2008.08.11

Tencent Makes Forbes Top Enterprises List

On August 11th the Chinese edition of Forbes magazine published the 2008 “China’s Top Enterprises List.” The only Internet enterprise on the list and the first Internet enterprise to have made the list the Shenzhen-based Tencent Holdings Limited (HK: 0700) was ranked number 46.

Forbes list compiler Liu Ruiming revealed that conditions for making China’s Top Enterprises List were very “strict.” The list provided an overview of Mainland China-based private enterprises that generated sales of more than CYN 3 billion in 2007. The list was compiled according to the weighted calculations of the return rates of candidate enterprises from the three years between 2005 and 2007 growth indices and profit indices (rates of returns on sales) and adjustments made to changes in the scales of sales of candidate enterprises over the last three years.

According to Tencent’s 2007 annual financial report the company reported total revenue of CYN 3.82 billion and net profit of CYN 1.568 billion. The growths compared to the same period last year were 36.4% and 47.4% respectively. In 2008 Tencent continued its rapid growth. According to the company’s 2008 first quarter financial report Tencent reported total quarterly revenue of CYN 1.43 billion 85.4% growth compared to the same period last year and quarterly profit of CYN 737 million 125.2% growth compared to the same period last year. Of the enterprises that made the Forbes list the iron and steel and real estate enterprises were still dominant. Various reasons caused many textile enterprises to be eliminated from the list. The number of agricultural producers and processors that made the list increased markedly. The list also marked the first time Internet enterprises new media companies and new energy enterprises with Tencent as the leading representative appeared in a list usually dominated by traditional industries.

Representatives from Forbes explain that Internet enterprises are beginning to be embraced as new economic model in China. The Shenzhen Stock Exchange Vice President Chen Hongqiao points out that enterprise like Tencent use very little energy generate an astonishing level of economic returns and are especially suited to the industrial structural upgrade that China is pushing for. To a large degree Tencent has also increased the operating efficiency of Chinese society. By the end of March 2008 Tencent QQ was serving 783.4 million registered accounts 317.9 million active accounts and at their highest number 40.3 million simultaneous users. Tencent QQ has formed a highly cohesive and highly active super-community. Senior IDC analyst Huang Yongtao points out that “As Web 2.0 becomes popularized in China more and more Internet users in China are switching their online interests from news browsing to creating personal spaces participating in online communities and building online social networks. As personal spaces become more widespread and as connections among users become closer like instant messaging Web 2.0 applications will also become an example of the Matthew Effect.” Analysts from Morgan Stanley believe that Tencent QQ has already become a “cultural phenomenon” of Mainland China. QQ account numbers have already become a virtual identity for Mainland Chinese youths rivaling mobile phone numbers and e-mail addresses in importance.