Last week’s 2017 Fortune Global 500 list likely led to CEO bonuses and celebrations across the 115 Chinese companies that made the cut (including at Fortunechina.com, which published an op-ed stating, “The time has indeed arrived for China to develop mighty enterprises”), but all anyone really wants to talk about is how commerce giant Alibaba made the list.
The poster child of China’s digital economy development since the early 2000s, Alibaba is behind ubiquitous e-commerce sites Taobao and Tmall, and e-payment platform Alipay, selling about 500 billion USD worth of goods in 2016. But its marked absence from the Global 500 did not become obvious until 2016, when main rival JD.com—a company with one-fifth the sales volume of Alibaba, and previously reported to be in financial trouble—became the first Chinese internet company to make the list, in 366th place.
Though this discrepancy had netizens and media up in arm trying to guess the cause (some brought up the fact that JD had lost 570 million USD the same year, topping Fortune’s list of loss-making Chinese companies in the 500 that were losing money), the explanation is simply that Fortune’s list only looks at revenue. JD and Alibaba’s platforms have different business models; the latter simply provides a platforms for merchants, and makes revenue from fees they pay, such as service charges and ads. JD, however, is an online retailer with a proprietary supply-and-delivery chain, and makes revenue from each transaction carried out on its website.
In 2016, JD’s revenue was around 39 billion USD, meaning that it still ranks higher on this year’s list (261) than Alibaba (462) and other newcomers this year such as Tencent Holdings (478). In all, all companies in the 2017 Global 500 had a minimum revenue of around 21.6 billion USD.
JD CEO Richard Liu Qiangdong used the opportunity to air his views on the digital economy, telling Fortunechina.com that he envisages an AI-based logistics and supply chain that will free people from manual labor—picture a driverless truck that fetches products from an automated warehouse, to be delivered by drone to customers.“Our technological developments are still in order to serve e-commerce,” he said.
Alibaba has not commented on the rankings, but Fortune reports that founder Jack Ma has also been busy promoting a vision of e-commerce based in cloud computing and big data, in the style of a classic Chinese political slogan: the “Five News,” referring to the development of “New Retail, New Production, New Finance, New Technology, and New Energy.”
Chinese companies saw their 14th successive year of increased representation on the list, with 10 newcomers, making it the nation with the second-largest number of companies after the US. After Walmart, the highest-ranking Chinese companies were (in order) state enterprises State Grid, Sinopec Group, and China National Petroleum rank the second, third and fourth, respectively. In terms of profit, the top five companies are Apple, the Industrial & Commercial Bank of China, China Construction Bank, the Agricultural Bank of China, and Bank of China.
However, Liu Qiao, director of the Guanghua School of Management of Peking University pointed out to China Daily, “Although China is undergoing a transformation from an investment-driven economy to an innovation and efficiency-driven economy, there aren’t many Chinese innovation-led companies on the Fortune list yet.”
Cover image from imaijia.com