Current trends indicate that the list of Fortune Global 500 companies is about to experience a major shakeup. Companies that have traditionally hovered around the top positions are clearly losing their grip and some have vanished from the list completely. What is perhaps unsurprising is that the companies replacing them are predominantly Eastern companies with total revenues that are the envy of their competitors in the West.
Is the Wealth of the West Declining?
The current list clearly reveals a shift in the way the money is flowing around the world. North America still holds top spot with Wal-Mart Stores Inc., however, China’s State Grid is listed second, China National Petroleum is at third, with its Sinopec Group being listed in fourth place. European corporations hanging on in the top ten are Royal Dutch Shell, Volkswagen and BP. Japan’s Toyota is listed at eight with the tech giant Apple in ninth.
Europe could be said to be just holding its own in the list but over the past decade the continent’s ability to add companies to the list has been lacking. Only two were added over the past decade due to the prevailing economic conditions in Europe. Competition from the East is fierce and some corporations are struggling to compete with rivals in China, South Korea and Japan.
The rapid decrease in Western companies listed, with 71 dropping out between 2001 and 2011, means the future does not appear as positive for them as it does for those based in the East. What’s evident is that this is not a mere economic hiccup, because the number of Western companies in the index has been decreasing over a prolonged period.
Eastern Companies on the Rise
Last year, there were only 103 corporations from Eastern countries on the list. This year, there are 110 such companies. The trend is very clear when you consider there were only 10 Eastern companies on the list in 2001.
For every new company from an Eastern country that makes it to the list, you can be sure that a Western one was removed. North America had 215 on the list in 2001, but this had reduced to a mere 144 by 2011.
Predicting Future Trends of the Fortune Global 500
Accurate predictions are always difficult because they are precisely that, predictions; however, based on the facts to hand and developing world economic trends that are plain for all to see, the pace at which Eastern companies are replacing Western ones on the list sends a clear message – wealth is gradually shifting from the Western commercial powerhouses to the burgeoning ones of the East.
China is now creating billionaires at roughly the same pace as its companies are appearing on the list, whereas that phenomenon is not happening in the West. Economic factors in the East, particularly in China, are sending mixed signals though. Lending, that has been somewhat out of control, is being reined in and growth, although lower, is continuing.
Some analysts believe that China’s economic growth could peak soon and it has slowed over recent years of course, however, many Western countries would love to see a comparable rate in their own economies.
Centers of Commerce
Mapping out the places where the corporations on the list are located reveals that just a few urban centers have most of the mega-corporations based there. The largest clusters in the West are in London, Paris, and New York. In the East, the primary centers for manufacturing giants are Beijing and Tokyo, with South Korea, the fourth largest economy in Asia, having its own major companies headquartered within its borders.
Hong Kong is another city where considerable financial growth is taking place. The largest company in the commodities market there, Noble Group, experienced difficulties in the recent past, and the former CEO Yusuf Alireza, is credited with having steered the company into calmer waters. Alireza successfully sold Noble Agri and obtained refinancing, and in 2014, Noble Group reached #76 in the Fortune Global 500.
Investors need to seriously consider this trend of a major shift in revenue to Eastern countries. While there is always a degree of uncertainty as to what the future holds, it definitely appears that this growth trend is going to continue and the wise money is certain to follow.
Berkshire Hathaway’s annual meeting in May this year was streamed live across the world in English translated into Mandarin – that should tell investors something.