The Competitiveness Report of Zhongguancun Listed Companies (2020) (Current Chinese Economic Report Series) 9813369078, 9789813369078

Table of contents :
Report Instruction
About the Author
Introduction
Editorial Board of The Competitiveness Report of Zhongguancun Listed Companies
Contents
1 The Development Report of ZLCs in 2019
1.1 The Overall Development of ZLCs in 2019
1.1.1 The Number of New Listed Companies Set a New Record, Sci-Tech Innovation Board Became a Highlight
1.1.2 The Stock Market Strengthened Collectively, ZLCs’ Market Capitalization Reached an All-time High
1.1.3 Steady Growth, with Domestic Listed Companies Outperforming HK Listed and US Listed
1.1.4 Continued Growth in R&D Input and Output, with Distinct Industry Characteristics
1.1.5 Over 70% Enterprises’ Liabilities Were Current Debt, and Solvency Was Higher Than the National Average
1.1.6 Continued Growth of Cash and Cash Equivalents, and Relative Difficulty of Private Enterprises Financing
1.1.7 Continued Growth in Accounts Receivable with a Turnover Below the National Level
1.1.8 Income Tax Growth Slowed, Tax Burden Widened Across Sectors
1.1.9 The Number of Employees Continued to Rise, with Excellent Output per Capita Performance and Reflecting Industry Differences
1.2 Development Suggestions for ZLCs
1.2.1 Broaden Financing Channels and Increase Capital Support for Private Enterprises
1.2.2 Add Efforts to Clear up Debts and Reduce the Scale of Accounts Receivable
1.2.3 Seize the Opportunity of Capital Market Reform and Explore the Opportunities for Enterprise Development
2 Report on Profitability of ZLCs in 2019
2.1 Revenue Situation
2.1.1 Overall Revenue Situation of ZLCs in 2019
2.1.2 Industry Distribution of Revenue
2.1.3 Revenue Ranking Status
2.2 Gross Profit Situation
2.2.1 Overall Situation of Gross Profit and Gross Margin
2.2.2 Industry Distribution of Gross Profit and Gross Margin
2.2.3 Ranking Status of Gross Profit and Gross Margin
2.3 Net Profit Situation
2.3.1 Overall Situation of Net Profit
2.3.2 Industry Distribution of Net Profit
2.3.3 Ranking of Net Profit and Net Margin of ZLCs in 2019 (Top 30)
2.4 ROA and ROE
2.4.1 Return on Assets (ROA)
2.4.2 Return on Equity (ROE)
2.5 Comparisons of Various Boards of Zhongguancun Domestic Listed Companies’ Profitability
2.6 Summary of the Chapter
3 Report on Solvency and Operating Capability Analysis of ZLCs in 2019
3.1 Analysis of ZLCs’ Asset and Liabilities in 2019
3.1.1 Analysis of ZLCs’ Asset in 2019
3.1.2 Analysis of ZLCs’ Liabilities in 2019
3.2 Analysis of ZLCs’ Solvency in 2019
3.2.1 Solvency
3.2.2 Analysis of ZLCs’ Long-Term Solvency in 2019
3.2.3 Analysis of ZLCs’ Short-Term Solvency in 2019
3.3 Analysis of ZLCs’ Operating Capability in 2019
3.3.1 Operating Capability
3.3.2 Overall Status Analysis of ZLCs’ Various Accounts Receivable Turnovers in 2019
3.3.3 Distribution Status Analysis of ZLCs’ Various Accounts Receivable Turnovers in 2019
3.4 Conclusions and Recommendations
4 Report on Innovation Capability of ZLCs in 2019
4.1 Innovation Input
4.1.1 R&D Investment of ZLCs
4.1.2 Rankings of R&D Expenses and R&D Intensity
4.1.3 The Industry Distribution of R&D Expenses and R&D Intensity
4.1.4 Relationship Between R&D Input and Profitability
4.2 Innovation Output
4.2.1 Number of Patent Application and Ranking
4.2.2 Number of Patent Authorization
4.2.3 Number of Valid Invention Patent and Ranking
4.2.4 Number of Patent Cooperation Treaty (PCT)
4.2.5 Industry Distribution of Patent
5 Report on Cash, Investment and Financing Capability of ZLCs in 2019
5.1 Analysis of Cash Content of ZLCs in 2019
5.2 Analysis of Cash Flows of ZLCs in 2019
5.3 Financing Analysis of ZLCs in 2019
5.3.1 IPO Financing of ZLCs in 2019
5.3.2 Financing Status of Equity Private Placement of a-Share ZLCs in 2019
5.3.3 Bond Issuance and Financing of ZLCs in 2019
6 ZLCs Under the Novel Coronavirus Epidemic
6.1 Overview of the Operation of ZLCs
6.1.1 Performance Overview
6.1.2 Asset Structure
6.2 R&D Investments
6.2.1 Cash Flow Conditions
6.3 Policy Suggestions
6.4 Assistance Provided by ZLCs on Preventing the Global Covid-19 Epidemic
7 The Basic Situation of ZLCs Whose Revenue and Net Profit Compound Growth Rate Exceeded 30% in the Past Three Years

Citation preview

Current Chinese Economic Report Series

Zhongguancun Listed Companies Association

The Competitiveness Report of Zhongguancun Listed Companies (2020)

Current Chinese Economic Report Series

The Current Chinese Economic Reports series provides insights into the economic development of one of the largest and fastest growing economies in the world; though widely discussed internationally, many facets of its current development remain unknown to the English speaking world. All reports contain new data, which was previously unknown or unavailable outside of China. The series covers regional development, industry reports, as well as special topics like environmental or demographical issues.

More information about this series at http://www.springer.com/series/11028

Zhongguancun Listed Companies Association

The Competitiveness Report of Zhongguancun Listed Companies (2020)

Zhongguancun Listed Companies Association Zhongguancun Listed Companies Association Beijing, China

ISSN 2194-7937 ISSN 2194-7945 (electronic) Current Chinese Economic Report Series ISBN 978-981-33-6907-8 ISBN 978-981-33-6908-5 (eBook) https://doi.org/10.1007/978-981-33-6908-5 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Report Instruction

1. The Competitiveness Report of Zhongguancun Listed Companies: The report concerning ZLCs (short for Zhongguancun listed companies) was drafted and edited by ZLCA (short for Zhongguancun Listed Companies Association). 2. Objects of Research: We regard these companies as research objects——innovative high-tech companies registered in Zhongguancun National Innovation Demonstration Zone according to Regulations of Enterprise Registration in Beijing Zhongguancun Science Park and listed on global capital markets, representing the new economy and leading the development of strategic emerging industries. This report takes 344 companies, with their 2019 annual reports published before June 30th, 2020, as objects of research, excluding businesses with domicile relocation, delisting companies, backdoor listings, firms that did not publish annual reports, and other exceptional cases. 3. Definitions of Key Concepts: (1) Domestic Listed Companies: Any Zhongguancun company that listed on Shanghai Stock Exchange (hereinafter referred to as SSE) and Shenzhen Stock Exchange (hereinafter referred to as SZSE). (2) Overseas Listed Companies: Any Zhongguancun company that listed on overseas capital markets, including New York Stock Exchange (hereinafter referred to as NYSE), NASDAQ Stock Market (hereinafter referred to as NASDAQ), Hong Kong Stock Exchange (hereinafter referred to as HKEX), and Singapore Exchange (hereinafter referred to as SGX). In this report, companies listed on NYSE and NASDAQ are collectively referred to as US listed companies; and that listed on HKEX are referred to as HK listed companies. (3) Continuous Operation Enterprises: Any Zhongguancun company that listed on the capital market for two consecutive years from 2018 to 2019. There are 308 continuous operation enterprises in this report. 4. Data Sources: All financial data without special remarks was collected from the 2019 annual reports of ZLCs. The patent-related data was collected from Zhongguancun Intellectual Property Promotion Office. Equity price of listed companies, collected from Sina Finance, was the closing price on the last trading day v

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of 2019 fiscal year. Some comparative data was collected from WIND database, the database of Choice, a financial software of East Money Information, as well as the websites of the World Federation of Exchanges, Beijing Municipal Bureau of Statistics, SZSE, SSE, and HKEX. 5. Methodology: A database was created by assembling all the public financial data of ZLCs together. Based on the database, the overall competitiveness of ZLCs and status of diverse industries were analysed vertically and horizontally. Conclusions were then drawn from the analysis, and development suggestions were proposed. 6. Currency Unit: RMB was used as the currency unit throughout this report. For companies whose annual reports used foreign currencies settlement, all the financial data was exchanged into RMB by the project team based on the exchange rate, which was the conversion price of the Bank of China’s foreign exchange quotation on the balance sheet date of 2019 fiscal year. 7. Data Check: The financial data of Zhongguancun Listed Companies quoted in this report was collected and checked by the project team. The team also received valuable guidance and assistance from Ernst & Young Hua Ming LLP.

About the Author

Zhongguancun Listed Companies Association Zhongguancun Listed Companies Association (ZLCA), founded autonomously by a number of listed companies in Zhongguancun, is a national NGO registered under the Bureau of Civil Affairs of Beijing. The association was officially established on August 16th, 2012. ZLCA’s mission is to assist government in delivering and implementing policies, representing members in providing advices and suggestions to government, providing professional policy consultation for its members, and establishing a high-level networking, resource sharing and learning platform. The foundation of ZLCA will play an important role in helping listed companies operate normatively and develop healthily, building a bridge between listed companies, investors, capital market supervisory bodies and government, promoting sharing of resources and cooperation. Objectives Observation of Authoritative Data Through the analysis of growth data, the study of growth pattern and the publication of the annual competitiveness report of ZLCA. This association aims to assist the government, members and investors in their relevant project research and development strategies for member companies. Communication Bridge We are committed in the communication between listed companies, investors, market regulators and government in order to improve their mutual understanding by respecting needs and views. Promotion for Innovation We strive to facilitate the development of initiative companies. We also wish to support companies listed on Growth Companies Market and promote technological innovation in Zhongguancun.

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About the Author

International Influence We will host international conferences, activities and organize overseas roadshows with group visits to boost the international influence of companies in Zhongguancun.

