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Jim Trippon is an Amazon.com bestselling business and finance author, a practicing CPA, and a fee based investment advisor. His portfolio of companies includes J.M. Trippon & Company CPA, Trippon Wealth Management & Trippon Financial Publishing. Jim has dedicated his business career to... More
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Global Profit$ Alert
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Stay Rich Forever: Retirement Planning Secrets of Millionaires and How They Can Work For You!
  • China Clobbers U.S. Profits: Finding the Money 0 comments
    Sep 23, 2010 8:45 AM | about stocks: SHI, PTR
    I had to read the news reports three times before I could believe my eyes.

    China beat the U.S. in profitability?

    How is this possible?

    It's a fact. And it's worth noting, even though western business media ignored it. As reported by the likes of Xinhua, China Daily and Global Times, China's biggest companies beat the U.S. in profits. They also gave the world's giants a run for their money in terms of profitability.

    "The money-earning capability of China's top 500 enterprises has exceeded that of their United States counterparts for the first time."

    China Daily, Xinhua

    This eye-opening story is the result of a report by the China Enterprise Confederation. It's a snapshot of conditions during 2008, the peak of the financial crisis. America is on the ropes and China is still raking in the billions.

    Net profits for the top 500 U.S. companies stood at just $98.9 billion in 2008. Chinese companies towered above their American counterparts with $170.6 billion for the same period.

    The Chinese report gives a picture of how much damage the financial crisis did to U.S. profitability. U.S. firms suffered a stunning 84.6 percent plunge in profits. China's top 500 were relatively safe from the storm, losing just 12.4 percent of their profits.

    China also topped worldwide competitors in 2009.

    Click HERE to know more about the China Stock Digest: China Stock Market Research & China Stock Analysis

    China's top 500 enterprises chalked up $4.05 trillion in operating revenues last year. That is about 18 percent of the operating revenue of the world's top 500 companies in 2009.

    Chinese firms also led the world in profit margins.

    The average profit margin of China's top 500 enterprises was 5.44 percent in 2009. That's compared with 4.16 percent for the world's top 500 companies.

    And what about the growth rate? China leads again.

    The net profits of Chinese heavyweights grew by more than 20 percent last year. Again, that's faster than the mere 17 percent chalked up by the world's top 500.

    It was the second consecutive year that Chinese enterprises outshone their foreign counterparts in annual profits.

    Who Are China's Leaders?

    Although China's performance in the top 500 rankings was exceptional, it's important to know which firms led the list.

    China Clobbers U.S. Profits: Finding the Money

    The top money earner was Industrial and Commercial Bank of China. The nation's biggest lender earned $16.4 billion in profits during 2008. At the time, U.S. banks were grabbing for bailouts from Uncle Sam.

    In fact half of the top ten money-makers are financial firms. Banks and insurance companies dominate. But China does lag in high tech, and the Chinese press worries that local high tech firms have a long way to go to match the U.S.

    Measured by revenue, energy firms topped China's top 500 list. Sinopec was the leader, followed by State Grid and PetroChina. As Asia's leading refiner, Sinopec took in an awe-inspiring $204 billion dollars.

    China Clobbers U.S. Profits: Finding the Money

    But Chinese commentators worried that the dominance of energy firms in the revenue race exposed a weakness. As one report author told Xinhua, "It is a tough job to make Chinese corporations catch up with their foreign counterparts in terms of 'soft power'. That includes resource integration, management expertise, brand building and intellectual property protection."

    Investment Lessons

    If you invest in China, it's important to note that the profit leaders are not the revenue leaders. Government control is the key.

    Banks and financial institutions have been encouraged to lend during the financial crisis. While U.S. banks shut their doors, Chinese banks were lending record amounts. The result: a healthier economy and larger profits.

    But China's energy firms have labored under Beijing's rules. Price controls limit refiners' ability to charge what they want at the pumps. The same is true of many firms in the energy field. As a result, sky-high revenues do not translate into huge profits.

    The report also provides a reminder about the wisdom of diversification. Even during a global crisis, China stood above the fray.

    China's profit leadership may prove to be temporary as the west rebounds. But the trend is clear.

    George Soros says China now runs the world. Well, maybe not yet. But it is crucial to keep an eye on the rising sun of profits to the east.


    For more information and archived issues, visit http://www.globalprofitsalert.com

    Global Profits Alert (GPA) is published by Trippon Financial Research, Inc. a financial media organization with offices in the United States, Hong Kong and Mainland China. GPA is written by Jim Trippon in conjunction with George Wolff, Sunny Wang, Todd Shriber, Kelley Damiani and J. Daryl Thompson.

    Would you like to republish this article? Global Profits Alert issues can be republished, as long as the republished issues contain the name of the author(s) and the following short paragraph:

    This information was brought to you by GlobalProfitsAlert.com, a publication of Trippon Financial Research, Inc. GlobalProfitsAlert.com publishes information on Investing in the China stock market and emerging markets, dividend stock and income investing, exchange traded funds (ETFs), green energy stocks, technology stocks, global market trends and other investment information. To view archives or subscribe, visit http://www.globalprofitsalert.com.



    Disclosure: No positions
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