SOURCE: The Boston Consulting Group

The Boston Consulting Group

September 11, 2012 00:01 ET

Fifty Companies Represent Both the Ambitions and Challenges of the New China

The Chinese Global Challengers Are Fast Growing but Face a Slower Domestic Market and More Competitive Global Landscape, According to The Boston Consulting Group

TIANJIN, CHINA--(Marketwire - Sep 11, 2012) -  Fifty Chinese companies, the Chinese global challengers, are fast-growing and globalizing rapidly, but they are also facing a more demanding future, according to a report published today by The Boston Consulting Group (BCG). These companies are balanced between their past successes and the uncertainties of the future, according to 2012 BCG 50 Chinese Global Challengers: End of Easy Growth.

"We selected a group of companies in order to celebrate their accomplishments but also to draw attention to the more challenging business environment for all Chinese companies," said David C. Michael, a BCG senior partner and coauthor.

The Chinese global challengers are broadly representative of the Chinese economy, ranging in size from $180 million to around $300 billion in annual sales. Nearly one-half of the companies are private, while 26 of them are owned by the state. Thirteen of them generate more than one-half of their revenue from overseas.

Between 2001 and 2011, sales growth at the Chinese global challengers averaged 20 percent a year, compared with 9 percent for the S&P 500. Since 2000, they have outperformed the S&P 500 by more than a factor of eight and also outperformed the MSCI Emerging Market and MSCI China indexes by wide margins.

But their stock-market returns have cooled off since the start of 2011, as profitability has come under pressure, according to 2012 BCG 50 Chinese Global Challengers: End of Easy Growth. In 2011, the profit margin of the challengers was 11 percent, compared with 18 percent for their global peers, putting downward pressure on the stocks of the challengers.

This softening signals that it may be time for Chinese companies to move beyond the advantages that they have historically enjoyed: a large domestic market, competitive cost position, and strong state support.

The hypergrowth phase of China's economic development is over. Real GDP growth in 2012 is likely to settle below 8 percent, the lowest increase since 1991.

China's cost advantage is shrinking, as labor and other input costs rise. Between 2012 and 2016, manufacturing labor costs are expected to rise by at least 10 percent annually, five times as fast as in many developed nations and twice as fast as developing markets such as Thailand and Vietnam. Finally, multinationals are starting to defend against the early successes of Chinese challengers.

Many Chinese companies have started to mature into global players through mergers and acquisitions, establishing capabilities beyond cost leadership, and other measures. "The global successes of such companies as Huawei in telecommunications and Lenovo in technology are real and becoming well known, but there are many other less-well-known challengers. Mindray is a leading global supplier of patient-monitoring devices, for example, while BGI currently holds one-third of the global capacity in high-end gene-sequencing machines," says Christoph Nettesheim, a BCG senior partner and coauthor of the report.

Tiens Group, one of the world's largest nutritional-supplement companies, has branch offices in about 70 nations, mostly in Asia, Africa, and Eastern Europe. Revenues have been growing 12 percent annually since 2007, reaching $4.5 billion in 2011.

Sany and Zoomlion have become the sixth and seventh largest global construction-equipment manufacturers. Another equipment manufacturer, Sinoma, has acquired a 40 percent global share in the cement equipment market by helping developing countries to build their cement-production capability.

To become global leaders, Chinese companies should embrace five strategic initiatives:

  • Take advantage of megatrends such as the rise of the middle class;
  • Strengthen M&A capabilities;
  • Establish capabilities beyond cost leadership;
  • Improve productivity;
  • Develop global organization, management, and governance practices.

A copy of the report can be downloaded at

To arrange an interview with one of the authors, please contact Alexandra Corriveau at +1 212 446-3261 or

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