Forbes recently released its 20th annual Global 2000 list of the world’s top listed companies, where it was revealed that one of the most prominent trends over the last two decades has been China’s gains. With Hong Kong included, the number of Chinese companies reached 346 this year, compared to just 43 two decades ago. During that time, China’s economy grew the fastest in the world and now ranks second only to the United States. China’s presence in the 2023 Forbes Global 2000 list is second only to the United States with 611 members. State-owned enterprises (SOEs) accounted for most of China’s overall growth on Forbes’ Global 2000 list. An SOE is an enterprise ultimately controlled by the Chinese government through ownership.
State-owned enterprises are seen as reliable companies that undertake large-scale projects or carry out central government duties. They operate as a modern enterprise, and their productivity is largely in line with that of the private sector. However, their purpose is not just to maximize profits like private companies, they also have obligations. Some companies have monopolies in strategic areas.
Over the last few years, there has also been consolidation of state-owned enterprises to avoid “tournament-style” competition among state-owned enterprises. The number of state-owned enterprises is decreasing, but power and state assets are concentrated. This is in strategic industries, not manufacturing or services.
The connection and cooperation between private and state-owned enterprises are very important and often underestimated. Private companies need support from state-owned enterprises to overcome institutional barriers, assist in arranging bank loans, obtain licenses and contracts, and overcome red tape. Many private companies often seek participation with state-owned enterprises.
China’s government-private cooperation will help China in the next chapter of technological development such as AI. It needs to be nuanced about what role the government is playing. For example, in many consumer-related innovation scenarios, Chinese private companies do not need state support. In fact, the less involved, the better. But if we’re talking about the role of the state in areas involving huge amounts of money and patient capital, such as quantum, space, or even certain aspects of AI, it becomes very important.
China needs fewer countries and more markets. The United States, on the other hand, needs to have a few more nations and strengthen their capabilities. However, there is still a huge amount of what the author calls competitive cooperation between the United States and China.