When the dragons go marching in

C IS CLOSER TO ‘D’ than ‘E’. The ever expanding legion of Chinese companies in the Fortune Global 500 (FG500) suggests the Asian powerhouse is closer to being called a ‘developed’ economy than an ‘emerging’ one.

China, which boasts a near $6 trillion economy (Rs 305.7 lakh crore), up by 10.3% from last year, has added 15 new companies to the 2011 list, brushing aside companies from the eurozone (101 in 2011, down from 114 in 2010), Japan (68, down from 71), and the U.S. (133, down from 139). It is on course to fulfil the predictions of L. Michael Cacace, senior list editor, Fortune, who estimated last year that 75 Chinese companies would be part of the rankings by 2012, and between 100 and 110 companies by 2014.

Calculations from Oxus Research and Investments, a New Delhi-based economic research, asset management, and emerging-markets advisory firm, lend further credence. It suggests that each $1 trillion in gross domestic product broadly translates into about 10 companies (or more) on the FG500 list if it’s a developed economy and fewer than six if it’s a developing economy (see graphic).

China’s investment rate, believed to be about 55% of the economy, is central to its dominance. In comparison, India’s is at about 36%, indicating significant room to grow. It also helps that a number of Chinese government companies have been merged and restructured for the sake of scale and efficiency (see graphic). Take the example of Jizhong Energy Group, a Xingtai-based conglomerate with interest in energy, coal, pharma and chemicals. The company’s revenue grew by a mammoth 176% over the past year to $21 billion and it entered the FG500 at No. 458 (BRIC rank 77). The clincher: It is just three years old in its current avatar.

It’s getting awfully lonely in BRIC (it may just be the last time we use the moniker). Sample this: The number of new Chinese entities is equal to the total number of companies from Russia and India put together. Not impressed? The growth in revenue over the past year for Chinese companies is nearly equal to the total revenue (you read that right: total) of all the companies from the other three nations (see graphic).

On the FG500, India and Brazil have remained static, with eight and seven companies respectively, while Russia has added one to its previous year’s tally of six. Hindalco (Fortune India rank 9), which is closest to breaking into the Fortune Global 500 from India, is still nearly $5 billion off. That’s because the moving goal post is a tough one to chase: The revenue needed to be the 500th largest corporation in the world has moved up from $17 billion to $19.5 billion.

In contrast, the 500th corporation on the Fortune U.S. 500 is at $4.3 billion, up from $4.1 billion last year. Hindalco would figure around the 169th position on the U.S. list.

So how do Indian companies compare in terms of various performance indicators? Not too badly, at least on the face of it. They give a rather good account of themselves when it comes to revenue per employee (see graphic) and also sweat assets (see graphic) better, even while struggling with costs (see graphic). Surjit Bhalla, managing director, Oxus Research and Investments, says while the revenue per employee for India may be high, China has a much lower cost per employee.

Similarly, the disparity in the asset-turnover ratio needs to be viewed through the lens of what companies in China are doing, in comparison to Indian, Russian, and Brazilian companies.

Nagesh Kumar, chief economist and director at United Nations Economic and Social Commission for Asia and Pacific, says that Chinese companies are investing far more in capital intensive expansion compared to Indian companies. That, he adds, could explain why Indian firms sweat their assets better than their Chinese counterparts.

Both India and China also seem to be saddled with higher costs, which ultimately drag down profit margins. Obviously with the commodities boom, Brazil and Russia, being large exporters of minerals and oil, don’t face as much of an issue with margins (see graphic).

In her book, The Elephant and the Dragon, Robyn Meredith calls the shift in the world economic focal points to India and China ‘tectonic economics’. For now, there’s no stopping the dragon. We are at that juncture in global business where factories in China are churning out everything from dolls to iPads, and FG500 companies, with irrepressible regularity.