The success of China's economy depends on its ability to build a large number of world class companies. This is a complex process which inevitably lags behind the overall growth of China's economy. Increasing the number of China's equivalents of Exxon Mobil, Toyota, Apple, or Samsung requires not only great financial resources but managements experienced in international operations, high technology, branding skills and innumerable other attributes. None can be acquired in a short period.

To indicate where China stands in that process in different industries today, Table 1 shows the percentage of revenue by country and sector for firms in the Forbes Global 2000 – the list of the world's 2000 largest publicly quoted companies. The comprehensiveness of its coverage can be judged by the fact that the combined revenue of these companies is nearly $30 trillion – equivalent to more than half of world GDP.

The first clear trend is that China still has a relatively small number of really large companies. China only accounts for 4.9 percent of the revenue of the world's largest companies. This remains below smaller European countries such as Germany's 5.9 percent, the UK's 6.2 percent, and France's 6.7 percent. China's share is far behind Japan's 14.2 percent and is dwarfed by the US's 29.9 percent.

China now has the world's second largest GDP but only the world's sixth largest big company sector. US GDP is two and a half times that of China, at market exchange rates, but its large companies are six times as big as China's. In short, the institutional strength of China's companies remains much weaker than their US competitors.

This is an important reason China's government is right to stress that the strengths of economies cannot be judged by their GDPs alone. US companies enjoy a much greater lead over China's than does the US domestic economy over China.

But world beating companies cannot be created overnight. Actually China has made rapid progress. If the same list were looked at in 2004 China would have only had 0.8 percent of the revenue of the world's largest companies. To advance from 0.8 percent to 4.9 percent in only six years is a considerable achievement. But the overall figures show the long distance that still has to be travelled.

The second key feature shown by the data is the unevenness of the development of China's companies by different industries.

In some industries major progress has been made:

? China's large construction companies, with 14.5 percent of the revenue of the global sector, have already overtaken the US, Germany and UK and are only slightly behind Japan's 18.2 percent and France's 17.5 percent. With their present growth rate China's construction companies will soon be the world's largest. But this is a small sector, accounting for only $1 trillion of all turnover in the Forbes Global 2000.

? In production of primary products, that is oil, gas, mining, electricity supply etc., China has also secured a significant position – and this is a large industrial sector. China's 9.1 percent share is far behind the US's 21.9 percent but has overtaken every European country and is only marginally behind Japan.

? In financial services China's position is strengthening. In revenue it has overtaken Germany and is not far behind Japan. But China's 5.6 percent share of the revenue of large financial service companies lags far behind the US's 22.3 percent. A detailed comparison of banks alone, however, shows that China has already overtaken Japan.

But turning to the two largest international industrial sectors, manufacturing and non-financial services (retailing, media, business services etc), China's position remains extremely weak.

? In non-financial services China's companies only account for 2.9 percent of the revenue of large international companies – compared to 43.6 percent for the US. Furthermore China's position is weaker than it looks as a large part of its total is made up by telecoms operators such as China Mobile and China Telecom. In other non-financial services only a few Chinese companies, for example retailers Gome and Suning, figure in the world's largest 2,000 firms. They are dwarfed by foreign retailers such as the US's Walmart, France's Carrefour, or the UK's Tesco.

? In manufacturing the revenue of China's companies is only 1.8 percent of the total compared to 33.1 percent for the US and 24.2 percent for Japan. China might be the modern "workshop of the world" but unfortunately most of the revenue of international manufacturing is still going to companies of other countries.

None of this is a reason for pessimism. Companies in other countries which are now universally regarded as world beating faced just as great (or greater) problems as China's at an equivalent stage of development. When Toyota, now the world's largest car maker, first started to export cars it had to withdraw from the US market after two years due to low quality – Toyota automobiles seriously overheated. Samsung, now one of the world's top brands, used to produce fans that regularly broke when they were simply lifted up.

It is important to remember that the present GDP per capita of China is still only equal to Japan in 1966 or South Korea in 1986. The industries in which China is successful today, for example steel and shipbuilding, are just the type that South Korea and Japan were successful in at the same stage of development. Just as with these countries, it will take further economic development in China to build world beating companies in high value added manufacturing and non-financial services. But it is simply a question of effort and time.

China has already gained international "star" companies. Haier is the world's largest producer of domestic goods – refrigerators, washing machines etc. Huawei is the world's second largest producer of telecommunications equipment after Ericsson. The world's largest banks by market capitalization are ICBC and China Construction Bank. PetroChina has the world's second-largest market capitalization after Exxon Mobil.

But the situation is clear. China's GDP should overtake the US within ten years. However it will take a minimum of twenty years, probably longer, for China to build a company sector that is advanced as the US. That real situation demands a clear head and hard work.

Table 1
Revenue by Sector and Country of Companies in the Forbes Global 2000 in 2010
	% of total for sector						All countries
	China	US	Japan	Germany	France	UK	$ billion
Total	4.9%	29.9%	14.2%	5.9%	6.7%	6.2%	29,996
Construction	14.5%	7.1%	18.2%	5.8%	17.5%	2.5%	1,049
Primary Products	9.1%	21.9%	10.1%	3.8%	6.9%	6.6%	6,476
Financial Services	5.6%	22.3%	6.1%	5.3%	8.1%	10.9%	6,644
Non-Financial Services	2.9%	43.6%	16.8%	5.3%	5.8%	6.0%	7,384
Manufacturing	1.8%	33.1%	24.2%	7.5%	5.3%	3.2%	7,367
Conglomerates	0.2%	29.9%	0.0%	16.6%	2.3%	0.4%	1,078
Source: Calculated from Forbes Global 2000, 2010 edition

The author is a columnist with China.org.cn. For more information please visit: http://www.h5a3.com/opinion/node_7080931.htm

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