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Top 1,000 Listed Companies of Greater China

Chinese Companies Looking to Play - Is Taiwan Ready?


The latest ranking of Greater China's top 1000 companies reflects the growing strength of China's domestic-demand driven companies and the major challenge they pose to Taiwanese competitors.



Chinese Companies Looking to Play - Is Taiwan Ready?

By Benjamin Chiang
From CommonWealth Magazine (vol. 422 )

From China's blizzards early in the year and the Sichuan earthquake in May to the global financial meltdown as the year ended, natural and manmade disasters were a continual drag on Greater China's (China-Taiwan-Hong Kong) economic development last year, but with crisis comes transformation.

Never in its history had the nation, its people and businesses encountered such an inconceivable turn of events.

Armed with a multitude of questions about the direction of China's economic development, CommonWealth Magazine's reporters spent two weeks scouring China, covering more than 8,000 kilometers during their journey to bring back firsthand reports from eight cities in key regions around China, including the Yangtze Delta, Inner Mongolia, Shaanxi and the mountainous regions of northern Guangdong Province.     

Firms Targeting Domestic Market Dominate Exporters

The Top 1,000 Greater China companies on the 2009 CommonWealth Magazine list last year raked in a combined NT$100.14 trillion in operating revenue, undaunted by the floundering global economy.

The Hong Kong Stock Exchange remained the market of choice for the listing of shares among the Top 1,000. A total of 284 companies, with combined operating revenue of NT$27.5 trillion, or 31 percent of the top 1,000's total, are listed on the Hong Kong bourse. A further 253 companies are listed in Shanghai, 252 are listed in Taipei, and 161 are listed in Shenzhen. Fifty are listed on two markets (Hong Kong/Shenzhen or Hong Kong/Shanghai).

China Petroleum & Chemical Corp. (Sinopec), with operating revenue of NT$7.5 trillion, retained its crown as the top of the heap, and even posted a 20.5 percent jump in operating revenue over the previous year.

Analyzing the top 10, eight are China-financed enterprises focused on the domestic market, while only two, HSBC Group Holdings and Hon Hai Precision Industry (also known by its trade name Foxconn Electronics Inc.), are focused on the global market.

"Exporters cannot compete with companies catering to China's domestic market," says C.Y. Huang, vice chairman and president of Greater China investment banking for Polaris Securities.

The serious decline in European and North American markets in the second half of last year resulted in China Mobile supplanting Hon Hai, Taiwan's biggest private enterprise, in the overall rankings. Of the top 10 enterprises on the list, only HSBC Group Holdings saw a decline in operating revenue last year.

Energy, Banking and Telecoms Most Profitable

PetroChina Company Limited took the most profitable enterprise crown for the second straight year, with after-tax net profit of NT$614.7 billion. Coming in second was China Mobile, the world's largest telecommunications enterprise.

Judging from the top 50 enterprises, it appears one need only get a handle on the vital everyday energy, financial, telecom and transport needs of China's 1.3 billion people to secure a seat on the high-speed train to profitability.

China Unicom, China Shenhua Energy Co., Ltd. and Bank of Communications were newcomers to the top 10 most profitable list, knocking Sinopec and Hong Kong tycoon Lee Ka-shing's Hutchison Telecommunications International Ltd. and Hutchison Whampoa Ltd. out of the top 10.

Zhejiang-based Geely Holding Group posted the steepest growth in operating revenue on this year's list, up 31-fold.

Under the leadership of company chairman Li Shufu, known as "China's automotive madman," Geely has been aggressive in recent years in acquiring foreign auto and automotive parts plants to boost the company's technological research capabilities. The market is now abuzz with rumors that Li will next target Swedish carmaker Volvo for acquisition.

A Taiwanese company is among the top 10 in operating revenue growth for the first time. Riding the global solar energy wave, E-Ton Solar Tech's operating revenue soared 178 percent last year.

There are 10 Taiwan companies on the list of the top 50 most profitable cross-strait enterprises in terms of earnings per share. Among them, HTC Corp.'s sales of high-end smart mobile devices powered earnings per share of NT$37.97, ranking third. MediaTek, sometimes called the "godfather of the ‘shanzhaiji'," or so-called "bandit phones," saw its EPS ranking drop to 20th.    

Taiwan's solar energy sector was no slouch in this department last year either, with Gintech Energy Corp. and E-Ton Solar Tech both breaking into the top 50 EPS list.

Benefiting from China's domestic stimulus and the opening of direct transport links with China, Taiwan dry bulk carriers U-Ming Marine Transport Corp. and First Steamship Co., Ltd. also made the list of Greater China's top 50 companies in EPS terms for the first time.

Among the top 50 in terms of profit margin, eight of the top 10 are involved in Hong Kong real estate and property management.

At the top of the profit margin heap, Hang Lung Properties, Ltd. chairman Ronnie Chan grabbed the top two spots. Since 2003, Hang Lung has invested HK$40 billion in 18 development projects in Shanghai, Tianjin, Shenyang, Wuxi and Jinan.

Among Taiwan enterprises, only U-Ming Marine cracked the top 50 in terms of profit margin.

