changes in the economic system in China

China’s Transition Economy and the Top 500 Private Companies

There is a relevant argument posited by Pittinsky and Zhu (2011) that the changes in the economic system in China have necessitated the readjustment of the mode and roles played by public and private firms in the market by an attempt to embrace the changes. Thus, public-owned companies have been going private and in fact, their performance has been significant and well-received; especially from 2010, when economic indicators showed that top 500 private companies in China surpassed state-owned ventures in terms of tax payments, creation of employment and other economic indicators as reported by the All-China Federation of Industry and Commerce as reported in the China Daily (2010).  These roles of the privately listed companies are very important for consideration since with taxation and creation of employment, comes the ability of the private firms and enterprises to raise their voice and influence policy-making process.

According to the report by the All-China Federation for Industry and Commerce, Chinese privately-owned enterprises exhibit an employment growth rate of 9.5% per annum; which is more than tenfold the national average of 0.6%. In addition, the top 500 private companies paid a total of 177.6 billion Yuan (about US $29.13 billion) in tax in the year 2009, which was about 20% improvement over the previous year (China Daily 2010). Nevertheless, despite the immense role played by the privately-owned companies sin China as shown above, the platform availed to them is not even when leveled against the state-owned ones as they face stiffer tax rules and fiercer competitions from the state-owned companies that enjoy government backing. Moreover, out of the top 500 privately listed companies, at least 33% of the payrolls of 148 of them comprise of college graduates.

By 2009, according to the All-China Federation for Industry and Commerce, more than 60% of the top 500 private companies had exceeded their earnings realized in the previous year of 2008. In a more recent report by the All-China Federation for Industry and Commerce, the private sector provides employment such that out of every five employees or workers, one works in the private sector, which implies that the private sector contributes to about 20% of the national employment (ACFIC 2012).

The 2012 ACFIC Report also shows that the topmost privately listed company among the top 500 is Sha Steel, which registers a revenue base of 207.5 billion Yuan (about US 34.03 billion) and is followed by Huawei, then Suning Appliance, Legend Holding, and Shandong Weiqiao closes the list of top five among the top 500 (ACFIC 2012).

With respect to the challenges faced by the CEO’s of the top Chinese privately listed companies, Wang et al (2006) argue that the leaders are faced with unique challenges especially given the need to adapt to the rapidly-changing demands of a global market. This, as Wang et al (2006) further argue, is compounded by the fact that the Chinese leadership culture is inherited from the philosophies of Confucius who developed a very conservative philosophy to culture. The conflict between respecting the traditional values as the Chinese culture demands and the embracing the demands of the highly competitive global market give the CEO’s of these companies a reason to work hard with respect to the leadership aspect.

References:

Pittinsky T. L. & Zhu C. (2011) Contemporary Public Leadership In China A Research Review And Consideration, Harvard University

China Daily. (2010, September 1). Private companies playing vital role. China Daily. Retrieved October 21, 2013, from http://usa.chinadaily.com.cn/2010-09/01/content_11240343.htm

ACFIC. (2012, December 22). ACFIC Unveils Top 500 Private Firms for 2012 . All-China Federation for Industry and Commerce. Retrieved October 26, 2013, from http://www.chinachamber.org.cn/Web/c_000000020007/d_15650.htm


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