Introduction

In 2019, under the background of long-term Sino-US trade friction and constant pressure on macro economy, China’s capital market launched a series of basic system reform measures. From the launch of STAR market to the revision of securities law and the promotion of registration system, China’s capital market is further strengthened under the guidance of STAR market. At the same time, Zhongguancun’s listed companies have handed out brilliant transcripts in the past year. The overall development of listed companies in Zhongguancun in 2019 is as follows: The number of newly added listed companies reached a new high, and the STAR market became the highlight. As of December 31, 2019, the total number of listed companies in Zhongguancun reached 362, up 9.7% year-on-year. The number of listed companies in Zhongguancun has greatly increased. There are 25 domestic listed companies were added (11 listed companies on the STAR market, 5 main boards, 7 GEM and 2 small and medium-sized boards), and the number of new listed companies exceeded 3 times that of 2018; The number of newly listed companies in Hong Kong stocks and US stocks is 3 and 2 respectively, which is 1 and 4 less than that in 2018. The stock market was bullish in 2019, and the total market value of listed companies in Zhongguancun reached a record high. The growth of the total market value of listed companies in Zhongguancun is the result of the contribution of existing enterprises. The total market value of Zhongguancun listed companies was 6.60 trillion on December 31, 2019, with a year-on-year increase of 44.10%. The total market value of going concern companies was 5.72 trillion yuan with a year on year 28.43% return. From the perspective of growth, the total market value of over 60% of the enterprises that are going concern shows different degrees of growth. Among them, the market value of 46 companies increased by more than 5 billion yuan; The market value of 34 companies increased by more than 10 billion yuan; The market value of 6 companies increased by more than 50 billion yuan (the market value of Meituan Review and BOE exceeded 100 billion yuan). The performance of going concern enterprises increased steadily. In 2019, the operating income and net profit of Zhongguancun listed companies were 624.89 billion yuan and 212.4 billion yuan, respectively, with an increase of 14.00% and 4.27% year-on-year; The operating income and net profit of going concern enterprises ix

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reached 6,071.606 billion yuan and 202.279 billion yuan respectively, up by 13.16% and −3.15% respectively. It can be seen that the growth of total operating income of Zhongguancun listed companies is not only the contribution of incremental enterprises, but also related to the performance growth of existing enterprises; The net profit of the top two enterprises with declining net profit decreased by 40.591 billion yuan compared with 2018, which lowered the overall net profit scale of Zhongguancun listed companies. From the perspective of growth, among the 308 going concern enterprises, nearly 70% of the enterprises achieved an increase in operating income, and 40% of the companies with increased revenue achieved a growth rate of more than 20%; Eighty percent of the companies are profitable, and over 70 percent of the companies are profitable for two consecutive years. R&D input and output continued to grow. In 2019, 314 Zhongguancun listed companies disclosed research and development expenses, and their total research and development expenses were 196.9 billion yuan, up 22.15% year-on-year; The average R&D intensity is 3.65%, which is higher than that of the whole society. A detailed analysis is made of 276 Zhongguancun listed companies that have disclosed their R&D expenses for two consecutive years. In 2019, the R&D expenses of Zhongguancun listed companies that have continuously disclosed their R&D expenses are 185.785 billion yuan, up 21.76% year-on-year, while their operating income has increased by 13.36% year-on-year, indicating that the growth rate of R&D expenses is much higher than the growth rate of operating income, and Zhongguancun listed companies are not afraid of the downward pressure of economy and continue to build core competitiveness. Accounts receivable continued to grow, and the turnover rate was lower than the national level. In 2019, the total accounts receivable of listed companies in Zhongguancun was 1,065.833 billion yuan, up 9.33% year-on-year. The accounts receivable of going concern enterprises amounted to 1,004.533 billion yuan, up 7.00% year on year. Among the domestic listed companies that continue to operate, the accounts receivable of state-owned enterprises and private enterprises are 476.142 billion yuan and 157.651 billion yuan respectively, up 5.70% and 5.57% year on year. According to the accounts receivable turnover rate, the accounts receivable turnover rate of Zhongguancun listed companies was 6.18 in 2019, which was significantly lower than the accounts receivable turnover rate of 9.92 for all A shares. Financing activities are slowing down, and private enterprises are relatively difficult to finance. In 2019, the cash flow generated by the financing activities of Zhongguancun listed companies was 100.495 billion yuan, down 56.96% year-on-year; The cash flow from the financing activities of the going concern enterprises was 66.42 billion yuan, down 70.06% year on year. From the perspective of private placement, the funds raised by Zhongguancun listed companies through private placement and bond issuance were 30.809 billion yuan and 63.033 billion yuan respectively in 2019, up 35.00% and 22.90% year-on-year. From the perspective of enterprise attributes, the total private placement financing of private enterprises and state-owned enterprises is 6.284 billion yuan and 24.004 billion yuan respectively, accounting for 20.40% and 77.91% respectively; The scale of funds raised by private enterprises and state-owned enterprises through issuing bonds is 1.300 billion yuan and 61.733

Introduction

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billion yuan respectively, accounting for 2.06% and 97.94% respectively. It can be seen that the total amount of funds raised by state-owned enterprises far exceeds that of private enterprises, and private enterprises are relatively difficult to raise funds. Generally speaking, despite the ups and downs of Sino-US economic and trade frictions and the increasing downward pressure on macro economy, the listed companies in Zhongguancun still performed brilliantly in various key performance indicators in the past year, showing strong development resilience and great potential. At the same time, the financing difficulties of private listed companies in Zhongguancun and the continuous growth of enterprise accounts receivable require the attention of the government and enterprises. In view of the problems faced by Zhongguancun listed companies, the following suggestions are put forward: In view of the financing difficulties of private listed companies in Zhongguancun, this paper puts forward policy suggestions from increasing the proportion of direct financing of enterprises, changing the existing rating standards of enterprises and encouraging enterprises to innovate financing methods. Specific suggestions are as follows: First, it is suggested that relevant departments relax the threshold of corporate IPO and refinancing of listed companies, and increase the proportion of direct financing of enterprises. The launch of STAR market provides a new financing channel for enterprises with strong Innovation capacity of science and technology and high growth. However, according to the survey conducted by Zhongguancun Association of Listed Companies, the listing conditions of STAR market are relatively high for biomedical enterprises. Therefore, it is suggested to further lower the threshold of listed companies of STAR market, so that more science and technology enterprises and biomedical enterprises can enjoy the dividends brought by capital market reform. Second, change the traditional credit rating method and fully consider the future development prospects of enterprises. Third, it is suggested that the government should encourage enterprises to innovate financing methods, and gradually broaden the financing channels of enterprises by trying various ways such as intellectual property pledge financing, financial leasing, splitting and listing subsidiary companies. In view of the increase in the scale of accounts receivable, this paper puts forward policy suggestions from the aspects of strengthening debt clearing, encouraging supply chain financing and promoting the construction of blockchain confirmation center. First, the government increased the debt clearing efforts of central enterprises and state-owned enterprises to private enterprises, especially private listed companies, so as to revitalize the accounts receivable of enterprises in the whole industrial chain from point to area. The specific measures are as follows: (1) It is recommended that the central government set up a leading group for “revitalizing the private economy”, with the Politburo Standing Committee as the team leader, and coordinate with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance and other relevant departments to solve various problems faced by private enterprises in the development process; (2) In view of the arrears owed by local government departments to private enterprises, it is suggested that local governments issue special bonds to repay the accounts owed to private enterprises, and the regulatory authorities should strictly supervise

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the use of the funds raised by bonds to ensure that the funds can be returned to private enterprises. Second, it is suggested that the Beijing Municipal Government should guide and encourage enterprises to carry out supply chain financing, and give corresponding subsidies to enterprises that carry out supply chain financing, so as to promote the establishment of supply chain financial ecology, promote the financing of small and medium-sized enterprises in the upstream and downstream of the industrial chain through accounts receivable, revitalize assets, and ensure the daily operation of enterprises. Third, it is suggested that the Beijing Municipal Government speed up the promotion of the application of blockchain confirmation center in the whole city. Scientific and technological means are used to promote the confirmation of core enterprises and protect the rights and interests of accounts receivable of upstream enterprises and their industrial chain enterprises. In addition, it is suggested that Zhongguancun listed companies seize the important window of capital market reform opportunities and embrace the opportunities for enterprise development. Specific suggestions are as follows: First, it is suggested that the assets related to high-tech industries and strategic emerging industries that are in line with the national strategy should be listed on the GEM, so as to promote the optimization, integration, transformation and upgrading of resources for highquality enterprises in Zhongguancun. Second, it is suggested that the subsidiaries of Zhongguancun listed companies that meet certain conditions should be split and listed in China, so as to achieve business focus and balanced development. Third, it is suggested that some companies in Zhongguancun should have orderly Return and spread the listing risks. Keywords: Zhongguancun listed companies, Operational condition, Innovation capacity, competitiveness

Editorial Board of The Competitiveness Report of Zhongguancun Listed Companies

Guidance Unit: Administrative Committee of Zhongguancun Science and Technology Park Guidance Expert: Jun Liu, Kang Li, Ying Xiong, Jianxuan Hou, Gang Zhang, Peng Du, Fang Qin Professional Counsellor: Ernst & Young Hua Ming LLP Editors in Chief: Estela Kuo Editors in Chief: Estela Kuo Associate Editor: Yaopeng Gu, Jiangping Ran, Hongli Ma, Xiaoying Xue Research Team: Yan ge, Zhichang Chang, Zhonghui Wang, Hongge Liu, Yajun Shen, Jiahe Zhang, Yiyun zheng Translation Team: Shane Zhao

