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Greenland rises in Fortune Global 500 to 202, from 252; credit rating still "junk," though analysts more positive; caution re state-owned firms

Even as Greenland USA recedes from some development in the United States, such as selling off (or leasing) parcels in Brooklyn and Los Angeles, parent Greenland Holding Group (aka Greenland Group, or even Greenland Holdings Group) has made significant strides in its annual ranking in the Fortune Global 500, the world's largest companies.

Greenland's ranking, based on revenue in the past fiscal year, rose to 202, from 252 in 2018. (See below, however, for some skepticism about a ranking based merely on revenue rather than broader indices of corporate health.)

Here's the 2019 ranking, in a Fortune screenshot.



Greenland's revenues were $52.72 billion, a 22.7% rise. Its assets were worth $150.98 billion. It had 39,091 employees.

Its $1.72 billion in profit represented a 28.6% increase over 2018. Profit represented 3.3% of revenues and 1.1% of assets, and 16.8% of stockholder equity, which is $10.21 billion.

2018 comparison

In 2018, as in screenshot below, revenues were $42.97 billion, and profits $1.34 billion. It had 33,473 employees.


Rising, but not as fast as once hoped

As I wrote, while a Greenland press release noted that the company's 2018 Fortune Global 500 ranking of 252 was 25 slots above last year's mark of 277, another perspective suggests that growth, as rated by that magazine, has been less dramatic.

That ranking was only six slots above Greenland's 258 rank three years earlier, on the 2015 Fortune Global 500. It was previously 268 in the 2014 listing, a significant jump from 359 in 2013 and 483 in 2012.

Despite the progress, thats pace still casts severe doubt on Greenland's goal--announced in 2014--to rank among the world's top 100 companies by 2020. Greenland's stock price, as shown in the screenshot below, has been stagnant for years, as per Bloomberg.


Credit rating still "junk"

Greenland also has a less than stellar credit rating.

Rating agency Moody's, in a 5/23/19 press release cited a Ba1 credit rating, which by Moody's metrics represents the highest category of "junk": Ba is considered "to be speculative and are subject to substantial credit risk," though Ba1 is in the higher subcategory.  (Here's a graphic on credit ratings.)

From the Moody's announcement:
Greenland Holding Group Company Limited's Ba1 corporate family rating is supported by the company's (1) large scale with nationwide coverage and a range of products in China (A1 stable), (2) growing construction business, which partly mitigates cyclicality in its property development business, and (3) good access to funding, supported by its status as a local state-owned enterprise (SOE).
Greenland Holding's rating is constrained by its weak but improving credit metrics. Specifically, the company's debt leverage has improved over the last 12 months, supported by increased cash collections from its contracted sales and a slowdown in its land acquisitions.
Moody's in a 3/5/19 press release, announced it had assigned a slightly lower rating, Ba2, to a short-term debt refinancing. It noted:
Greenland Holding Group Company Limited is a China-based company and state-controlled enterprise group. The Shanghai State-owned Assets Supervision and Administration Commission is effectively the largest shareholder of Greenland Holding. Headquartered in Shanghai, the company is focused primarily on the real estate sector, and is also engaged in other businesses, including construction, finance and auto dealerships.
Ratings agency Standard & Poor's most recently reviewed Greenland nearly a year ago. In a 9/27/18 announcement, it maintained its "junk" ratings on Greenland but revised the outlook to stable from negative. Its long-term issuer credit rating on Greenland Group is BB, one notch below the highest speculative grade, which is BB+. 

S&P also maintained a 'BB- long-term issue rating on Greenland's outstanding guaranteed senior unsecured notes The revised outlook was based on an expectation of Greenland continuing to reduce debt.

Ratings agency Fitch most recently reviewed Greenland more than a year ago. In a 6/14/18 announcement, it maintained its "junk" rating but revised the outlook from stable to negative. Its overall rating, as well as for outstanding bonds, is BB-, which is the third notch in the highest speculative-grade category.

More 2019 details, from Fortune



The rise of China

Fortune, in an overall article regarding the 2019 Global 500, noted the rise of Chinese companies:
The stakes are, of course, much higher in the worldwide battle for corporate dominance—a theme that we explore throughout our special Global 500 issue. For the past two decades, China’s home-grown companies have grown so fast that this year, for the first time ever, they’ve drawn ahead of the U.S. in representation in our annual Global 500 ranking. China now has 129 companies on the list (including the 10 Taiwanese companies), compared with 121 for the U.S.—and though China has a stronger presence near the bottom of the roster than the top, it’s clear where the momentum is. Twenty years ago, there were just eight Chinese companies on the Global 500.
Greenland is 49th among the Chinese companies on the list and 14th among them in terms of the largest leap in rank.

Dominance of state-owned firms a sign of weakness?

Then again, Fortune's Clay Chandler and Eamon Barrett, in a 7/27/19 article headlined China’s wobbly giants, noted the promotional frenzy in China regarding the list, yet offered a caution:
In Chinese, the Global 500 is known as the wubai qiang (五百强), which literally means "500 strong." And yet, as astute Fortune readers know, the ranking is based strictly on revenue—and is thus a measure of size, not strength. The two can be very different things.
...Even so, the most striking characteristic of China's presence on the Global 500 remains the overwhelming—and growing—dominance of state-owned firms. A calculation by Hong Kong's South China Morning Post found that, if firms from Hong Kong and Taiwan are excluded, state-owned enterprises account for 80% of the revenue generated by Chinese companies on the 2019 list, up from 76% last year.
They cited an argument by Derek Scissors, resident scholar at the (conservative) American Enterprise Institute, who wrote that the dominance of state-owned firms "reveals more weakness than strength, unless you believe that being permanently sheltered from competition constitutes strength." 

Writes Scissors:
If anything, profits rankings are more disturbing than revenue. China has four entries in the top 10 for total profits, but they are all state banks. There is no good interpretation here...
If China matched the US in private firms, it would have size and productivity. As it is, China has undermined the potential indicated by its size. SOEs [state-owned enterprises] and state banks are handed a huge market and effectively told to stay out of trouble. Why would they innovate? Why would productivity be high? The huge sum of revenue at Chinese firms in the Fortune 500 primarily represents waste.
(Note: Greenland is no longer majority state-owned, but essentially state-controlled, given that the government of Shanghai is the largest shareholder.)

Another take

Chandler and Barrett suggest a "more nuanced explanation" from former Financial Times China correspondent Richard McGregor, whose new book Xi Jinping: The Backlash, was recently excerpted in The Guardian:
The relationship between the party and private sector companies is, up to a point, flexible – certainly more so than with state companies. The party doesn’t habitually micromanage their day-to-day operations. The firms are largely still in charge of their basic business decisions. But pressure from party committees to have a seat at the table when executives are making big calls on investment and the like means the “lines have been dangerously blurred”, in the words of one analyst.  
...If there was any question as to who was in charge of the economy and business, Xi’s local and overseas critics alike only have to take the Chinese leader at his word, that in private enterprises, as with state-owned firms and every institution in China, the party is the ultimate authority.
The author notes that the Chinese firm structure does not necessarily duplicate that of capitalist ones:
There has always been an awkward fit between western notions of corporate governance and the party state’s insistence on having a role in companies. “It is rather like drawing a tiger with a cat as a model,” said one Chinese commentator. But the direction of policy under Xi has been clear: the power that the party had over business decisions and personnel in state firms, once wielded behind the scenes, would not only be strengthened. The party’s power would also be exercised explicitly.

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