China Overtakes Japan in Fortune Global 500 Companies for First Time

Chinese firms have overtaken their Japanese peers on the Fortune Global 500 list of the world’s largest companies for the first time, and will continue to gain market share at the expense of the more developed competitors, the U.S. business magazine said on Monday.

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China had 73 firms on the list, which ranks the world’s biggest companies by revenue, compared to 61 last year. Japan stayed steady, with 68 firms. The biggest Chinese firms on the list are state-owned energy and utilities companies Sinopec Group, China National Petroleum and State Grid , which grabbed the fourth, fifth and sixth spots on the list.

“(High oil prices) contributed to Chinese companies gaining on the list but we have also got a number of private companies on the list as well, including Huawei, the big manufacturer of telecommunications equipment, and that’s gaining at the expense of some of the Western companies they compete against,” Stephanie Mehta, Executive Editor of Fortune, told CNBC Asia’s “Squawk Box” on Tuesday.

The rise of the Chinese enterprise will continue, Mehta said, signaling that a shift in the global economy is underway. The U.S. for example, which has dominated the list for the past decade, lost more companies during that period than any other country.

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Although the U.S. still hosts the lion’s share of Global 500 corporations, there are 132 U.S.–based businesses on this year’s list, compared with 133 last year, and 197 a decade ago. The number of European firms fell to 161 from 172 in 2011.

More emerging Chinese consumer brands may increasingly overtake Western firms as the middle-class of the Asian economy grows, Fortune said in the July 9 issue in which the list was published. Names like computer manufacturer Lenovo (No. 370) and carmaker Zhejiang Geely Holding Group (No. 475), which boosted revenue by 126 percent last year after acquiring Volvo from Ford, will gain in prominence over the next few years.

“Companies like Lenovo and Geely cut their teeth selling ‘good enough’ products at low prices to middle-class Chinese consumers,” the magazine. “After studying (and, increasingly, buying) Western competitors and exploiting Chinese manufacturing efficiencies, they are now poised for global market gains.”

Fortune said the index is not just a measure of “corporate muscle” but also an indicator of prosperity in some cases. For example, despite the global economic headwinds last year such as the debt crisis in Europe and the nuclear disaster in Japan, 2011 was a pretty good year for the companies of the Global 500 list.

They posted record revenues of $29.5 trillion, up 13.2 percent over 2010. Total profits rose 7 percent to $1.6 trillion, roughly equal to the gross domestic product of India, Fortune said.

- By CNBC's Jean Chua.