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1 The Development Report of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . . . 1.1 The Overall Development of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . 1.1.1 The Number of New Listed Companies Set a New Record, Sci-Tech Innovation Board Became a Highlight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.2 The Stock Market Strengthened Collectively, ZLCs’ Market Capitalization Reached an All-time High . . . . . . . . . 1.1.3 Steady Growth, with Domestic Listed Companies Outperforming HK Listed and US Listed . . . . . . . . . . . . . . . . 1.1.4 Continued Growth in R&D Input and Output, with Distinct Industry Characteristics . . . . . . . . . . . . . . . . . . . 1.1.5 Over 70% Enterprises’ Liabilities Were Current Debt, and Solvency Was Higher Than the National Average . . . . . 1.1.6 Continued Growth of Cash and Cash Equivalents, and Relative Difficulty of Private Enterprises Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.7 Continued Growth in Accounts Receivable with a Turnover Below the National Level . . . . . . . . . . . . . . . 1.1.8 Income Tax Growth Slowed, Tax Burden Widened Across Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.9 The Number of Employees Continued to Rise, with Excellent Output per Capita Performance and Reflecting Industry Differences . . . . . . . . . . . . . . . . . . . . . 1.2 Development Suggestions for ZLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.1 Broaden Financing Channels and Increase Capital Support for Private Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.2 Add Efforts to Clear up Debts and Reduce the Scale of Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.3 Seize the Opportunity of Capital Market Reform and Explore the Opportunities for Enterprise Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2 9 14 15 16

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2 Report on Profitability of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Revenue Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Overall Revenue Situation of ZLCs in 2019 . . . . . . . . . . . . . . 2.1.2 Industry Distribution of Revenue . . . . . . . . . . . . . . . . . . . . . . . 2.1.3 Revenue Ranking Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Gross Profit Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.1 Overall Situation of Gross Profit and Gross Margin . . . . . . . 2.2.2 Industry Distribution of Gross Profit and Gross Margin . . . . 2.2.3 Ranking Status of Gross Profit and Gross Margin . . . . . . . . . 2.3 Net Profit Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 Overall Situation of Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.2 Industry Distribution of Net Profit . . . . . . . . . . . . . . . . . . . . . . 2.3.3 Ranking of Net Profit and Net Margin of ZLCs in 2019 (Top 30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 ROA and ROE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.1 Return on Assets (ROA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.2 Return on Equity (ROE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Comparisons of Various Boards of Zhongguancun Domestic Listed Companies’ Profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 Summary of the Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Report on Solvency and Operating Capability Analysis of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Analysis of ZLCs’ Asset and Liabilities in 2019 . . . . . . . . . . . . . . . . 3.1.1 Analysis of ZLCs’ Asset in 2019 . . . . . . . . . . . . . . . . . . . . . . . 3.1.2 Analysis of ZLCs’ Liabilities in 2019 . . . . . . . . . . . . . . . . . . . 3.2 Analysis of ZLCs’ Solvency in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.2 Analysis of ZLCs’ Long-Term Solvency in 2019 . . . . . . . . . 3.2.3 Analysis of ZLCs’ Short-Term Solvency in 2019 . . . . . . . . . 3.3 Analysis of ZLCs’ Operating Capability in 2019 . . . . . . . . . . . . . . . . 3.3.1 Operating Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.2 Overall Status Analysis of ZLCs’ Various Accounts Receivable Turnovers in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.3 Distribution Status Analysis of ZLCs’ Various Accounts Receivable Turnovers in 2019 . . . . . . . . . . . . . . . . . 3.4 Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Report on Innovation Capability of ZLCs in 2019 . . . . . . . . . . . . . . . . . 4.1 Innovation Input . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.1 R&D Investment of ZLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.2 Rankings of R&D Expenses and R&D Intensity . . . . . . . . . . 4.1.3 The Industry Distribution of R&D Expenses and R&D Intensity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.4 Relationship Between R&D Input and Profitability . . . . . . . . 4.2 Innovation Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4.2.1 4.2.2 4.2.3 4.2.4 4.2.5

Number of Patent Application and Ranking . . . . . . . . . . . . . . Number of Patent Authorization . . . . . . . . . . . . . . . . . . . . . . . . Number of Valid Invention Patent and Ranking . . . . . . . . . . . Number of Patent Cooperation Treaty (PCT) . . . . . . . . . . . . . Industry Distribution of Patent . . . . . . . . . . . . . . . . . . . . . . . . .

5 Report on Cash, Investment and Financing Capability of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Analysis of Cash Content of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . 5.2 Analysis of Cash Flows of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . 5.3 Financing Analysis of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 IPO Financing of ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . . . 5.3.2 Financing Status of Equity Private Placement of a-Share ZLCs in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.3 Bond Issuance and Financing of ZLCs in 2019 . . . . . . . . . . . 6 ZLCs Under the Novel Coronavirus Epidemic . . . . . . . . . . . . . . . . . . . . 6.1 Overview of the Operation of ZLCs . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.1 Performance Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.2 Asset Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 R&D Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.1 Cash Flow Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Policy Suggestions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Assistance Provided by ZLCs on Preventing the Global Covid-19 Epidemic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87 89 91 92 93 95 95 99 100 100 101 105 109 109 110 114 115 117 123 125

7 The Basic Situation of ZLCs Whose Revenue and Net Profit Compound Growth Rate Exceeded 30% in the Past Three Years . . . . 129

Chapter 1

The Development Report of ZLCs in 2019

Abstract In 2019, the overall operating conditions of Zhongguancun listed companies were stable. The number of newly listed companies has reached the new high, and the STAR Market plays the pivotal role; The stock market has raised collectively, and the total market value of Zhongguancun listed companies has reached a record high; The performance has grown steadily, and domestic listed companies have performed better than Hong Kong stocks and US stocks; R&D investment and output continue to increase, and the industry characteristics are obvious; More than 70% of corporate liabilities are current liabilities, and their solvency is higher than that of the whole country; Cash and cash equivalence continue to grow, and private enterprises are relatively difficult to finance; Accounts receivable continue to grow, and the turnover rate is lower than the national level; The number of employees continues to rise, and the per capita output is excellent and reflects industry differences. In the face of the above situation, this report states: increase the intensity of debt clearing and reduce the scale of accounts receivable; Broaden financing channels and increase capital to support private enterprises; Further reduce the tax burden of enterprises and reduce the pressure on enterprises. Keywords Zhongguancun listed companies · Market performance · Operating condition

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Zhongguancun Listed Companies Association, The Competitiveness Report of Zhongguancun Listed Companies (2020), Current Chinese Economic Report Series, https://doi.org/10.1007/978-981-33-6908-5_1

1

2

1 The Development Report of ZLCs in 2019

Fig. 1.1 Distribution of ZLCs in capital markets. Source Wind, compiled by ZLCA

37 US ZLCs 10.76%

57 HK ZLCs 16.57% 250 DomesƟcally ZLCs 72.67%

1.1 The Overall Development of ZLCs in 2019 1.1.1 The Number of New Listed Companies Set a New Record, Sci-Tech Innovation Board Became a Highlight 1.

Distribution of Capital Market

Statistics from ZLCA show that by December 31st, 2019, the number of ZLCs had reached 362,1 up 9.70% over 2018, in which the number was 330. This report excludes companies with special conditions such as delisting and unpublished annual reports, taking just 344 companies that released their 2019 annual reports before June 10th, 2019 as research objects. In 2019, ZLCs distributed in several major global capital markets.2 Among them, 250 were domestic listed companies and 94 were overseas. Among domestic listed companies, there were 89 companies listed on SSE (with 11 listed on Sci-Tech innovation board, 78 on the Main Board), while 161 on the SZSE (with 99 listed on the ChiNext Board, 48 on the SME Board and 14 on the Main Board). Among overseas listed companies, there were 57 companies listed on HKEX, 22 on NASDAQ, and 17 on NYSE (see Fig. 1.1). 2.

New ZLCs in Capital Markets

The number of domestic ZLCs increased significantly. In 2019, the number of new listed companies in Zhongguancun was 30 (Table 1.1), an increase of 87.50% year1 The

number of ZLCs does not include the situation of secondary listing in this report. capital market distribution of ZLCs only bases on companies’ initial listing locations in this report.

2 The

KRKR.O

DAO.N

GSX.N

1797.HK

1917.HK

688078.SH LONGRUAN TECHNOLOGIES

300803.SZ COMPASS

688111.SH KINGSOFTSOFFICE 2019-11-18 SSE

3

4

5

6

7

8

9

10

DOUMOB

KOOLEARN

GSX TECHEDU

YOUDAO

2019-11-18 SZSE

2019-12-30 SSE

2019-03-14 HKEX

2019-03-28 HKEX

2019-06-06 NYSE

2019-10-25 NYSE

Wind industry

ChiNext board

Consumer Discretionary

Consumer discretionary

Consumer discretionary

Consumer discretionary

Information technology

Sci-Tech Information innovation technology board

ChiNext board

Sci-Tech Information innovation technology board

Main board

Main board

Main board

Main board

Information technology

Information technology

Sci-Tech Health care innovation board

Sector

2019-11-08 NASDAQ Main board

300810.SZ BEIJING 2019-12-06 SZSE ZHONGKEHAIXUN DIGITAL S&T

2

36KR

2019-12-09 SSE

688198.SH BALANCE MEDICAL

1

Place

Launch date

Rank Stock code Name

Table 1.1 List of Newly ZLCs in 2019 (Unit: Million)

75,557.90

15,341.40

3,615.325

401.7573

15,636.8103

36,391.5667

10,978.3762

1,932.9877

5,745.10

4,046.40

1,579.5206

622.9733

154.34

189.45

918.9110

2,114.8550

80.094

15.2255

(continued)

400.5792 598.7857

120.3846

47.0817

1.215

147.52

−64.109 10.915

212.197

275.367

1,304.8830 −601.455 226.63

35.807

655.6060

−25.911

15.1494

R&D expenses

41.4764

62.8872

Net profit

81.3272

241.3673

146.0333

Market cap Revenue (2019/12/31)

1.1 The Overall Development of ZLCs in 2019 3

688369.SH SEEYON

300799.SZ BEIJING ZUOJIANG 2019-10-29 SZSE TECHNOLOGY

002963.SZ HES

688068.SH HOTGEN

603927.SH SINOSOFT

688168.SH ABT

603613.SH IBI

13

14

15

16

17

18

19

SSE

2019-7-30

2019-9-6

2019-9-9

2019-9-30

SSE

SSE

SSE

SSE

2019-10-28 SZSE

2019-10-31 SSE

2019-11-1

688058.SH BES

12

SZSE

2019-11-1

300797.SZ NCS

11

Place

Launch date

Rank Stock code Name

Table 1.1 (continued)

