The top 500 Chinese private companies are seeing improvement in their revenue earnings and are increasing investment in research and development (R&D), as they strive for more technological innovations, according to the annual report by the All-China Federation of Industry and Commerce (ACFIC), a national body serving the private sector. The country’s leading 500 private enterprises recorded a total revenue of CNY39.83 trillion last year, which represents a 3.94% year-on-year growth. E-commerce company JD topped the revenue rankings with CNY1.05 trillion, followed by Alibaba Group Holding with CNY864.53 billion, oil and coal enterprise Hengli Group with CNY611.75 billion and nonferrous metal enterprise Amer International Group with CNY608.76 billion. In terms of R&D investment, Tencent Holdings won the crown with CNY61.4 billion, followed by Alibaba Group and Baidu, with CNY53.8 billion and CNY23.3 billion, respectively. Huawei Technologies, which topped the 2022 list with a staggering R&D investment of over CNY100 billion, did not participate in the rankings this year.
In 326 of the top 500 private companies, R&D staff account for more than 3% of all employees. The core technologies of 414 enterprises are independently developed, while 90% of the 500 companies have pushed forward their digitalization plans, the report said. Peng Wensheng, Chief Economist at China International Capital Corp, said: “China’s economy will rely more on technological innovations in the future as demographic dividends gradually decrease. To achieve technological progress, continuous R&D investment is the key.” According to China’s 14th Five Year Plan (2021-25), the country will scale up its R&D spending by more than 7% annually to drive more technological breakthroughs. Consulting firm McKinsey & Co said in a report that 7% annual growth in R&D spending will set China on the path to becoming the world’s largest spender on R&D. “China’s R&D investment must be increased substantially in the coming decades to get rid of what we call the ‘late-mover disadvantage’, compared with developed countries such as the United States,” Peng said.
The All-China Federation of Industry and Commerce (ACFIC) report also noted that the entry threshold for the Top 500 private enterprises reached CNY27.58 billion in revenue for this year’s rankings, CNY1.21 billion more than the previous year. Zhao Dejiang, Secretary General of the Federation, said: “The report showed that the Top 500 Chinese private companies have seen steady improvement in quality and technological innovations amid rising economic uncertainties, thanks to a series of targeted support measures offered by the government in driving the private economy.” In September, a special bureau was set up within the National Development and Reform Commission (NDRC) to offer targeted support for private enterprises, and in July, a top-level national guideline to drive the development of the private economy was released.
Private enterprises, which accounted for over 97% of China’s total market entities last year, are the primary driver of the country’s economic development. They have contributed about 50% of the country’s tax revenues, 60% of GDP and 70% of technological innovations, data from the Ministry of Industry and Information Technology (MIIT) showed. However, the Top 500 private companies gained a combined net profit of CNY1.64 trillion in 2022, down 4.86% year-on-year, the report said. Among the 500 companies, 38 experienced losses last year, 16 more than in 2021. These enterprises are mainly from the housing, internet and aviation sectors, the China Daily reports.