Small Chinese firms ready for the big leap

CHINA'S NEXT 100 GLOBAL GIANTS. SU JINGBO/CHINA DAILY

Companies get prepared to challenge established rivals in overseas markets

Alibaba Group Holding Ltd, Huawei Technologies Ltd, Lenovo Group Ltd and Haier Electronics Group Co have become household names in China and the Western corporate world. But for a giant economy like China, they are just the tip of the country's business iceberg.

There are several other firms that are lesser known and rarely make headlines in domestic and foreign media. But with their fast growth rates, strong domestic market presence and clear business strategies, they look poised to up the ante for global market share in the next three to five years, a study said on Tuesday.

The study, prepared by the Association of Chartered Certified Accountants, a global accountancy body, has identified 100 fast-growing Chinese businesses and categorized them as China's Next 100 Global Giants, which will compete against established companies from all over the world.

The report, which was carried out by the Lancaster University in the United Kingdom, identified three major criteria for companies to be on the list.

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They are: a dominant domestic position (top ones excluded), a considerable overseas market business, and competitiveness in their business strategy and business model.

The result showed that among the top 20 selected companies, all grew at an annual pace of more than 30 percent in the 2008-12 period. The fastest-growing company posted a 49.2 percent annual growth rate, and the slowest managed to grow 16 percent annually. That means the majority of the top 100 companies have doubled in size, and in some cases quadrupled, in just five years, the report said.

"It's not just about their balance sheets, it's about growth. These companies' future growth trajectories are based on sustained annual levels of growth from 2008-2012. ... They are clearly doing something right," said Ada Leung, head of ACCA China.

Jiangsu Hengtong Photoelectric Co Ltd, an electronics company in Suzhou, Jiangsu province, topped the list for its leading role in the domestic market and clear business model and strategy. The company grew 46.5 percent annually during 2008-12, and its revenue in 2012 hit 7.8 billion yuan ($1.27 billion).

The 100 companies are mostly concentrated in the computer and telecom equipment sector (18). Electronics, metal-processing and information technology are also hotbeds for fast-growing companies.

Seventeen companies from the service industry also made it to the list, including online tourist agency Ctrip.com International Ltd, language training firm New Oriental Education & Technology Group Co Ltd, and Huayi Brothers Media Corp, China's equivalent of Warner Bros Entertainment Inc.

The analysis found several common characteristics among the 100 companies, including clear and coherent business strategies, a tight grip on the monitoring of progress and performance. Other noteworthy aspects included in-depth industry knowledge and thorough understanding of customers' needs.

Andrew Atherton, a professor of enterprise at Lancaster University, said: "We have also seen these companies use their business models to expand into other regions in China as well as other markets outside the country.

"Thirty-four of the 100 already have a strong domestic as well as international market presence. Yet, even those that have concentrated on their local markets are showing immense growth, and the expectation is they will appear in other markets within the next three to five years," Atherton said.