Information technology

Wind industry

Industrials

Information technology

Information technology

Main board

Information technology

Sci-Tech Information innovation technology board

Main board

Sci-Tech Health care innovation board

SME board

ChiNext board

Sci-Tech Information innovation technology board

Sci-Tech Information innovation technology board

ChiNext Board

Sector

10,655.4711

5,272.0518

28,586.08

2,918.8743

5,154.3384

7,150.88

4,523.9079

3,966.40

5,294.1060

7,197.6801

248.7318

5,499.2086

210.4123

1,157.0005

218.7650

699.8360

143.3023

546.4247

Market cap Revenue (2019/12/31)

28.9907

23.2128

29.8624

89.371

30.8829

45.8083

R&D expenses

186.6057

73.0687

(continued)

17.2901

37.7731

385.7257 618.0687

33.7481

215.8185

88.7083

101.9456

58.5018

69.0972

Net profit

4 1 The Development Report of ZLCs in 2019

2019-7-22

688066.SH BEIJING PIESAT INFORMATION TECHNOLOGY

688033.SH TYSJ

688015.SH TCT

688028.SH WORLDIA

300785.SZ SMZDM.COM

601698.SH CASC

600968.SH CNOOC

002955.SZ HIT

603267.SH BEIJING YUANLIU HONGYUAN ELECTRONIC TECHNOLOGY

300773.SZ LAKALA PAYMENT 2019-4-25

20

21

22

23

24

25

26

27

28

29

2019-5-15

2019-5-23

2019-6-26

2019-6-28

2019-7-15

2019-7-22

2019-7-22

2019-7-22

Launch date

Rank Stock code Name

Table 1.1 (continued)

SZSE

SSE

SZSE

SSE

SSE

SZSE

SSE

SSE

SSE

SSE

Place

Wind industry

ChiNext board

Main board

SME board

Main board

Main board

ChiNext board

7,681.0668

5,089.60

5,296.00

12,124.8788

6,357.1617

Information technology

Information technology

Information technology

Energy

41.3237

88.7437

R&D expenses

17.483

689.8399

74.5328

119.0293 107.4839

60.0216

125.1608 113.1739

270.5623

83.3987

Net profit

31,388.7847

8,483.5954

8,277.2967

4,899.4216

1,054.4593

4,830.4697

32.0484

(continued)

816.9334 251.5458

278.6688

316.6539 174.4142

29,783.7553 33,463.2926 1,302.7648 804.9084

2,734.1926

662.0292

255.0140

1,651.7751

581.8372

601.1715

Market cap Revenue (2019/12/31)

Telecommunication 45,280.00 services

Information technology

Sci-Tech Industrials innovation board

Sci-Tech Industrials innovation board

Sci-Tech Industrials innovation board

Sci-Tech Information innovation technology board

Sector

1.1 The Overall Development of ZLCs in 2019 5

2019-1-28

30

Source Wind, compiled by ZLCA

300759.SZ PHARMARON

Launch date

Rank Stock code Name

Table 1.1 (continued)

SZSE

Place ChiNext board

Sector Health care

Wind industry 39,257.6639

3,757.1601

Market cap Revenue (2019/12/31) 530.6738

Net profit

62.8715

R&D expenses

6 1 The Development Report of ZLCs in 2019

Newly ZLCs /Number

1.1 The Overall Development of ZLCs in 2019

7

30 25 25 20 20 15 10 6

6 4

5

4

3

2

1 0 DomesƟc Listed

US Listed 2017

2018

HK Listed

2019

Fig. 1.2 Distribution of the number of newly ZLCs from 2017 to 2019. Source Wind, compiled by ZLCA

on-year. Among them, the number of new domestic listed companies is 25, which is more than three times the number added in 2018; the number of new HK and US listed companies is three and two, respectively, which is one and four less than that in 2018 (Fig. 1.2). In terms of the distribution of the number of new additions across major stock exchanges, there were 16 on the Shanghai Stock Exchange (11 on the Sci-Tech innovation board and 5 on the Main Board); 9 on the Shenzhen Stock Exchange (7 on the ChiNext and 2 on the SME Board); 1 on the NASDAQ; 2 on the New York Stock Exchange; and 2 on the Hong Kong Stock Exchange. In 2019, the number of new listed companies in Zhongguancun increased, and the number of new domestic listed companies was much higher than that outside China. The reasons for this phenomenon are mainly as follows. First, the domestic A-share market rebounded for the first time after four consecutive years of decline in the IPO audit and approval rate.3 In 2019, a total of 161 (excluding Sci-Tech innovation board) domestic A-share initial IPO companies came to market, of which 138 companies passed the audit of China Securities Regulatory Commission (CSRC), accounting for 85.71%, a much higher percentage than the 57.51% in 2018. Similarly, for the whole year of 2019, a total of 21 (excluding SciTech innovation board) Zhongguancun enterprises with initial IPOs were listed, of which 18 enterprises, accounting for 85.71%, passed the examination, a much higher rate than the 33.33% in 2018. Second, China’s capital market has launched a series of measures to reform the basic system, especially the launch of Sci-Tech innovation board, which provides a more inclusive financing platform for China’s high-tech innovative enterprises. On July 22th, 2019, the Sci-Tech innovation board officially opened its door. As a segment of China’s capital market focused on serving science and technology 3 From

2015 to 2018, the approval rate of A-shares was 90.94, 90.15, 76.92 and 57.51%.

8

1 The Development Report of ZLCs in 2019

innovation, the board sets diverse and inclusive listing conditions for science and technology enterprises that are in line with national strategies, breakthroughs in key core technologies and high market recognition. These conditions include allowing companies that meet the positioning of the board and are not yet profitable or have accumulated uncompensated losses to list on the board; and allowing companies with special shareholding structures and red-chip companies that meet the relevant requirements to list on the board. Zhongguancun added 11 new companies listed on the Sci-Tech innovation board in 2019, with the number of new additions catching up with the Main Board and ChiNext Board. In addition, on December 28th, 2019, the Standing Committee of the National People’s Congress (NPC) deliberated and passed the newly amended securities law. This amendment clearly implements the registration system in a comprehensive manner. With the implementation of the registration system, China’s capital market will further enhance its influence. In the future, with the deepening of the reform of China’s capital market and the increasing recognition of the A-share market by the mainstream international indices, such as the Shanghai-London stock connect and MSCI, the number of new domestic listed companies of either A-share or Zhongguancun, will increase significantly. 3.

Industry Distribution of ZLCs

As a leader of scientific and technological innovation in China, Zhongguancun Park has given birth to more than 20,000 high-tech enterprises, forming a high-tech industrial cluster with R&D and services in electronic information, biomedicine, energy and environmental protection, new materials, advanced manufacturing and aerospace as its main forms. Among them, the listed companies are the leaders in this cluster, and their development and growth are continuously injecting new vitality into the sustainable development of Zhongguancun’s economy. In view of the fact that ZLCs are distributed in major global capital markets and demonstrate international characteristics, therefore, this report adopts Wind industry classification4 in line with international standards. The data shows that ZLCs have a wide range of industry distribution and prominent focuses, which are in line with the positioning of Zhongguancun High-Tech Park. In 2019, the listed companies in Zhongguancun are mainly distributed in the four industries of Information Technology, Industrials, Consumer Discretionary and Health Care (Fig. 1.3). The total number of companies is 303, accounting for 88.08% of the total number of ZLCs. Zhongguancun also takes into account seven major industries, including Materials, 4 The

most distinctive feature of Wind industry classification standard is that it fully draws lessons from the authoritative international standard GICS (Global Industries Classification Standard) industry classification standard. With reference to the four-level industry system of GICS, Wind fine-tuned it according to the actual situation in China, and finally established the industry classification standards that are both in line with international standards and applicable to the China market. The Wind industry contains 11 primary industry indexes (including Industrials, Materials, Health Care, Information Technology, Consumer Discretionary, Utilities, Energy, Consumer Staples, Real Estate, Telecommunication Services, Financials), There are 24 second-level industry indicators, 69 third-level industry indicators and 161 fourth-level industry indicators.

1.1 The Overall Development of ZLCs in 2019 160

9

141

ZLCs/Number

140 120 100 80 60

79 49

40 20

34 16

7

6

5

3

3

1

0

Fig. 1.3 Industry distribution of ZLCs in 2019. Source Wind, compiled by ZLCA

Energy, Utilities, Customer Staples, Telecommunication Services, Real Estate, and Financials.

1.1.2 The Stock Market Strengthened Collectively, ZLCs’ Market Capitalization Reached an All-time High

1.

Zhongguancun Stock Index

In order to better reflect the performance of ZLCs, the ZLCA and the Shenzhen Stock Exchange jointly developed the Zhongguancun Stock Index in early 2014. The index, whose compiling plan is internationally compatible, was designed to be a benchmark index that represented the level of innovation in China’s science and technology sector. Though mainly including A-share listed companies at present, the index will trace overseas listed companies in the future. The ZLCA is expected to develop more indexes related to Zhongguancun and ZLCs. The Zhongguancun Stock Index is currently made up of the Zhongguancun A-share Composite Index (hereinafter referred to as Z-Park A-share Index) and the Zhongguancun A-share 50 index (hereinafter referred to as Z-Park 50 Index), which were officially released on February 5th, 2015, and the SZSE Zhongguancun Non-SOE 60 Index (hereinafter referred to as Z-Park 60 Index), which debuted on January 10th, 2017. All three indices are based on A-share listed companies registered in Z-Park, which is a comprehensive index reflecting the overall development level of Zhongguancun. The Z-Park 50 Index reflects market performance of ZLCs with large market capitalization and good liquidity, highlighting their investment value. The Z-Park 60 Index takes Z-Park registered private enterprises which listed in Z-Park as sample space, offering a scale plate for the performance of these companies.

