Chinese Firms in the Fortune 500 Are Not Internationally Competitive : Explaining What Constrains the Global Rise of Chinese Business

The rise of Chinese firms in the ranks of the world’s top corporations over the past few decades has shaken the world. From zero firms in the early 1990s Fortune Global 500 to surpassing the United States by 2021 in number of top firms by revenue (not, however, by profit), many now regard China as a global economic superpower. This paper, however, problematizes this characterization of unbridled success by illuminating a paradox: despite having the most firms in the world’s top 500 by revenue, very few of these are actually internationally competitive; the vast majority are giant oligopolies within the confines of the Chinese domestic market with negligible operations overseas. This is in striking contrast to the top corporations from Europe and Japan, not to mention the United States, which are truly globally competitive. This paper argues that in fact the top Chinese firms are heavily constrained both domestically and internationally to truly compete on the world stage with their peers in the Fortune Global 500. We explain such domestic constraints as the nature of Chinese state-owned enterprises, the relatively decentralized Chinese political economy, the necessity to maintain capital controls, and certain bureaucratic-political constraints imposed by the Chinese Communist Party. We also identify various international constraints such as the nature of export-driven growth in a global capitalism that we argue remains underpinned by American hegemony, and the increasing post-2016 resurgence of techno-nationalism in the West, including Japan. These and other domestic and international constraints on Chinese firms’ capacity to successfully compete abroad have dire implications for both President Xi Jinping’s stated goals of “dual-circulation” and “common prosperity”, and more broadly to surpass the United States in economic power by 2035. Hence, China’s apparent success in the ranks of the world’s top corporations is much more paper tiger than contemporary conventional wisdom would suggest.