Chinese companies

Stir-fry capitalism
Aug 30th 2007 | BEIJING
From The Economist print edition

Three of the world's biggest companies are now Chinese

CHINA'S stockmarket continues to hit record highs. Last week the benchmark Shanghai Composite index topped 5,000, a rise of 90% since the start of the year; and China's total stockmarket capitalisation now exceeds its GDP for the first time. This has been hailed in the Chinese media as marking progress towards a more advanced stage of capitalism. Others simply see it as evidence of a bubble.

The fact that China's shares are worth more than its GDP has little economic significance, since it compares a stock with an annual flow. And in any case, the value of tradable shares—that is, excluding those held by the government—is still only about 35% of GDP, compared with 150% in America or over 100% in India.

Higher share values do, however, mean that Chinese companies are rapidly climbing up the rankings of the world's biggest. No fewer than three of the world's top six firms by market value are now Chinese (see chart). The rest are American. Taking the world's 25 largest, six are Chinese—more than the number of European Union or Japanese companies. A few years ago there were no Chinese firms in the top 25.


The Industrial and Commercial Bank of China (ICBC) has overtaken Citigroup as the world's biggest bank by market value (although Citigroup's profits last year were more than three times bigger); it is in third place overall. If PetroChina, now in fourth place, goes ahead with its plan to sell shares on the Chinese mainland, then it could soon eclipse Exxon Mobil as the world's largest company. This assumes that, as with previous IPOs, the new share price soars above that of those already listed in Hong Kong. But since the bulk of PetroChina's shares are not freely traded, its claim to having the highest “market value” would be highly contentious.

However, those who view China's advance up corporate league tables as part of its inevitable move towards world domination would be wise to remember Japan. In 1989, just before its bubble burst, six of the world's ten biggest banks were Japanese. Look at what happened to them.