10

1 The Development Report of ZLCs in 2019

According to calculations, the Zhongguancun serial indexes outperformed the CSI 300 Index and the Hang Seng Index between December 31st, 2008 and December 31st, 2019, but Z-Park A-share Index and Z-Park 50 Index underperformed the SP 500 Index. Specifically, the accumulative yields of Z-Park A-share Index, Z-Park 50 Index, and Z-Park 60 Index reached 178.53%, 155.23% and 275.37%. Comparing to the CSI 300 Index in the same period, the cumulative excess returns rates were 53.16%, 29.86% and 150.00% respectively. Comparing to the Hang Seng Index in the same period, the cumulative excess returns rates were 82.59%, 59.29% and 179.44% respectively. Different from the Zhongguancun serial indexes, which were significantly ahead of the CSI 300 Index and the Hang Seng Index, the cumulative excess returns rates of Z-Park A-share Index and Z-Park 50 Index were nearly 80 and 102% lower than the SP 500 Index in the same period, while the cumulative excess returns rate of Z-Park 60 Index was nearly 18% higher than the SP 500 Index in the same period. 2.

Market Cap of ZLCs

In 2019, amid concerns about slowing global growth, trade frictions and slowing inflation, a new cycle of monetary easing was set in motion around the world, and a wave of interest rate cuts continued to play out, quickly reversing the liquidity crunch expected at the end of 2018. With the deepening of the Sino-US negotiations and the signing of the first phase of the Sino-US economic and trade agreement, the risk appetite of the capital market has been boosted significantly, the trade pattern has been gradually reshaped, the instability is expected to improve marginally, and the risk appetite of the global capital market has been gradually upgraded. At the same time, with the normalization and prolongation of trade disputes, countries around the world are paying more attention to the establishment of regional multilateral trade organizations, and multilateral trade agreements have made breakthroughs one after another. From the perspective of China’s capital market, 2019 was also a year of reform and development. From the launch of the Sci-Tech innovation board to the revision of the securities law and the promotion of the registration system, China’s capital market, led by the technology sector, has further strengthened, with valuation repair and market capitalization jumping for ZLCs. As of December 31st, 2019, the total market cap of ZLCs was 6.60 trillion yuan, an increase of 44.02% over 4.58 trillion yuan in 2018 (see Fig. 1.5). The total market cap of national A-share listed companies jumped 36.95% to 5.93 trillion yuan, up from 4.33 trillion yuan in 2018. Meanwhile, the overall valuation level of A-share market continued to recover, with price-earnings ratio rising from 14.45 times to 20.17 times. Based on the analysis of the total market cap of continuously operating enterprises, the total market cap of ZLCs operating continuously for two consecutive years from 2018 to 2019 increased from 4,457.08 billion yuan in 2018 to 5,724.301 billion yuan in 2019, with an increase of 28.43%. In addition, the market capitalization contributed by the 30 new ZLCs in 2019 was 442.190 billion yuan, accounting for 6.70% of the total market capitalization of ZLCs. It meant that the growth of the total

1.1 The Overall Development of ZLCs in 2019

11

1000.00% 800.00% 600.00% 400.00% 200.00% 0.00% 2008-12-31 2009-06-09 2009-11-09 2010-04-12 2010-09-08 2011-02-18 2011-07-19 2011-12-16 2012-05-25 2012-10-25 2013-03-28 2013-08-30 2014-02-10 2014-07-09 2014-12-08 2015-05-13 2015-10-14 2016-03-14 2016-08-10 2017-01-11 2017-06-19 2017-11-16 2018-04-20 2018-09-17 2019-02-26 2019-08-05

-200.00%

Z-Park-A-Share Index

Z-Park 50 Index

Z-Park 60 Index

CSI 300 Index

Hang Seng Index

SP 500 Index

Fig. 1.4 Accumulative return rates of Z A-share index, Z 50 index, Z 60 index, CSI 300 index, SP500 index and Hang Seng index from 2008/12/31 to 2019/12/31. Source Wind, compiled by ZLCA

market capitalization of ZLCs cannot be separated from the growth of the market capitalization of the stock and incremental companies. In terms of the magnitude of changes in market capitalization, over 60% of listed companies that have been in continuous operation for two consecutive years have seen their total market capitalization increase to varying degrees. Specifically, of the 308 enterprises that have been in continuous operation for two consecutive years, 7000

6601

4817.5

4758.7

20

14.71 4583.6

0

-1.22

4000

-16.03

-20 -40

2000 1000

%

3000

44.02 40

5458.9

Growth RaƟo

Billion Yuan

5000

Markrt Cap

6000

60

-60 -80

-84.65

0 2015

2016

2017

2018

2019

-100 (Year)

Fig. 1.5 Changes in the market capitalization of ZLCs from 2015 to 2019. Source Wind, compiled by ZLCA

12

1 The Development Report of ZLCs in 2019 4000.0

Market Cap

billions yuan

3500.0

3258.9

3437.0

3000.0 2500.0

2415.1

2000.0

1647.8

1500.0

1602.2

1562.0

1199.7 954.7

1000.0

552.1 500.0 0.0 DomesƟc ZLCs

US ZLCs 2017

2018

HK ZLCs

2019

Fig. 1.6 Changes in market value of ZLCs capital markets from 2017 to 2019. Source Wind, compiled by ZLCA

192 enterprises, or 62.34%, saw their total market capitalization increase, while 116 enterprises, or 37.66%, saw their total market capitalization decrease. Of the 192 companies whose total market capitalization increased, 46 saw their market capitalization increase by more than 5 billion yuan; 34 companies saw their market capitalization increase by more than 10 billion yuan; and 6 companies saw their market capitalization increase by more than 50 billion yuan, with MEITUAN and JINGDONG both seeing their market capitalization increase by more than 100 billion yuan.5 From a capital market perspective, the total market capitalization of domestic ZLCs, US listed companies and HK listed companies all rose by more than 30% in 2019, with the largest increase of 67.82% in the market capitalization of HK listed companies. In terms of the market capitalization of each capital market as a percentage of the total market capitalization, the total market capitalization of domestic ZLCs as a percentage of the overall market capitalization was basically unchanged from 2018, remaining at around 52%; the total market capitalization of US listed companies decreased, from 26% in 2018 to 24% in 2019; and the total market capitalization of HK listed companies continued to increase, with a total market capitalization of 24% in 2019 (Fig. 1.6). Judging from the trend of the total market capitalization of various capital markets in the past three years, the market capitalization of domestic and US listed companies has picked up after the cold winter of 2018; while the total market capitalization of HK listed companies has been maintaining a good growth trend. In terms of different industries, both the total market cap of industry and the average market cap of industry increased significantly. But the market cap of different 5 In

2019, MEITUAN’s market capitalization rose the most, to 318.912 billion yuan, followed by JINGDONG, with a 151.479 billion yuan increase in market capitalization.

1.1 The Overall Development of ZLCs in 2019

13

Table 1.2 Changes in total market capitalization and average total market capitalization of various industries from 2018 to 2019 Market capitalization (billion yuan)

Average market capitalization (billion yuan)

Industry

2018

2019

2018

2019

Year-on year Growth (%)

Information technology

2082.7

2715.5

30.38

41.14

16.1

19.3

19.88

Consumer discretionary

850.4

1600.3

88.18

24.24

18.5

32.7

76.76

Industrials

1028.6

1094.1

6.37

16.57

13.4

13.8

2.99

Health care

260.3

437.6

68.11

6.63

8.1

12.9

59.26

4.0

323.8

7995.00

4.91

4.0

107.9

2597.50

Materials

171.4

254.5

48.48

3.86

10.7

15.9

48.60

Utilities

61.7

58.6

−5.02

0.89

10.3

9.8

−4.85

Energy

20.6

52.2

153.40

0.79

3.4

7.5

120.59

Customer staples

39.7

49.8

25.44

0.75

7.9

10.0

26.58

Real estate

10.0

10.5

5.00

0.16

3.3

3.5

6.06

Financials

54.1

4.2

−92.24

0.06

18.0

4.2

−76.67

4583.5

6601.1

44.02

100.00

14.1

19.2

36.17

Telecommunication services

Total

Year-on year Growth (%)

Proportion of total market cap of the industry in 2019 (%)

Source Wind, compiled by ZLCA

industries varied greatly. From the perspective of the total market cap of industry, as 5G construction entered the breakout period, the market cap of Telecommunication Services6 also rose with a growth rate of 7995.00%, becoming the leader of the market cap increase of the industry, followed by the Energy, with a market cap increase of 153.40%. Most of the rest are growing by 30–90%. Some industries saw declines, with Utilities down 5.02% and Financials (with only one GI-TECH) down the most by 92.24% (Table 1.2). From the perspective of the average market cap of industry, the growth rate of the average market cap of more than half of the industries is higher than that of the overall average, among which Telecommunication Services had the largest growth rate.

6 As

of the end of 2019, there were three enterprises in Telecommunication Services: China Tower, Net263 and CASC, of which CASC was a newly listed company in 2019 with a market capitalization of 45.280 billion yuan at the end of 2019, and Net263 and China Tower also both had large increases in market capitalization, with increases of 81.41% and 4.10%, respectively.