Taiwan Stocks Becoming ‘China Plays'Following the two governments' announcement of the opening of direct links, cross-strait business exchanges went from being under the table to fully public, with cross-strait trade now on the express track.

Taiwan's government recently finalized a list of 99 types of businesses that will be open to Chinese investment.

"We've been waiting a long time for this," laughs Jeff Lee, sales and service director for Sheng Jung Motors Co., Ltd., which is currently hastily retooling its Taichung plant in preparation for the arrival of mainland Chinese automaker Chery Automobile Co., Ltd.

On the evening of April 29, Far EasTone Telecommunications chairman Douglas Hsu dropped a bombshell, announcing that China Mobile was acquiring a stake in Far EasTone, sending Taiwan stocks surging.

"The entire Taiwan stock market is becoming a China play," says Polaris' Huang. Polaris has been busy lately too, hosting three to four Chinese fact-finding groups each month.

Amidst Downturn, Accelerated Integration and ExpansionChina's government is also seizing on the downturn to engage in an industrial restructuring project, eliminating weaker elements and strengthening more robust elements, including the auto industry.

Auto Shanghai 2009, which opened on April 20, became a competitive arena in which foreign and Chinese domestic automakers did battle.

Formerly a maker of refrigerator components, Geely rented a third of the total exhibition space, exhibiting 22 new car and truck models in one go.

China's private automakers have been developing new models at the pace of development in the IT industry.

"Western automakers spend five years developing new models; in China you only need a year to be in mass production," according to Simon Chang, vice president and general manager for automotive electronics and industrial automation for Delta Electronics Inc.

A concept car Geely exhibited at the 2008 Beijing International Automotive Exhibition didn't even have working doors at the time of the show in April of last year; it's now going into mass production.

In late March, Geely signed an agreement to acquire Australian auto parts supplier Drivetrain Systems International, thus obtaining high-torque transmission technology. By 2015, the company expects to be able to produce 42 different auto and truck models.

An hour and a half drive from downtown Shanghai in Jinshan District, the Geely Group-owned Huapu auto plant sits astride the highway, its production lines churning out 150,000 vehicles annually. Japanese technicians are everywhere, instructing workers in the ways of Toyota-style management.

 A few hundred kilometers deeper into Zhejiang Province at Geely's automotive industrial park, the Geely Technical Institute and the Geely University and Research Institute employ an army of foreign technicians to improve production quality.

Taiwan Companies in Supporting RoleTaiwan companies can often play a highly valuable supporting role to major Chinese companies with grander visions and the domestic market to back them up.

"Taiwan companies can assist Chinese companies in modernizing and internationalizing their flow systems management and planning," says Synnex Technology International president Evans Tu. 

As China's industrial rise moves forward, the signs of Taiwanese companies can be seen everywhere; steeled by the market, they have continually evolved and advanced.

More than 90 percent of the chips in one of the hottest "bandit phones" on the market earlier this year were of MediaTek design.

"Chinese companies need to learn from Taiwanese quality control capabilities," says Yin Tongyao, chairman and president of Chery Automobile Co., Ltd.

The tooling used to manufacture Chery's first production model was made in Taiwan, directly challenging Japanese standards.

In the aftermath of the financial meltdown, the strengths of Taiwan companies in production process management and technological research became even more evident, leading Chinese companies to strengthen cooperative relations with Taiwanese counterparts.

Delta Electronics led the way by building a plant in Wuhu, Anhui Province, bringing in a first tier parts supplier for Chery and a partner in development of new automotive fuel and power technologies.

With Taiwanese know-how and Chinese capital, everyone gets what they need from the cross-strait collaboration.

China Mobile, China Unicom and China Telecom formally launched their third generation mobile services on May 17, in conjunction with World Telecom Day.

China is expected to add at least 30 million 3G mobile users this year, an enormous opportunity that has had Taiwan companies licking their chops for some time.

To increase customers' data transmission usage, China Mobile is also promoting sales of up to 2 million TD-SCDMA-enabled netbooks this year.

Mitac International Corp. designed a netbook for China Mobile, due out this month, which dramatically reduces the device's startup time.

"Every second the boot-up process can be shortened means the customer can get online sooner and China Mobile can earn more data transmission fees," says C.P. Lee, vice president of China Region for Mio Technology Ltd.

Driving for Domestic Market Share

"The Chinese market is just too big, in another decade it still won't be tapped out," Ting Hsin International Group chairman Wei Ing-chou told a conference of executives from China's interior. The consumer explosion has yet to ignite in China's towns and villages, he says.

This year is also critical in the all-out expansion efforts of Clevo-invested China-based IT products retailer Buynow, which will open four new locations in China, bringing the number to 20, by the end of the year. 

"Our next move will be to head out into tertiary cities and towns," says Buynow CEO Cai Ming-xian. In June, Buynow will introduce online shopping services, offering an additional sales conduit to more than 8,000 vendors and helping them reduce their inventories.

As cross-strait policy gradually loosens, the competitive-cooperative relationships among Greater China companies will be become even tighter. With the market opening, Taiwan companies stand to share in a piece of the huge China pie, but they have a formidable foe in Chinese companies that may not always play by the rules.

Chinese companies are looking to play, but the question is, is Taiwan ready?

Translated from the Chinese by Brian Kennedy