PetroChina Valued at $1 Trillion After IPO
RENEE MONTAGNE, host:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
China's economy has again surprised the world. The country's state-owned oil and gas producer surged pass ExxonMobil yesterday after its initial public offering. PetroChina is now the world's largest company, worth some trillion dollars. PetroChina's market value is more than twice that of ExxonMobil. And by that measurement, China now has five of the world's 10 biggest companies.
NPR's Anthony Kuhn reports from Beijing.
ANTHONY KUHN: PetroChina's shares dropped nine percent in Shanghai today as investors locked in profits. But PetroChina remains the world's biggest energy company and China also now has the world's largest bank and its largest insurance company - all as measured by market capitalization.
But Fraser Howie, the author of "Privatizing China," says that it's misleading to compare these firms to their counterparts in other countries. These Chinese firms are all state-owned, and they all enjoy government-granted monopolies in their industries.
Mr. FRASER HOWIE (Author, "Privatizing China"): If you compared it with your traditional company, like your ExxonMobil, you can't compare these companies or just look at their numbers and make a genuine comparison. Because actually what they're made of and how they've been all put together - they're very, very different sort of beasts, entirely.
KUHN: Howie points out that while China may have five companies in the world's top 10 in terms of market value, it has only two in the top 50 in terms of sales. But this is not to say that these companies are insignificant.
Mr. HOWIE: Well, you can certainly be taking some of this with a pinch of salt, and you can make excuses or reasons why their numbers are so large. I think the danger, as well, is to then also dismiss it and somebody say it doesn't matter.
KUHN: It does matter he says because Chinese companies are becoming increasingly competitive and integrated into the world economy.
But China's government keeps most of its state-owned firm shares off the markets. Yesterday, PetroChina listed less than 2 percent of its shares. Huang Yiping, senior economist with Citigroup in Hong Kong, explains why the government doesn't float more shares.
Mr. HUANG YIPING (Manager Director and Chief Economist, Asia Pacific, Citibank Group): The government still want to maintain state ownership.
KUHN: PetroChina's market value results, in part, from this pent-up demand. China is, after all, a nation of 1.3 billion people with a savings rate of around 40 percent. Its economy and incomes are growing at a double digit annual clip, and it's got a massive trade surplus. That's a lot of people in companies looking for a place to park their money.
But bank interest rates aren't even keeping pace with inflation and China's capital controls mean that its citizens are barred from buying stocks overseas. Huang points out that luckily for China, its stock markets are still young, and they account for less economic activity than other sectors, such as manufacturing and trade.
Mr. YIPING: It still is a relatively small portion of the economy and the other part of the economy remains pretty robust, for instance, if export continue to grow out between 20 to 30 percent would provide a very strong support.
KUHN: That suggests that when China's stock market bubble bursts, as many economist are sure it will, China may not necessarily suffer a recession.
Andy Xie is an independent economist based in Shanghai.
Mr. ANDY XIE (Independent Economist): The Chinese stock market drops by 50 percent the last of people (unintelligible) is about 20 percent of the GDP. It's common to the U.S. stock market dropping by 15 percent. So the world effect is relatively low.
KUHN: But Chinese investors have been conditioned to see every drop in the market as a bargain-hunting opportunity. So they're just waiting for more mega listings this year including China Mobile, the world's largest mobile phone company in terms of subscriptions.
Anthony Kuhn, NPR News, Beijing.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.