14

1 The Development Report of ZLCs in 2019

1.1.3 Steady Growth, with Domestic Listed Companies Outperforming HK Listed and US Listed In 2019, the total revenue and total net profit of ZLCs were 6348.9 billion yuan and 212.40 billion yuan respectively, up 14.00 and 4.27% year-on-year. As for 308 ZLCs that have been in continuous operation for two consecutive years from 2018 to 2019, the total revenue and total net profit reach 6071.606 and 202.279 billion yuan in 2019, up 13.16 and −3.15% year-on-year. As can be seen, the growth of the total revenue of ZLCs related to the contribution of incremental enterprises and the growth of the stock enterprise performance. Compared with 2018, the top two companies in the scale of net profit declined 40.591 billion yuan,7 pulling down the overall net profit scale of ZLCs. In addition, 145 domestic ZLCs disclosed overseas revenue, with a disclosed size of 346.5 billion yuan, accounting for 10.99% of the total revenue of such companies, up slightly from 2018. The data showed that in the atmosphere of science and technology innovation, where the capacity of science and technology innovation continued to grow and high-end factor resources were concentrated, ZLCs, in spite of the increasing pressure of economic downturn and the risk of continued weak global trade, continued to breakthrough innovation, make efforts and seek new growth points. The overall strength of ZLCs has been continuously enhanced, and the scale of enterprises varies greatly. From the perspective of growth, among the 308 ZLCs that have been operating continuously for two consecutive years, nearly 70% of them have achieved growth in revenue, and among 40% enterprises that have achieved growth in revenue, the growth rate is more than 20%. 80% (277) of ZLCs have made profits, and over 70% (221) have made profits for two consecutive years. From the perspective of enterprise scale, there is a big difference in revenue of ZLCs inward. Enterprises with revenue scale of 100 billion and above, accounting for 3.2% of ZLCs, have nearly 70% of the revenue. Enterprises with revenue scale of 5 billion and below, accounting for 72.68% of ZLCs, have less than 7% of the revenue. From the perspective of the scale of net profit, among the 221 enterprises that have made profits for two consecutive years, there are 7 ZLCs with an average net profit of more than 10 billion yuan, 5 ZLCs with an average net profit of 5–10 billion yuan, 27 ZLCs with an average net profit of 1 billion–5 billion yuan, and 182 companies with an average net profit of less than 1 billion yuan. The performance of different capital markets varied, with domestic listed companies outperforming US listed companies and HK listed companies. The revenue and net profit of domestic ZLCs were 3567.1 billion yuan and 114.709 billion yuan respectively, up 14.56 and 6.40% year-on-year. The revenue and net profit of US listed companies were 892.9 billion yuan and 9.575 billion yuan respectively, up 17.55 and

7 The

two companies with the largest decrease in the scale of net profit were Xinwei Group (600485.SH) and Baidu (BIDU.O). Among them, Xinwei Group’s net loss increased from 2.952 billion yuan in 2018 to 18.673 billion yuan in 2019; Baidu’s net profit decreased from 22.582 billion yuan in 2018 to −2.288 billion yuan in 2019.

1.1 The Overall Development of ZLCs in 2019

15

−56.78% year-on-year. The revenue and net profit of HK listed companies were 188.89 and 77.996 billion yuan, up 12.85 and −1.13% year-over-year.

1.1.4 Continued Growth in R&D Input and Output, with Distinct Industry Characteristics A total of 314 ZLCs disclosed annual R&D data in 2019, accounting for 91.28% of the total. The total research and development expenses of these companies reached 196.9 billion yuan, increasing 22.15% y-o-y. The social average R&D intensity was 2.19% in 2019. The average of these 314 ZLCs’ R&D intensity was 3.65%, increasing 0.29% y-o-y, and was much higher than that of the whole society in 2019. Based on a specific analysis of 276 ZLCs that have disclosed their R&D expenses for two consecutive years, these enterprises’ revenue was 5183.397 billion in 2019, increasing 13.36% yo-y, and the R & D expenses were 185.785 billion in 2019, increasing 21.76% y-o-y. The growth rate of the R & D expenses was much higher than that of revenue, showing that ZLCs continued to build their internal competitiveness despite the pressure of economic downturn. As for R&D intensity, 80% of ZLCs’ R&D intensity was above 2%, which reached the international standard of basic survival, and over 25% of ZLCs’ R&D intensity was 10%, which reached a high level worldwide. Innovation output increased sustainably. In 2019, 72.29% of domestic listed Zhongguancun companies (180 companies) filed 9660 patent applications, up 2.90% y-o-y. 25 domestic ZLCs filed PCT applications, which came to a grand total of 2005, up 6.50% y-o-y. 171 Zhongguancun domestic listed companies obtained 6104 patents, increasing by 11.22% y-o-y. As of December 31st, 2019, a total of 196 domestic ZLCs had obtained 19,694 valid invention patents, up 26.79% y-o-y. There were distinct industry characteristics. In 2019, a vast majority of patents of ZLCs were owned by companies in three industries—Information Technology, Industrials and Consumer Discretionary. These three industries accounted for 92.91% of patent applications, 91.59% of patent authorization, 92.02% of valid invention patents and 98.80% of PCT applications. The sector of Information Technology ranked first by number of patent applications, number of patent authorization, number of valid invention patents and number of PCT applications. The first reason was that Zhongguancun had the largest proportion of firms in the information technology industry and a high investment in innovation and R&D. Also, BOE, a leading enterprise in the information technology industry, had a relatively high percentage of patent applications in the patent index, contributing the majority of the contribution rate of patents in the information technology industry.

16

1 The Development Report of ZLCs in 2019

1.1.5 Over 70% Enterprises’ Liabilities Were Current Debt, and Solvency Was Higher Than the National Average As of December 31st, 2019, the total assets of ZLCs were 9,908.570 billion yuan, an increase of 15.75% year-on-year. The total current assets were 5,443.601 billion yuan, accounting for 54.94%, an increase of 11.90% year-on-year. Among the current assets, the total scale of inventory, accounts receivable, cash and cash equivalents with strong asset realization capability was 3,388.170 billion yuan, accounting for 62.24%. As of December 31st, 2019, the total liabilities of ZLCs totalled 6,276,242 million yuan, with an average total liability of 18,245 million yuan (an increase of 1,280 million yuan from 16,965 million yuan in 2018). Of which, the total current liabilities were 4,680,639 million yuan, accounting for 74.58%. Judging from the distribution of the current debt ratio of ZLCs, the current debt ratio of 273 (79.36%) ZLCs was higher than 70%. It can be seen that current liabilities are the main source of debt financing for ZLCs, but if there are projects that require long-term investment, relying mainly on current liabilities will increase the financial risk of enterprises. The solvency of ZLCs is higher than that of A-shares. In terms of long-term solvency, the overall asset-liability ratio of ZLCs was 63.34% at the end of 2019, down 0.87% from 2018 (64.21%), slightly above the reasonable range of 40–60%. The overall cash flow debt ratio was 8.51%, while the overall cash flow debt ratio of national A-share listed companies for the same period was 1.21%. The capability of ZLCs to use the net cash obtained from operating activities to pay off all debts was much higher than the average level of national A-share listed companies. In terms of short-term solvency, after removing missing data on current ratio, quick ratio and cash ratio respectively, in 2019, nearly half of the ZLCs had a current ratio of no less than 2, indicating that ZLCs were relatively more liquid. Nearly 80% of ZLCs’ quick ratios were higher than 1, indicating that ZLCs as a whole had a strong ability to use quick assets to pay off current liabilities. Nearly 80% of the enterprises had a cash ratio of 0.5 above, indicating that ZLCs generally had high cash ratios and strong short-term solvency. From a capital market perspective, the average asset-liability ratios of domestic, US and HK listed companies are 64.58%, 50.94% and 65.11% respectively; the average cash flow debt ratios of domestic, US and HK listed companies are 5.49%, 17.61% and 11.91% respectively. This set of data shows that the overall asset-liability ratio of US listed companies is lower than that of the other two capital markets as a whole, indicating that US listed companies prefer equity to bond financing due to their industry attributes and stage of development.

1.1 The Overall Development of ZLCs in 2019

17

1.1.6 Continued Growth of Cash and Cash Equivalents, and Relative Difficulty of Private Enterprises Financing By the end of 2019, cash and cash equivalents of ZLCs reached 1249.758 billion yuan, up 8.95% year- on-year. The cash and cash equivalents of 308 ZLCs that have been operating continuously reached 1160.098 billion yuan, up 6.25% year-onyear. Cash and cash equivalents of ZLCs have risen continuously in recent five years, accumulating to a certain scale. Cash and cash equivalents of ZLCs in 2019 increased 148.24% compared to 2015. In terms of various capital markets, the year-on-year increase in cash and cash equivalents for HK, domestic and US listed companies declined sequentially to 12.04%, 10.74% and −4.13%, respectively. In terms of the size of cash and cash equivalents, 30% of companies held nearly 80% of cash and cash equivalents. In 2019, there are 20 ZLCs with cash and cash equivalents more than 10 billion yuan (accounting for 5.81% of the total number of enterprises), with cash and cash equivalents totaling 827.066 billion yuan (accounting for 66.18% of the total amount of cash and cash equivalents). Also, there are 20 listed companies with cash and cash equivalents between 5 billion and 10 billion yuan (accounting for 5.81% of the total number of enterprises), with cash and cash equivalents totaling 144.314 billion yuan (accounting for 11.55% of the total amount of cash and cash equivalents). In addition, this report divides 250 domestic ZLCs according to the attributes of enterprises. Analysis shows that domestic ZLCs have nearly 800 billion yuan in cash, but nearly 80% of them belong to about 30% of state-owned enterprises, private enterprises have limited cash and cash equivalents. Specifically, 78 state-owned enterprises (accounting for 31.20%) had cash and cash equivalents of 631.505 billion yuan (accounting for 81.64%), with each one having cash and equivalents of 8.096 billion yuan on average. While 153 private enterprises (accounting for 61.20%) had cash and cash equivalents of 124.407 billion yuan (accounting for 16.08%), with each one having cash and equivalents of 0.813 billion yuan on average. The rest (public, other, foreign-owned and collective enterprises) have less than 3% of their cash and cash equivalents (see Table 1.1). In 2019, the net cash flows from operating activities, the amount of cash flows from financing activities and the net cash flows from investment activities of ZLCs were 306.701 billion yuan, 100.495 billion yuan and 478.254 billion yuan, up 74.15%, −56.96% and 12.27% year-on-year, respectively. 308 continuing-operation companies’ net cash flows from operating activities, financing activities and investment activities were 447.197 billion yuan, 66.420 billion yuan and 447.197 billion yuan respectively, up 59.54%, −70.06% and 1.95% year-on-year, indicating that the investment activities of ZLCs gradually slowed down and financing was hindered. In terms of the financing of ZLCs, in 2019, the total amount of IPO financing for ZLCs was 44.542 billion yuan. Among them, the IPO financing for domestic, US and HK listed companies was 35.247 billion yuan, 2.841 billion yuan and 6.554 billion yuan, accounting for 79.13%, 6.38% and 14.49% respectively. In addition, the scale of IPO of domestic listed companies increased by 719.70% compared to 2018, which was importantly related to a number of capital market reform policies such

18

1 The Development Report of ZLCs in 2019

as the domestic Sci-Tech innovation board. In terms of equity private placement, in 2019, the total amount raised by ZLCs by equity private placement was 30.809 billion yuan, an increase of 35.00% year-on-year. In terms of bond issuance, in 2019, Zhongguancun raised a total of 63.033 billion yuan through bond issuance, up 22.90% year-on-year. In terms of enterprise attributes, the total amount of equity private placement financing for private enterprises and state-owned enterprises was 6.284 billion yuan and 24.004 billion yuan respectively, accounting for 20.40 and 77.91% of the total. The scale of bond raised by private enterprises and state-owned enterprises through bond issuance was 1.300 billion yuan and 61.733 billion yuan, accounting for 2.06 and 97.94%. From the above data, it shows that the total amount of bond raised by state-owned enterprises far exceeds that of private enterprises, and it is relatively difficult for private enterprises to raise bond.

