Socialist business model works best

State-owned enterprises have been the architects of China's strong economic growth

Economic competition between nations is essentially the competition between enterprises, and in most cases it is the multinational companies that feel the impact of international competition among big powers. However, in the case of China, it is more clearly the competition between China's "national champions" and the multinational corporations.

During the past decade, Chinese enterprises have collectively managed to break the long-term global monopoly held by multinational companies from the US, Europe and Japan. This has largely been made possible by the pioneering efforts of Chinese state-owned enterprises.

The Fortune Global 500 is often recognized as the best ranking for big global enterprises. In 1989, Bank of China became the first Chinese company to enter the list. By 2002 there were 11 Chinese firms and since then the number has increased steadily. Last year, more than 70 mainland enterprises were on the list, with a vast majority of them (66) being state-owned and state-holding enterprises. Nearly 42 of them were enterprises overseen by the State-owned Assets Supervision and Administration Commission. There is no doubt that the collective growth of Chinese enterprises in recent times has been largely fueled by state-owned enterprises.

The total revenue of China's Fortune Global 500 companies has already surpassed Japan to become the world's second largest after the US. The rise of state-owned enterprises has also been consistent with the economic growth of China, reflecting the strong correlation between the two.

The strong economic growth has also led to the creation of several large Chinese enterprises. From 2011, the proportion of revenue earned by Chinese enterprises in the Fortune Global 500 list has exceeded the proportion of China's GDP in the world total. It can be predicted that both proportions will continue to rise rapidly and synchronously.

If by 2020 China's share of world GDP surpasses the GDP of the US, then the number of Chinese enterprises in the Fortune Global 500 is likely to exceed that of the US, including more than 100 state-owned enterprises from various sectors.

State-owned enterprises in China have gone through several turbulent phases, before making their presence felt in the international arena. The more powerful and competitive group of Chinese state-owned enterprises has undoubtedly been the "national backbone" of economic growth.

In a market economy, enterprises are often the most important source of economic vitality, the core of technological innovation and the impetus for social progress. The rise and the prosperity of an economy essentially depends on the growth and maturity of a number of competitive enterprises and a group of hard-working, intelligent and diligent entrepreneurs. The Chinese state-owned enterprises have adapted to the requirements of socialized mass production and marketization and formed a highly efficient and flexible operational mechanism through the establishment of a modern enterprise system. This shows that Chinese enterprises and the modern Western enterprise have much more in common, including the full absorption of the full use competition mechanism and the competitive advantage of modern enterprises.

State-owned enterprises are not only modern enterprises, but also socialist enterprises. China's state-owned enterprises fully embody the national advantage, political advantage and organizational advantage of socialism, which is also its biggest difference from capitalist enterprises. As socialist enterprises they have four characteristics or four distinct advantages - having state owned capital, state support, political advantage, or the central role of Party organizations and the organizational advantages, or wholeheartedly relying on the working class.

The first two advantages are external strengths, while the latter two are internal strengths.

The biggest difference between Chinese State-owned enterprises and other multinational companies lies in the socialist nature of the former. China's corporate culture is largely based on traditional culture. Although these enterprises have learned several things from Western culture, it is still largely different from Western culture.

The Western enterprise culture emphasizes individualism, while the state-owned enterprise culture reflects more on harmony, collectivism and dedication. A good business model not only creates material wealth, but also creates spiritual wealth. Enterprise culture is such a reflection of spiritual wealth and, therefore, the formation of internal and external soft power.

China, being a huge economy, needs large, internationally competitive state-owned enterprises. This is the only way that China can ensure that its enterprises enjoy an invincible position amid fierce international competition.

So improving the competitiveness of state-owned enterprises, and promoting and deepening the reform of state-owned enterprises are necessary for China's economic development and social transformation and the important driving force for promoting sustainable and stable development of the economy and society.

The prosperity of an enterprise leads to the prosperity of a country; hence the strengthening of enterprises leads to the strengthening of a country. From the point of view of China, the essence of this is the rise of state-owned enterprises. From the point of view of the world, the rise of China's enterprises has great significance for the developing countries of the world.

The author is the dean of the Institute of Contemporary China Studies, Tsinghua University.