2017 will be a milestone in the history of Chinese companies. In April, Tencent ranked among the Top 10 companies in the world by market value. In June, Alibaba joined it in the Top 10, and within a few days surged to seventh place. On November 21, Tencent’s market value grew to $520 billion, passing Facebook to become the world’s fifth-largest company by market value.
Before the opening of the stock market on November 21, the world’s Top 10 companies were Apple ($872.7 billion), Google ($707.6 billion), Microsoft ($636.7 billion), Amazon ($542.7 billion), Tencent ($522.8 billion), Facebook ($519.4 billion), Alibaba ($481.3 billion), Berkshire Hathaway ($447.4 billion), Johnson & Johnson ($370.6 billion) and Exxon Mobil ($341.3 billion).
Tencent and Alibaba are listed in Hong Kong and the US respectively. It’s fair to say that their market value is affected by global investors. In the next three to five years, they may become the Top 3 companies or even the first by market value.
China’s massive economic growth and China’s unique demographic dividends in the Internet age are creating two miracles.
Looking at the sales volume of basic industries, as indexed in the Fortune 500, there were 115 are Chinese companies. The State Grid Corporation of China, Sinopec and Petrochina rank second, third and fourth place respectively.
There were 149 Japanese companies in the Fortune 500 in 1995, but only 51 in 2017. Two-thirds of Japanese companies have disappeared from the list during the last 22 years. There were 198 American companies among the Fortune 500 in 2002, but only 132 in 2017. Nearly a third of American companies disappeared from the list in the past 15 years.
Who is taking their place? There were three Chinese mainland companies in the Fortune 500 (Bank of China, Sinochem Group and COFCO) in 1994, six in 1999 and 11 in 2002. But in 2017, there were 109 Chinese mainland companies in the Fortune 500 and six based in Taiwan and Hong Kong.
In terms of digital emerging industries, Baidu, JD.com (http://jd.com/) and Netease are all in the Top 10 among global listed Internet companies by market value. As for the unlisted global unicorns, Didi, Xiaomi, Meituan Dianping, LU.com, Toutiao and DJI, they can also enter the Top 10 companies.
In basic industries, state-owned leading companies are expected to become what is prescribed in the 19th CPC Centrl Committee Report: “world first-class enterprises with global competitiveness.” But in emerging industries, private companies have been at the forefront of the world in many ways. Given that China still ranks first in terms of economic growth among the world’s major economies, Chinese companies still have a lot of potential, no matter whether state-owned or private.
In the history of modern commerce, there are prominent entrepreneurs everywhere and in every era. But there are times when some entrepreneurs are especially lucky, and they become historic, cosmopolitan benchmarks, and are hard to beat for a long time.
Based on personal wealth in proportion to the national economy, the three richest men in the history of the United States are oil magnate John D. Rockefeller, steel magnate Andrew Carnegie, and shipping and railway magnate Cornelius Vanderbilt. The first two were born in the 1830s (financial magnate John Pierpont Morgan was also born in this era). Their wealth was unprecedentedly high in history, and impossible to surpass. This is because their entrepreneurship and development coincided with the birth of unified markets in the United States after its Civil War, the acceleration of industrialization and the transformation of America’s economy. The roles of oil, steel and transportation in that era were probably equivalent to the modern data and Internet industries.
From the 1880s to 1890s, American oil production accounted for 70 percent to 80 percent of the world’s total production. At its peak, Rockefeller’s Standard Oil Company monopolized 30 percent of the nation’s oil, more than 85 percent of the oil refining industry and 90 percent of the oil pipeline transportation business. Even the modern measure of one barrel of oil equaling 42 gallons was determined by Rockefeller. Such a high degree of control in basic industries is one element of the Rockefeller fortune riddle.
China’s per capita GDP today is only about 15 percent of that of the United States. If China is able to become a high-income economy in the future, it will be logical for Chinese companies to continue to multiply their sizes and market values. It is not impossible for companies like Tencent and Alibaba to become companies valued $1 trillion or $2 trillion.
In a sense, Pony Ma and Jack Ma are products of China’s success, the Internet era and a huge demographic dividend. In my opinion, if they can understand the relationship between themselves and the era, their position in the history of Chinese business will be historic.
Pony Ma and Jack Ma are not gods. When they started their businesses, they were just ordinary people who were willing to work hard. In this era, the driving feedback of hundreds of millions of users helped them become greater visionaries day by day. Their strength was empowered by the era and the users.
In the history of the United States, tolerance of emerging economic development was higher than that of basic industry. In 1911, the federal government accused Standard Oil of monopolizing the oil industry, and Standard Oil was broken into 34 small companies. In 1945, Alcoa was forced to dismantle because of its monopoly in the aluminum market. In 1984, AT&T was accused of monopolizing the telecommunications industry and was broken into seven regional companies.
During the same period in 1970, International Business Machines (IBM) was accused of monopoly for its dominant position in the fields of large scale computer hardware, software and operating systems. After a 12-year lawsuit, the federal Department of Justice withdrew the prosecution when Ronald Reagan became president, on account of scientific and technological progress in the information industry. In late 1990s, the federal government and 19 states jointly charged Microsoft for bundling its operating system with its World Wide Web browser. The Department of Justice considered splitting up Microsoft, but in June 2001, a Federal Appeals Court rejected this on the grounds of insufficient evidence. The judge in the Appeals Court said that although Microsoft had a monopoly position, the need for standardized personal computer operating systems made monopolies impossible to avoid. If it wasn’t Microsoft, it would be another manufacturer. At the same time, the Appeals Court ruled that Microsoft violated the law in abusing its monopoly position against some computer vendors to exclude competitive contracts and undercut the business strategy of Apple and Java. In September 2001, the Justice Department said it would no longer seek to break up Microsoft, and the company agreed to restrictions on future business conduct. Eventually, Microsoft avoided the split.
In the world of Pony Ma and Jack Ma, considering that they still have such an intense innovation and expansion impulse, they should be optimists who believe in their bright futures and the huge potential of development. At the same time, their strong sense of urgency drives them to work hard.
As China’s exploration of modernization is unique, we have no clues about what business and social environment companies such as Tencent and Alibaba will have. Never in history has any Chinese company become the infrastructure platform of its era or a top-ranked company in such a short time. From this point of view, China should be proud.
And more importantly, they, as well as the participants and observers in our business world, should be grateful to the era for its blessings.