1.1.7 Continued Growth in Accounts Receivable with a Turnover Below the National Level In 2019, the total amount of accounts receivable of ZLCs was 1,065.833 billion yuan, an increase of 9.33% year-on-year. The accounts receivable of 308 ZLCs with continuing operations was 1,040.533 billion yuan, an increase of 7.00% year-onyear. Among them, accounts receivable from domestic listed companies amounted to 645.553 billion yuan, accounting for 64.26%. Specifically, among the 224 domestic listed companies operating for two consecutive years, the scale of accounts receivable of state-owned enterprises was 476.142 billion yuan, up 5.70% year-on-year; the scale of accounts receivable of private enterprises was 157.651 billion yuan, up 5.57% yearon-year, slightly higher than the growth rate of state-owned enterprises (Table 1.3). In terms of accounts receivable turnover, in 2019, the accounts receivable turnover of ZLCs was 6.18, which was significantly lower than the accounts receivable turnover rate of 9.92 for all A-shares. The data indicated that the scale of ZLCs showed a trend of further growth in accounts receivable.

1.1.8 Income Tax Growth Slowed, Tax Burden Widened Across Sectors In the past five years, the enterprise income tax paid by ZLCs has increased year by year, but the rate of increase has narrowed. Specifically, in 2019, the scale of income tax paid by ZLCs is 78.4 billion yuan, an increase of 17.19% year-on-year (Fig. 1.7), the growth rate is lower than the 18.83% in 2018 and far lower than the 40% increase between 2015 and 2017. The total income tax paid by 308 enterprises with continuous operation for two consecutive years increased from 64.401 billion yuan to 74.540 billion in 2019, an increase of 15.74%.

1.1 The Overall Development of ZLCs in 2019 Table 1.3 Accounts receivable from continuing-operation enterprises of different attributes

19

Attribute of enterprises

Accounts receivable (billion yuan)

Growth (%)

End of 2018

End of 2019

450.470

476.142

5.70

Public enterprises

7.366

7.599

3.17

Collective enterprises

1.108

1.09

Private enterprises

149.326

157.651

5.57

Other enterprises

1.779

1.952

9.69

Foreign-owned enterprises

1.06

1.118

5.54

State-owned enterprises

−1.71

Source Wind, compiled by ZLCA 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 17.19% 15.00% 10.00% 5.00% 0.00% 2019 78.4

43.37%

42.50%

41.10%

66.9

56.3 39.9 28

2015

18.83%

2016

2017

Income Tax Expenses

2018

Growth RaƟo

billion

90 80 70 60 50 40 30 20 10 0

Growth RaƟo

Fig. 1.7 Income tax paid by ZLCs in 2015–2019. Source Wind, compiled by ZLCA

In terms of industry, the income tax contributed by Industrials, Information Technology, Materials and Consumer Discretionary occupies the top four, and the total income tax contributed by these four industries is 67.763 billion yuan, accounting for 86.48%. In terms of the average income tax of the industry, the average enterprise income tax of the four pillar industries (Information Technology, Industrials, Consumer Discretionary and Health Care) in Zhongguancun is relatively low. Among them, the average income tax of Information Technology and Health Care is the lowest, which is far lower than the overall average income tax of ZLCs (Table 1.4).

20

1 The Development Report of ZLCs in 2019

Table 1.4 Income tax payment of various industries in 2019 Industry classification

Income tax (billion yuan)

Materials

13.116

0.820

Telecommunication services

1.752

0.584

Real estate

2.585

0.862

Industrials

23.567

0.298

Utilities

Average income tax (billion yuan)

1.608

0.268

Financials

−0.063

−0.063

Consumer discretionary

12.782

0.261

Energy

0.949

0.136

Customer staples

0.364

0.073

18.298

0.130

3.395

0.100

Information technology Health care

Source Wind, compiled by ZLCA

In terms of the actual tax burden8 of enterprises, in 2019, the actual tax burden paid by ZLCs was 124.485 billion yuan, down slightly from 2018. The actual tax burden as a percentage of revenue was 3.49%, a decrease of 0.51 from 4.00% in 2018. The actual tax burden of continuing-operation enterprises decreased from 129.520 billion yuan in 2018 to 128.979 billion yuan in 2019, a decrease of 0.42%. The actual tax burden as a percentage of revenue decreased from 4.30% in 2018 to 3.82% in 2019, down 0.48% year on year, indicating that the tax burden of ZLCs is substantially lower than that in the past few years. As for the industry, actual tax burden paid by Industrials is the heaviest, which reaches 90.116 billion yuan, accounting for 72.39%. The actual tax burden paid by Industrials far exceeds other industries. Judging from the average actual tax burden, the average actual tax burden of Industrials, Materials, Consumer Discretionary and Energy exceed the overall average actual tax burden of ZLCs. In terms of the proportion of actual tax burden to revenue, the actual tax burden of most industries accounts for 6–7% of revenue, while the actual tax burden of the four pillar industries (Information Technology, Industrials, Consumer Discretionary and Health care) accounts for a relatively low proportion of revenue—1.17, 3.53, 2.13 and 5.81% (Table 1.5). Overall, the key industries in Zhongguancun bear most of the taxes and fees, but the actual tax burden as a percentage of revenue is relatively low. In terms of the industries to which continuing-operation enterprises belong for two consecutive years, the actual tax burden as a percentage of revenue decreased to varying degrees in 2019, with the exception of the Financials (Table 1.6). actual tax burden of the enterprise = various taxes paid in the current period-tax refund received in the current period + taxes payable in the current period-taxes payable in the previous period. In addition, in view of the difficulty in obtaining the actual tax burden overseas, this report only analyzes the actual tax burden of domestic listed companies. 8 The

1.1 The Overall Development of ZLCs in 2019

21

Table 1.5 Actual tax burden by various industries of domestic ZLCs in 2019 Industry classification

Actual tax burden (billion yuan)

Average actual tax burden (billion yuan)

Materials

11.818

0.909

7.17

0.227

0.114

6.06

Real estate

0.120

0.120

6.55

Industrials

90.116

1.306

3.53

Telecommunication services

Actual tax burden/revenue (%)

Utilities

0.452

0.113

6.35

Financials

0.137

0.137

11.59

Consumer discretionary

4.014

0.161

2.13

Energy

2.589

0.518

6.09

Customer staples

2.471

0.618

6.58

Information technology

5.190

0.050

1.17

Health care

7.351

0.320

5.81

Source Wind, compiled by ZLCA Table 1.6 Domestic continuing-operation ZLCs’ actual tax burden counted for the proportion of revenue

Industry classification

Actual tax burden as a percentage of revenue (%) 2018

2019

Changes

Materials

7.99

7.17

–

Telecommunication services

4.74

2.15

–

Real estate

54.09

6.55

–

Industrials

3.90

3.53

–

Utilities

6.46

6.35

–

Financials

2.38

11.59

+ –

Consumer discretionary

2.63

2.13

17.25

13.46

–

Customer staples

7.29

6.58

–

Information technology

3.96

3.86

–

Health care

7.83

6.03

–

Total

4.30

3.82

–

Energy

Source Wind, compiled by ZLCA

22

1 The Development Report of ZLCs in 2019

1.1.9 The Number of Employees Continued to Rise, with Excellent Output per Capita Performance and Reflecting Industry Differences In 2019, the number of employees of ZLCs continued to rise while the downward pressure on the economy continued to increase. Specifically, the number of employees of ZLCs reached 2,750,000 in 2019, up 4.68% year-on-year (Fig. 1.8). In terms of different industries, Information Technology, Consumer Discretionary, Industrials and Health Care had a total number of 2,372,400 employees, accounting for 86.27%. In terms of the average number of employees in the industry, the average number of employees in the four industries of Materials, Industrials, Consumer Discretionary and Customer Staples was more than 10,000, with the highest number of employees in Materials being 15,583. In terms of output per capita, the revenue per capita, net profit per capita and income tax per capita of ZLCs were 2,308,600 yuan per person, 77,300 yuan per person and 28,500 yuan per person in 2019. Among them, the Real Estate was ahead of other industries in terms of revenue per capita and income tax per capita, at 14,869,800 yuan per capita and 1,107,700 yuan per capita (Table 1.7). Employee

Growth RaƟo

300.00

(ten thousands)

262.70

194.82

200.00

100.00

45 40

39.26

250.00

150.00

275.00

35

205.20

30

28.02

25

139.90

20 16.88

15 10

50.00

5.33

4.68 5 0

0.00 2015

2016

2017

2018

2019

Fig. 1.8 Employees of ZLCs from 2015 to 2019. Source Wind, compiled by ZLCA

%

1.2 Development Suggestions for ZLCs

23

Table 1.7 Human resources status of ZLCs in 2019 Industry

Employee (number)

Materials

249331

15583

1678.7

112.2

52.6

24600

8200

3259.2

247.7

71.2

Telecommunication services

Average employee (number)

Revenue per capita (thousand yuan/person)

Net profit per capita (thousand yuan/person)

Income tax per capita (thousand yuan/person)

