US, China profit gap growing

The profit gap between China's 500 largest enterprises and their US counterparts is growing wider, with the economic slowdown seriously affecting profits at domestic manufacturing companies, the China Enterprise Confederation (CEC) said over the weekend.

China's top 500 enterprises, ranked by annual revenue, made a combined profit of 2.1 trillion yuan ($324.3 billion) in 2011, equivalent to 39.48 percent of the total profit of the top 500 US firms for the year, down 4.05 percentage points from a year earlier, Wang Zhongyu, chairman of the CEC, said at a summit held Saturday in Changchun, capital of Northeast China's Jilin Province.

The growing gap was mainly caused by a slowdown in profit growth among China's top 500 enterprises - which was 5.15 percent in 2011, compared to 38.51 percent in 2010 - mainly dragged down by manufacturing companies, according to a report by the CEC.

"Manufacturing companies' profits have been squeezed by inflation and fast-growing labor costs," said Liang Xinjun, CEO of 181st-rated Fosun Group.

State-owned enterprises still have a dominant position, with 310 firms on the list. China Petroleum & Chemical Corp was highest on the list with revenue of 2.55 trillion yuan in 2011. The rest of the top 10 are energy companies, banks and telecom operators.

The total revenue of the top 500 domestic enterprises in 2011 was equivalent to 59.1 percent of those in the US, up 9.25 percentage points from the year before, the report said.

"The data indicates that Chinese enterprises are becoming bigger, but not stronger," Qian Wei, vice president of consultancy Accenture Greater China, told the Global Times.

"China's biggest enterprises lag behind their foreign counterparts in terms of management, business models and technology innovation," he said.

The report also said that more than 55 percent of the US and global top 500 enterprises are in the services sector, while the ratio is only 30 percent in China.

"The top US companies are mainly in the retail, pharmaceutical and healthcare sectors, while Chinese ones are mainly in the construction and metallurgy industries," said Yang Du, a professor at the School of Business with Renmin University of China.

"Considering the large consumption potential in China, there will be more food and drinks as well as other consumer-related companies on the country's top 500 enterprises list," he said.

Big enterprises are also making efforts in terms of overseas expansion. Among the top 500 domestic enterprises, 261 have overseas business and realized an average overseas revenue of 19.1 billion yuan in 2011, year-on-year growth of 39.28 percent.