ZHENGZHOU: The top 500 Chinese companies accounted for more than three-fourths of the national economy last year, but have a long way to go to catch up with the Fortune 500 in terms of competitiveness, investment in R&D and energy efficiency.

A report released by the Chinese Enterprise Confederation (CEC) on Saturday said the top players generated 14.1 trillion yuan (US$1.8 trillion) in revenues, which made up 77.6 per cent of the gross domestic product.

Oil and petrochemical giant Sinopec Corp topped the list of the Top 500 with an operating revenue of 823 billion yuan (US$102.9 billion) and a profit of 21.9 billion yuan (US$2.7 billion), up about 30 per cent and 108 per cent over 2004. The company also led the table the previous year.

The State Grid, China National Petroleum Corporation, Industrial and Commercial Bank of China and China Mobile were ranked second to fifth.

Of the top 500, 23 qualify for the Fortune Global 500 in terms of revenues, said Feng Bing, CEC's executive vice-chairman, at a high-profile forum in the capital of Central China's Henan Province. Nineteen of them applied and were listed in Fortune magazine's ranking for 2006.

The Top 500 are mainly in the petroleum, petrochemical, automobile, banking, telecom and metallurgy sectors. On average, they have 16,074 employees.

However, major indices such as size, productivity, profitability, management ability and competitiveness show a significant gap between Corporate China and Fortune 500 companies, experts said.

The combined business income of China's top 500 accounts for only 9.3 per cent of the Fortune Global 500, and 19.4 per cent of the top 500 US firms, according to Feng.

According to the report, petrochemical, natural gas extraction, banking and ferrous metal industries reaped profits of 31.4 billion yuan (US$3.9 billion) in 2005, accounting for nearly half of the total profits of the Top 500.

Most of the global top 500 companies are in competitive sectors like the automobile industry and services, experts said.

"If China does not change the current pattern of economic development, which is dominated by energy-consuming and polluting heavy industries, it would have to compete with other nations for scarce natural resources," said Liu Jisheng, a professor at Tsinghua University's school of economics.

Ma Kai, minister of the State Development and Reform Commission, said that low energy efficiency continues to bedevil Chinese companies, limiting their competitiveness and returns.

Investment in R&D by 411 of China's top 500 enterprises accounts for only 1.45 per cent of their gross sales revenue, much lower than the 5 per cent international standard, Liu said.

Unlike global majors, which make profits through technology and IPR licensing, Chinese firms mainly rely on sales of products, resources and services, said Yang Du, a professor from Renmin University of China.

Liao Xiaoqi, vice-minister of commerce, urged companies to adopt innovation as the key component of their development.

Another strategy to become more powerful is to compete internationally, said Liao.

AUTO MAJORS LEAD Foreign Investor TAX LIST

Foreign investors paid 90 billion yuan (US$11.25 billion) in taxes last year a rise of 30 per cent over the previous year, it was announced over the weekend.

This compares to zero growth in 2004, according to the report on tax payment by foreign-invested companies, China News Service reported.

FAW-VW Automobile Co, a joint venture between First Automotive Works of Changchun, Jilin Province, and Volkswagen of Germany, tops the list, followed by Guangzhou Honda Automobile Co.

Of the top 100, 57 foreign-invested manufacturing enterprises are listed and contributed more than 50 billion yuan (US$6.25 billion) to the State coffers last year.

In the list of the top 500 taxpayers among Chinese companies, Daqing Oilfield, PetroChina and Bank of China are the top three.

There are 170 resource-based enterprises and 225 tobacco and power companies in the list, which turned in tax of 556.6 billion yuan (US$70 billion) 88 per cent of tax payments by the country's top 500 enterprises.