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21 CN: Profitability of the Large Companies in China is Worrisome

The TenCent website carried an article that was originally published by China Telecom on 21CN. The article stated that Chinese companies have been unable to make it to the list of the top brands in the world. They lag behind in their profitability and in their investment in research and development. According to the article, among the Forbes’ top 100 world’s most valuable brands list and the Interbrand’s Best Global Brands 2013, no Chinese brand made it to the list. Meanwhile the net profit that Chinese companies make lags far behind compared to those large companies in the U.S. and England. According to the China Enterprise Confederation, the profitability of the large companies in China is worrisome. Among the world’s top 500 companies, the average net profit for U.S. companies was 9.33 percent while Chinese companies were at 5.1 percent. Among the world’s top 500, of the 49 companies that had financial losses in 2014, one-third were Chinese companies. The article said that large companies in China lack the capacity for innovation and rely heavily on imports for their core technology. In 2014, among China’s top 500 companies, the average ratio of research and development spending to income from sales was 1.25 percent. This figure had declined over the last three consecutive years. At the same time, the technology commercialization ratio in China is only at 10 percent which is far below the 40 percent ratio in developed countries.

Source: TenCent, September 5, 2014