Fortune Global 500 ranking shows Asian multinationals are now competing globally, with Chinese companies leading the way

With Chinese enterprises rapidly evolving into successful multinationals, Western companies no longer dominate the global marketplace.

A record 110 Chinese companies have squeezed onto the latest Fortune Global 500 list, with 12 making their debut, including manufacturing powerhouse China Railway Rolling Stock Corp, e-commerce juggernaut JD.com, home appliance maker Midea and property developer Wanda Group.

Experts say it is no surprise more Chinese companies are making the ranking as the country is making relentless efforts to upgrade manufacturing, boost innovation and drive consumption.

"We'll see the continued rise of Chinese companies to capture the tremendous growth of the local economy," says Adam Xu, a partner at Strategy&, the strategy consulting business of PricewaterhouseCoopers.

As more technology and commerce companies leverage and benefit from China's tremendous market potential in e-commerce, entertainment and real estate segments, they will make the Fortune Global 500, he adds.

Three of the top five companies on the list are from China. State Grid has risen to second place from seventh last year, surpassing state-owned energy giants China National Petroleum Corp and Sinopec Group.

Among the 12 debutants, JD.com ranks at 366, with revenue reaching $28.85 billion last year.

"It's not a surprise, given how quickly Chinese e-commerce has been growing and how advanced China is for digital and mobile commerce," Xu says.

China Railway Rolling Stock Corp, which ranks 266, has grown into a leading global supplier of bullet trains and subway cars.

It is widely expected that China will become the largest e-commerce and consumption market, and will nurture a new consumer-centric ecosystem, Xu adds.

State-owned companies topped the Chinese names on the list, as the ranking is based on revenue rather of profitability, explains Han Xiaoping, an independent energy analyst.

"All state-owned energy enterprises are large enough to compete from a global perspective," he says. "But they are facing huge pressure when it comes to financial performance amid falling oil prices."

China Vanke debuts on the list at 356, with annual revenue of $29.33 billion, followed by real estate giants Wanda Group at 385 and Evergrande Real Estate Group at 496.

Wanda, which is headed by one of China's richest men, Wang Jianlin, said after the list was released that this was the first time the conglomerate had registered for the Fortune Global 500, even though it could have secured a place earlier.

Chinese companies have been grabbing headlines more often recently, and the deals they are making have growing international influence.

Midea Group, China's biggest home appliances maker, said in July it had acquired an additional 72.18 percent of the shares in Kuka AG, a global supplier of intelligent automation solutions. Paul Fang, chairman and CEO of the Chinese company, says the larger holding will help grow Kuka's business and increase its footprint, especially in China.

The number of Kuka shares in the takeover offer, plus the 13.51 percent that Midea had indirectly held previously, gives the company 85.69 percent of the issued share capital and existing voting rights of Kuka.

Shanghai Fosun Pharmaceutical (Group) Co Ltd announced recently that it will acquire an 86.08 percent stake in Indian pharmaceutical enterprise Gland Pharma Ltd for $1.26 billion, the largest overseas acquisition by a Chinese pharmaceutical company.

State-owned China National Chemical Corp offered Swiss agrochemical and seed producer Syngenta AG more than $43 billion to acquire its entire stake, making it the biggest acquisition deal by a Chinese company.

Syngenta said in July that talks with US regulatory authorities to win approval for the deal have been constructive and the Swiss company is confident the transaction can be closed on time.

"China, separate from the rest of Asia, focuses on big and developed markets. They are not constrained by markets close to home and look at the European Union and United States," says Gavin Watkins, an Asia-Pacific director at Willis Towers Watson, the global risk management and advisory company. "It's not that they are excluding Asia. They are more confident and have enough money to target US and European operations."

The wave of Chinese expansion started in 1992, when the central government first urged domestic companies to expand overseas to strengthen China's presence in the international market. Another turning point came in 2008, when the EU and US were hit by the global financial crisis.

That year, China's foreign direct investment nearly doubled from the previous year. The country has been the third-largest outbound investor after the US and Japan since 2012.

Flexing their muscles, Chinese mainland companies are making a point that they are no longer playing second fiddle to their Western peers.

Watkins says that 10 years ago, Chinese companies aspired to be like Western mutinational corporations. "Now, (Chinese companies) do not only have money, but also have reached a certain level of maturity. They are happy to take advice from external companies, such as finance advice and human resource advice from companies like us."

Asian strength

While China's multinationals tend to attract most of the attention, their peers elsewhere in Asia are also entering the public spotlight.

About 200 Asian multinationals are now in the Fortune Global 500 list, according to a Willis Towers Watson report. Through organic expansion, mergers, partnerships or acquisitions, they are tapping into new markets, often taking surprising turns.

Companies like Philippine property conglomerate SM Prime Holdings, South Korean automaker Hyundai and Thai feed producer C.P. Pokphand are all gaining global traction.

"Many say that what Asian companies are doing is just simply ad hoc," Watkins says. "From what I've observed, I don't see it being random at all. They are very focused. It is strategic plays in the businesses they want to acquire."

SM Prime is one of the pioneers in this global push. The company expanded into the Chinese mainland in the late 1990s.

Alexander D. Pomento, the company's vice-president for investor relations, says: "It was the Asian financial crisis back then. The Philippines was suffering from negative growth, and we saw China showing the promise of sustained GDP growth.

"We finally made up our minds to step out, as we learned that there were government policies encouraging foreign investment coming to the country. We chose to start our layout there gradually."

SM Prime will open its seventh mall in China this year in the city of Tianjin. Altogether, the properties cover more than 8 square kilometers.

According to a Willis Towers Watson survey between March and September last year, companies headquartered in the Asia-Pacific accounted for 40 percent of the Fortune Global 500. By comparison, European firms accounted for 30 percent and North American firms 20 percent.

"Asian multinationals are booming along with the region's economic growth," says Harsha Basnayake, head of transactions for Singapore and the Association of Southeast Asian Nations at global consultancy EY. "There is a more affluent middle class in Asia, who have strong consumption power and can drive up the consumer sector."

Despite downward pressure from a gloomy global economic outlook and concerns over the slowdown in China, the largest contributor to the region's economic growth, Asia remains the engine of the global economy.

Economies in the Asia-Pacific are expected to grow about 5.3 percent in 2016 and 2017, according to the latest outlook from the International Monetary Fund, released in April. Meanwhile, global GDP is forecast to grow 3.2 percent.

As the world's trading powerhouse, Asia grew its businesses first by exporting goods and, through that trade, built connections and credibility in other markets.

The initial expansion was as a result of these companies looking for joint ventures, a much easier avenue for growth than direct acquisition. This successful approach eliminated the need to deal with complicated issues such as human resources management and cultural differences.

By 2012, Asian multinationals outnumbered those headquartered in Europe and North America on the Fortune Global 500 for the first time.

With confidence and large war chests, many of them started moving toward mergers and acquisitions to tap directly into potential markets. As a result, the number of deals and investment abroad by Asian multinationals grew rapidly.

"There is a much greater appetite now. They do not bother much about going for joint ventures," says Watkins at Willis Towers Watson.

Statistics from law firm Baker & McKenzie show there were 1,268 outbound M&A deals from Asia last year, reaching a record high of $313.4 billion. The focus of the deals is shifting toward high-end manufacturing.

Baker & McKenzie expects cross-border M&As in Asia to remain positive this year, as a number of ASEAN members undergo regulatory reforms to attract foreign investment and China further liberalizes the renminbi.

Jing Shuiyu contributed to this story.

Contact the writers through chenyingqun@chinadaily.com.cn