By Andrew Kim
Despite China’s average per capita income–$1,000 compared to the U.S. average of $50,000– many economists say that the nation may soon become the world’s largest economy by sheer size. However, its long-term economic future is still cloudy and the country must significantly raise the living standards of hundreds of millions of its citizens in order to establish a truly strong, vibrant middle class. Judging by current indicators, especially the recent “FORBES Global 2000” report, that future may come much sooner than previously thought.
The FORBES Global 2000 is a list of the world’s largest public companies, as measured by certain criteria such as revenues, assets, market value and profits. Weighing the four categories equally, researchers have found that for the first time ever, China is home to the world’s three biggest public companies and five of the top 10 in the rankings. The top of the list is dominated by banks. Currently, the state-controlled Chinese bank ranks number one, China Construction Bank ranks number two, Agricultural Bank of China ranks third and Bank of China is fourth. The traditionally dominant winner (the United States) did not necessarily get pushed to a lower tier, being that the top five companies, in terms of market value, were American: Apple, Exxon Mobil, Google, Microsoft and Berkshire Hathaway.
While the United States accounts for the other half of the top 10 spots, the annual snapshot of today’s globalized business landscape still reflects the underlying changes in power dynamics between the East and the West. The United States holds onto the overall crown, given that it is the country with the most Global 2000 companies: 564. While Japan follows with 225, China (mainland and Hong Kong combined) added 25 to this year’s list, which was more than any other country. When changing total counts to reflect regional differences, Asia came in the lead with 674 companies, and North America came in second with 629.
What is truly remarkable is the sudden growth of Asian and predominantly Chinese companies, given that North America had over 50 percent more than Asia’s total number just over a decade ago. Moreover, the emerging markets of the Middle East, and Central and South America also gained significant headway throughout the last decade with 265 percent and 76 percent growth respectively.
When taking into account how the future IPO (Initial Public Offering) of the Chinese company Alibaba in American markets may be the biggest tech IPO in history (bigger than Twitter or Facebook), this trend is one that does not seem to be stopping.
In order for the trend to gain more significant headway, China’s government needs to enhance economic reform efforts, which by all measures and indicators it seems bent on doing. According to a publication by Bloomberg, the world is likely to see developments in the nation; predictions for change include: stronger anti-corruption reform, greater investment in technology and military, and massive public investment in Chinese universities.
By the last measure, it seems as though China is winning. The Chinese government has announced hundreds of millions of dollars to fund new investments in the C-9 (the top nine universities in China), and one simply needs to take a look around his or her college campus today to notice the plethora of international students from China. While the influx of international students will add to the diversity of a college campus and produce benefits in many intangible ways, it should be noted that the vast majority of such students will return back to their home country after graduation. In this regard, China will only continue to gain a massive influx in human capital over the coming years, with its collegiate population not only internationally cultured and educated, but also literate on matters regarding the economy and finance. As the traditionally Western dominant sectors of finance and business become more internationalized, it seems as if it is only a matter of time before China rises and maintains its position at the top.
Photo by Wikimedia