has been filled by Huawei.

Huawei must have presented Hurun with some of its most difficult calculations as it isn’t listed on any bourses. Not everyone agrees with the Rmb1.2 trillion valuation that Hurun awards to the global leader in 5G telecoms equipment either. In some cases they think it has understated Huawei’s worth. For instance, Ni Guangnan from the Chinese Academy of Engineering believes Huawei should rank higher than Alibaba and Tencent. He argues that Huawei enjoys almost double Alibaba’s revenues and gross profits. Net profit is lower, however, because of higher expenses in sales and R&D.

Hurun also points out that about a third of the 500 firms on its list have yet to float any of their shares on local or foreign bourses. That includes four in the top 20, three of which (Bytedance, Didi and Lufax) have all expressed ambitions to go public.

One surprising element in the rankings is that a few of the companies have non-Chinese founders. Arguably this indicates that China hasn’t been quite as closed off to foreign entrepreneurs as its critics have claimed (although some might take the alternate view – that there should be more foreign-founded firms in the mix, given the size of the Chinese market). BeiGene, ranked 75th, was co-founded by American John Oyler in 2010, while Denmark’s Allan Warburg and Dan Friis set up Bestseller Fashions in 1996 (listed at 410 on Hurun’s list).

Another standout statistic is where the most valuable firms are located. In terms of cities, Beijing comes top with 101 candidates, but Guangdong is the most productive province, with 116 of the 500.

Jinan University professor Yang Ying attributes this to Guangdong’s policies to encourage the private sector, something that the central government is trying to make more of a priority nationally as well.

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