The past two decades were widely assumed to usher in the transition from the “American Century'' to the “Chinese Century,'' as evidenced by the most populous nation's burgeoning gross domestic product, dominance in manufacturing and global trade and, most recently, advancing technology poised to overtake just about everything in the West.
The world's money says not so. China's juggernaut is a shadow of its perceived self in the market capitalization of the world’s 10 largest companies, seven of which are American, accounting for more than 78% of the group's shareholders equity, according to data compiled by Bloomberg. Aside from a brief ascendancy with four, or 42%, of the top 10 in 2008 during what was then the worst US recession since the Great Depression, China remains an also-ran. Investors increasingly eschew fossil fuel -- China is the No. 1 polluter with 30% of CO2 emissions, twice the amount produced by the US -- as climate change's existential threat accelerates the preference for innovation, especially clean, or alternative, energy.
With the exception of Saudi Arabian Oil Co., which went public in December 2019 as the world's biggest company only to be immediately devalued and displaced by Cupertino, California-based Apple Inc. and Seattle's Microsoft Inc. last year, most of the rest of the top 10 -- Seattle-based Amazon.com Inc., Mountain View, California-based Alphabet Inc., Menlo Park, California-based Facebook Inc., Palo Alto, California-based Tesla Inc., Omaha, Nebraska-based Berkshire Hathaway Inc., Shenzen, China-based Tencent Holdings Inc. and Hsinchu, Taiwan-based Taiwan Semiconductor Manufacturing Co. -- are technology, communications and consumer discretionary concerns. China is little more than 4% of the most valuable companies and less than 6% of its weighting in technology. Berkshire Hathaway is the only relic of 20th century industry in the elite group, according to data compiled by Bloomberg.
The second-largest economy now is restraining its most powerful corporations, including Hangzhou-based electronic commerce and content creator Alibaba Group Holding Ltd., social networking, payment systems and entertainment provider Tencent Holdings Ltd and the Beijing-based passenger transportation services maker Didi Global Inc. The Nasdaq Golden Dragon China Index, which includes 98 major Chinese companies publicly traded in the US, has declined 14% since July 22, representing losses of $120 billion and jettisoning Alibaba from the top 10, according to data compiled by Bloomberg.
Even before the government crackdown, when Saudi Aramco became the No. 1 company 20 months ago, Apple, Microsoft, Amazon, Alphabet, Facebook, Berkshire Hathaway and San Francisco-based Visa Inc. represented 71% of the most valuable equity, of which technology was more than 75%. China was just 12% at that point, an improvement from no presence among the top 10 in 2016 when the group was entirely American, according to data compiled by Bloomberg. The more recent China foray in technology still is eclipsed by corporate China's top 10 market cap in 2011, when Petrochina Co. Ltd. and Industrial & Commercial Bank of China, both based in Beijing, accounted for 21% of the group's equity when fossil fuel was almost 50% and technology was less than 30%.
The paucity of China equity among the most valuable firms is accentuated by unprecedented demand in the stock market, where companies raised a record $1.2 trillion via initial public offerings in 2020 and $909 billion this year, according to data compiled by Bloomberg. Industries classified as innovation and technology represent 80% of the top 10, up from 30% in 2011, when Apple was valued at less at than four times its annual sales, compared with more than seven times its revenue today. Tesla shares, which went public in 2010, change hands at 17 times the electric vehicle maker's sales, according to data compiled by Bloomberg.
No one reflects the trend more than Cathie Wood, founder and chief executive of Ark Investment Management LLC, the best stock picker over three and five years among 419 equity mutual funds or exchange-traded funds based in the US with a minimum of $5 billion, according to data compiled by Bloomberg. Ark Innovation ETF, her largest ETF, sold most of its Chinese holdings by the end of June and sold the rest last month.
Bloomberg
