Private firms lean toward innovation for growth

China's top private companies are betting big on innovation for growth, as they scale up their businesses and navigate mounting global economic uncertainties, according to a new report.

The latest annual report on the top 500 private firms in China by the All-China Federation of Industry and Commerce (ACFIC) covers 6,379 Chinese private companies with annual revenue of more than 1 billion yuan ($137 million) each in 2024.

Among these, the largest 500 firms have emerged as a bellwether for the country's private sector, according to the 27th edition of the report, which was released on Thursday.

The threshold to make the top 500 list rose to 27.02 billion yuan, with total revenue hitting a record 43.05 trillion yuan, the report showed.

Average revenue per company climbed 2.7 percent to 86.1 billion yuan. Of these, 105 firms topped the 100 billion yuan mark and 11 surpassed 500 billion yuan. Assets swelled to 51.15 trillion yuan, with 97 companies holding more than 100 billion yuan each.

Net profits totaled 1.8 trillion yuan, up 6.5 percent, with 34 firms earning more than 10 billion yuan each. Average return on equity stood at 10.6 percent. Governance has tightened, with over half introducing strategic or financial investors, including domestic and foreign capital.

Global exposure is growing for leading Chinese private firms.

Twenty-nine of these companies have made it to the latest Fortune Global 500, while combined overseas revenue jumped nearly 15 percent to 3.19 trillion yuan. Export earnings also rose 5.2 percent to 1.77 trillion yuan, and overseas assets topped 2.44 trillion yuan.

Despite a challenging environment, the companies have ramped up spending on technology and research and development. Total R&D expenditure among the top 500 reached 1.13 trillion yuan, with more than 1.15 million dedicated researchers.

Nearly three-quarters of these are manufacturing firms, with strong footprints in strategic industries including new materials, renewable energy, advanced electronics, high-end equipment, electric vehicles, and energy-saving technologies.

Investment in strategic emerging sectors is accelerating.

The survey counted 309 companies deploying capital across 627 projects in areas from green tech to AI-driven manufacturing. Digital and low-carbon transitions are also moving fast: 64 percent have formal digitalization plans, 83 percent are pursuing green upgrades, and two-thirds report improved efficiency from digital tools.

Gao Yunlong, president of the ACFIC, said: "The figures show that China's private sector is moving from speed to quality, with innovation as the key differentiator.

"It's not just about bigger numbers — it's about sharper technology, smarter governance and a stronger global presence."

The report comes as China signals stronger support for private enterprise, including a private economy promotion law.

According to the Ministry of Industry and Information Technology, as of the end of September last year, China had over 55 million registered private companies, accounting for 92.3 percent of all businesses. They contribute more than half of the country's tax revenue, over 60 percent of GDP and over 80 percent of urban employment.

Wang Peng, a researcher at the Beijing Academy of Social Sciences, said: "A swarm of private firms — not State-run or big names — are emerging from China, pulling off unexpected technological feats and, in some areas, even outmaneuvering global titans.

"While many Western countries, including the United States, are still considering how to restrict China's technological rise, Chinese private enterprises are rewriting the rules, pioneering innovations that redefine the entire industry," Wang said.

Xu Guanju, chairman of Transfar Group, a leading chemicals manufacturer, said that amid intense market competition, private enterprises at this new stage of development must not only consolidate their market presence, but also prioritize technological advancements, including the development of new quality productive forces.

"China's efforts in supporting private enterprises will help foster breakthroughs in product innovation, application innovation, foundational research and original cutting-edge technologies," said Xu.