Summary of Key Points
The widely circulated chart comparing the top ten companies by market value in China and the United States reaches a misleading conclusion due to the use of inconsistent measurement criteria: The US list includes companies listed on the NASDAQ, such as Taiwan-based TSMC, while the Chinese list only includes A-share listed companies, excluding overseas-listed giants like Tencent and Alibaba. In reality, both lists contain companies from traditional industries. The real differences lie in the financial system structures, the scope of corporate markets, and the logic of capital costs, as well as the historical limitations of the A-share system for high-quality companies to go public. The high market values of the four major Chinese banks are due to their large scale, not their valuation, and are also influenced by their small number of tradable shares and unique pricing mechanisms.
I. The “Misleading Criteria” of the Comparison Chart: Wrong Conclusions Based on Double Standards
The fundamental issue with this chart is its use of double standards:
- Inflated figures for the US list: TSMC, headquartered in Taiwan, is included as a US company because it is listed on the NASDAQ. Without TSMC, the top ten US companies would include traditional businesses such as Walmart (retail) and Berkshire Hathaway (insurance and manufacturing). Even companies like Apple (hardware manufacturing) and Amazon (retail and logistics) are still closely tied to physical businesses, so the claim that “the US has no traditional companies” is unfounded.
- Omissions in the Chinese list: Only A-share listed companies are counted, excluding internet giants like Tencent ($550 billion) and Alibaba ($315 billion) that are listed overseas. If we consider the actual market value, Tencent would surpass China’s largest bank, Bank of China ($380 billion), making it the highest-valued company in China.
Conclusion: This chart unfairly portrays a situation where China’s emerging economy is downplayed while US traditional industries are exaggerated, resulting in very limited comparability.
II. The Real Dividing Lines: Not Between Traditional and Emerging Industries, but Three Fundamental Differences
Once we account for these measurement issues, the core differences between Chinese and American companies lie in three key areas:
1. Different financial systems:
- In China, banks play a dominant role in indirect financing: People deposit money in banks, which then lend it to businesses, making banks the central hub of capital flow. This leads to large asset sizes, even if their valuations are low, resulting in high market values.
- In the US, the securities market dominates direct financing: Companies issue stocks or bonds directly to raise funds, so the top ten companies by market value are mainly real economy entities (such as Apple and Microsoft), not banks.
2. Different market scopes:
- US giants like Google and Apple generate profits globally, allowing for significant growth due to their international operations.
- Chinese banks, oil companies, and telecommunications firms primarily earn money domestically, which limits their potential for expansion.
3. Different capital costs:
- Google’s high stock price means that issuing new shares is akin to raising funds at a low cost (high valuation → low capital cost → investment in AI to strengthen competitive advantages).
- In China, the price-earnings ratios of state-owned banks have long been below 1 (e.g., 0.7), making it difficult for them to raise funds by issuing new shares without harming shareholder value.
III. Why Don’t Good Chinese Companies List on the A-share Market? Historical and Institutional Reasons
Tencent and Alibaba chose to list overseas, not because they didn’t want to return to the A-share market, but because of various restrictions:
- Restrictions on financing structure: They relied on foreign investment and VIE structures (overseas-controlled companies) that were not accepted by the A-share market at the time.
- Listing rules: The A-share market required continuous profitability, which these companies did not meet when they sought to list (for example, Meituan and Pinduoduo were still losing money at the time of their applications).
- Equity structure restrictions: Founders wanted to implement “dual-class share structures” (different rights for different types of shares), which were only allowed on the NASDAQ and the Hong Kong stock market after 2018.
Things have changed now: The Science and Technology Innovation Board (STAR Market) in China, established in 2019, allows companies to list without profitability requirements and with dual-class share structures. Additionally, pressure from the US market has encouraged new AI companies like Cambricon and Moore Threads to list domestically. This shows that the A-share market is beginning to attract high-quality growth companies.
IV. The Truth About the High Market Values of the Four Major Banks
The four major Chinese banks are in the top ten not because of their traditional industries, but for the following reasons:
1. Highly concentrated ownership: State-owned shares account for more than 50% of their total capital (e.g., 75% for Agricultural Bank of China and 59% for Bank of China), leaving little free tradable stock.
2. Large scale: Their enormous asset sizes (e.g., Industrial and Commercial Bank of China has over $30 trillion in assets) result in high market values, even if their valuations are low (price-earnings ratios of 0.7).
3. Market stability mechanisms: The Central Huijin Investment Corporation acts as a stabilizer, holding significant shares that help maintain stock prices, although this does not change the fact that bank stocks have often traded below their book value for years.
In short, the high market values of these banks are due to their large scale, not because they are inherently valuable.
V. Methodological Advice: Don’t Just Focus on Surface Numbers; Look at the Underlying Capital Logic
The biggest misconception with this chart is treating market values as directly comparable figures. However, the market values of Chinese and American companies reflect different underlying factors:
- The market values of US companies are determined by global capital flow (large number of tradable shares and transparent pricing).
- The market values of China’s A-share banks are based on accounting figures and limited tradable shares, which differ from the “realizable market values” of these companies.
- Many truly high-quality Chinese companies (like Tencent and Alibaba) are actually listed overseas.
Therefore, instead of debating whether there are more technology companies in one country or the other, it’s more important to understand how each country organizes its capital system and who invests in high-risk businesses. Also, consider whether the stock market serves as a financing tool or a pricing platform. These factors reveal the true underlying realities.
In conclusion: The comparison chart is based on a false premise. The real differences between China and the US lie in their capital systems and market functions, not in the nature of their industries being traditional or emerging.