The Rapid Ascent of China’s Corporate Giants

With a remarkable fivefold increase after 2008, China now has as many corporations among the world’s largest 500 as the United States. The rate of increase is puzzling—it was twice that of China’s economic expansion during a period when the national growth rate declined markedly. The rapid proliferation of corporate giants was due to three developments that distinguished China from all other major economies. The first was the massive and sustained expansion of credit for domestic infrastructure projects in response to the global financial crisis. The second was the allocation of close to $2.3 trillion of China’s foreign currency surpluses to finance foreign asset acquisitions and construction projects. The third was a drive to consolidate state firms, primarily those owned by regional governments, into larger conglomerates. All these corporations, along with nonstate firms, rode the updraft of opportunities provided by the infrastructure drive and outward investment. One by-product of this expansion is an extreme concentration of giant firms, both state and nonstate, in sectors related to infrastructure and heavy manufacturing. This corporate profile contrasts markedly with all other major economies, even with Japan’s at its height.