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Jul

Sinopec is one of the few Chinese firms that has capital, operations and sales on a global scale.

 

Following the Chinese government’s mandate that companies should “go out” (走出去) or “go global” (走向世界), many observers anticipate that Chinese multinational corporations (MNCs) will secure a growing share of the international consumer market around the world. This may eventually occur, but for the time being China’s multinational corporations remain a very long way from playing in the premier leagues of international commerce.

How many Chinese corporations can you name? Most likely fewer than 10, or even five. We are all familiar with Tsingtao beer, Air China, Bank of China and Lenovo computers—and some may know names like Huawei Technologies, Haier appliances or China Mobile. But not a single one of these firms made the 2011 ‘Top 100 Global Brands’ list compiled annually by BusinessWeek and Interbrand. The global brand presence of China’s best-known multinationals is nowhere near the likes of Coca-Cola, GE, Intel, McDonald’s, Google, Disney, Honda, Sony, Volkswagen and similar global giants.

Yet when measured in terms of total revenue, it is clear that Chinese companies have steadily climbed up the global rankings. Twelve Chinese companies were included in Fortune’s Global 500 list in 2001. And only a decade later, in 2011, that number rose to 61 (including four with headquarters in Hong Kong). China now ranks third on the global list, only slightly behind Japan but well behind American firms. In 2010 these 61 Chinese enterprises had a combined annual revenue of US$2.89 trillion and an estimated overall profit of US$176.1 billion. Of the 57 mainland companies, 49 are state-owned enterprises (SOEs).

While ranking on the Fortune Global 500 list indicates the growing clout of Chinese corporations, it does not mean that a company is internationally active or even that it is a real multinational. When these companies are ranked by foreign assets and sales, it becomes clear that, with few exceptions, they all operate predominantly within China. In other words, despite the government’s directives and financial incentives to ‘go global’, many leading Chinese corporations have yet to do so.

So why have Chinese multinational corporations encountered difficulties in going global? Ten possible factors may explain it. Read more…

David Shambaugh is a nonresident senior fellow in the Foreign Policy Program and the Center for Northeast Asian Policy Studies (CNAPS) at the Brookings Institution. He is also a professor of political science and international affairs at the George Washington University in Washington DC.

As published in www.brookings.edu on July 10, 2012 (this article originally appeared in East Asia Quarterly’s Volume IV/Number II, April-June 2012 issue).

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