Real estate

2334

778

14869.8

−389.1

1107.7

Industrials

980833

12416

2757.8

104.3

24.0

16190

2698

2654.6

445.9

99.3

246

246

4804.3

−4815.4

−255.4

581991

11877

1943.0

53.8

22.0

Utilities Financials Consumer discretionary Energy

32288

4613

1488.7

37.7

29.4

Customer staples

52650

10530

714.5

18.9

6.9

714510

5067

2388.7

44.0

25.6

95073

2796

1505.1

62.3

35.7

2750046

7994

2308.6

77.3

28.5

Information technology Health care Total

Source Wind, compiled by ZLCA

1.2 Development Suggestions for ZLCs 1.2.1 Broaden Financing Channels and Increase Capital Support for Private Enterprises Financing goes throughout the entire life cycle of an enterprise, in different life cycles of the enterprise, the purpose of its financing is not the same. Financing for listed companies is generally used for project financing, acquisition of assets, replenishment of liquidity, matching financing, introduction of strategic investors, equity incentives, etc. The financing methods are generally derived from directional issuance, equity pledge, debt issuance and bank credit. Financing generally comes from equity private placement, equity pledge, bond issuance and bank credit. In view of the fact that most of the private enterprises in Zhongguancun are science and technology innovation enterprises, their main credit rating is relatively low, which makes it difficult for them to obtain funds through bond issuance or bank credit, in addition, in the past two years, financial institutions have tightened the equity pledge limit to prevent risks, leading to a further increase in the difficulty of corporate financing. According to the data, the amount of cash flow from financing activities of ZLCs was 100.495 billion yuan, up −56.96% year-on-year in 2019. In terms of equity private placement, the total amount raised by domestic ZLCs through equity private

24

1 The Development Report of ZLCs in 2019

placement was 30.809 billion yuan, up 35.00% year-on-year in 2019. In terms of bond issuance, ZLCs raised a total of 63.033 billion yuan through bond issuance, up 22.90% year-on-year in 2019. In terms of enterprise attributes, the total amount of equity private placement financing for private enterprises and state-owned enterprises was 6.284 billion yuan and 24.004 billion yuan respectively, accounting for 20.40 and 77.91% of the total. The scale of funds raised by private enterprises and stateowned enterprises through bond issuance was 1.300 billion yuan and 61.733 billion yuan, accounting for 2.06 and 97.94%. The data shows that the total amount of funds raised by state-owned enterprises far exceeds that raised by private enterprises, and that private enterprises have relative difficulties in raising funds. In view of this, the following recommendations are made. First, it is suggested that the relevant departments should relax the threshold for IPO and refinancing of listed companies, and increase the proportion of direct financing. In 2019, the Sci-Tech innovation board tried to attract a large number of science and technology innovation enterprises and biomedical enterprises with strong science and technology innovation capacity and high growth rate and provide financing support for them. However, from the investigation and research conducted by ZLCA, for biopharmaceutical enterprises, the conditions for listing on Sci-Tech innovation board are relatively high, so it is suggested to further reduce the threshold of listed companies on the board to facilitate more science and technology innovation enterprises and biopharmaceutical enterprises to enjoy the dividends brought by the capital market reform. Second, it is proposed to regulate the rating market, optimize the rating indicator system and strengthen the unified supervision of the market. On August 8th, 2020, China Securities Regulatory Commission issued the exposure draft of Regulations of Corporate Bond Issuance and Trading (hereinafter referred to as the Regulations). The Regulations deleted the original Article 19 that when issuing corporate bonds in public, credit rating shall be entrusted to credit rating agencies qualified to conduct credit rating. It means that the new management approach no longer mandates external ratings and dilutes the public investor’s focus on things like investment bond ratings. As a matter of fact, as early as 2015, the private issue of corporate bonds clearly stipulated that the credit rating of the private issue of corporate bonds shall be determined by the issuer and disclosed in the prospectus of the bonds. However, most companies still chose to disclose their credit ratings during the actual bond issuance process, and the importance of credit ratings to bonds was self-evident. However, China’s credit rating market is facing a series of problems such as the lack of a unified rating standard for credit rating agencies, the optimization of the rating index system, and the inefficiency of supervision due to parallel supervision. Hence it is suggested that the rating market should be standardized, the rating index system should be optimized and the unified supervision of the market should be strengthened. Third, it is recommended that the government encourage enterprises to innovate financing methods and broaden financing channels. At present, there are two extremes of private enterprise financing. On the one hand, a small number of enterprises that are not short of money are chased by all kinds of financial institutions for loans and bonds. On the other hand, due to business rating, temporary business difficulties for

1.2 Development Suggestions for ZLCs

25

various reasons, most of the enterprises’ ways to get loans and financing channels are also blocked. In particular, following the issuance of the Measures on Share Pledged Repurchase Transactions and Registration and Settlement Business (2018 Revision) in 2018, it has become more difficult for shareholders of listed companies to obtain financing through share pledges, resulting in a narrowing of direct financing channels for enterprises. Therefore, it is recommended that the government encourage enterprises to innovate in their financing methods and gradually broaden their financing channels by trying a variety of methods such as intellectual property pledge financing, financial leasing, and spin-off subsidiary listing.

1.2.2 Add Efforts to Clear up Debts and Reduce the Scale of Accounts Receivable Accounts receivable refers to the money that an enterprise should collect from the purchasing unit for selling goods, products and providing labour services in the normal business process, including the taxes that should be borne by the purchasing unit or the labour service unit, and various freight and miscellaneous expenses paid by the purchasing party on behalf of the buyer. If the accounts receivable is managed properly and recovered in time, it can make up for the various expenses in the production process and the enterprise’s operation can be carried out continuously. If the management of accounts receivable is not paid attention to, a large amount of credit sales cannot be realized and become bad debts, lightly affecting the daily production and operation of the enterprise, and heavily becoming the last straw that crushes the enterprise. According to the data, in 2019, the total accounts receivable of ZLCs was 1,065.833 billion yuan, a year-on-year increase of 9.33%. The accounts receivable of 308 ZLCs with continuing operations was 1,004.533 billion yuan, a year-on-year increase of 7.00%. In terms of accounts receivable turnover, generally the social average of accounts receivable turnover is 7.8, the good value is 15.2 and the excellent value is 24.3. By this criterion, 75% (258) of ZLCs have accounts receivable turnover below the social average. According to the investigation and research conducted by the ZLCA, the majority of ZLCs, especially private enterprises, have a high concentration of accounts receivable, and the scale of accounts receivable is large and shows a rising trend year by year. As for reasons, first, companies adopt the strategy of selling on credit in order to expand its market share. Secondly, the customers of some private listed companies are the core enterprises such as central enterprises and state-owned enterprises. Because of the long approval process and many restrictions in the process of confirming the accounts receivable of core enterprises, it is difficult to confirm the accounts receivable of upstream enterprises, resulting in the upstream enterprises cannot collect the accounts receivable in time, which affects the normal production and operation, and then affects the return of funds of enterprises in the whole industry chain, causing a series of chain reactions. Thirdly, under the influence

26

1 The Development Report of ZLCs in 2019

of the macro-economy downturn and reduced market liquidity, the financial pressure on the purchaser further increased, leading to a lower-than-expected progress in the recovery of the enterprise’s accounts receivable and a longer recovery period for the accounts receivable, resulting in the scale of the enterprise’s accounts receivable growing year by year, while the recovery amount narrowed year by year and the accounts receivable accumulated more and more. In accordance with the deployment of the Central Committee of the Communist Party of China and the State Council of PRC, since November 2018, all regions, relevant departments and large state-owned enterprises have been actively clearing accounts owed to private enterprises and SMEs. In February 2019, at a briefing held by the State Council Information Office of PRC, Xin Guobin, the Vice Minister of Ministry of Industry and Information Technology of PRC, announced that the first stage of clearing arrears achieved initial results, and the accounts of private enterprises paid by the national government departments and large state-owned enterprises were more than 160 billion yuan. Although the clearance of arrears has made some progress, but because of the complexity of the work itself, the proportion of private enterprises in some areas of accounts receivable is still high. Based on this, first, it is suggested that the government should increase the efforts of central and state-owned enterprises to clear the accounts receivable of private enterprises, especially private listed companies, to revitalize the accounts receivable of the entire industry chain enterprises in a point-by-point manner. (1) It is proposed that the Central Government set up a leading group for the revitalization of the private economy, headed by a member of the standing committee of the Political Bureau of the Communist Party of China Central Committee, to coordinate with the National Development and Reform Commission, the Ministry of Industry and Information Technology of PRC, the Ministry of Finance of PRC and other relevant departments to unify and resolve the various problems faced by private enterprises in the course of their development. The private enterprise accounts receivable arrears should be carried out by special governance work. It is recommended that a comprehensive survey of private enterprise accounts owed by local governments, state-owned enterprises and central enterprises should be conducted. Sort out the reasons for each unpaid account with the establishment of special accounts. Set up expected payment terms and payment progress. The target task list of arrearclearing of accounts receivable should be issued. The results of clearing arrears with limited time should be reported to the leading group regularly. At the same time, it is recommended that add the private enterprise accounts receivable clearance results into the local government performance, central enterprises or state-owned enterprises leadership performance assessment index system, providing the corresponding system security. By thoroughly solving the problem of delinquent accounts receivable of private enterprises, we will effectively promote the healthy development of the private economy, which in turn will stimulate the steady growth of China’s overall economy. (2) For private enterprises’ arrears owed by local government departments, it is recommended that local governments issue special bonds specifically for the purpose of returning accounts owed to private enterprises, and that the regulatory authorities strictly supervise the use of the funds raised by the bonds to ensure that the funds can be returned to private enterprises.

1.2 Development Suggestions for ZLCs

27

Second, it is recommended that the Beijing municipal government guide and encourage enterprises to carry out supply chain financing. Enterprises that carry out supply chain financing should be subsidized so as to promote the establishment of supply chain financial ecology. In order to revitalize assets and protect the daily operation of enterprises, promoting the upstream and downstream SMEs of the industry chain to finance through accounts receivable is advisable. At present, banks and supply chain financial institutions have launched supply chain financing products to help companies carry out supply chain financing, but due to publicity or cost and other reasons, the actual results are not satisfactory. Third, it is recommended that the Beijing municipal government accelerate the promotion of the application of the blockchain confirmation centre in the city. Use technological means to promote core enterprises to secure rights and protect the rights and interests of their upstream enterprises and their industrial chain enterprises in accounts receivable. At present, Haidian District has been online and started a pilot “blockchain-based financial services platform for SMEs”. The platform uses the underlying technology of blockchain, featuring multi-party consensus and cannot be tampered, to achieve the government and state-owned enterprises’ procurement contracts and accounts receivable right, to provide enterprises with high-quality credit documents, to facilitate enterprises to obtain financing loans through credit documents. From the existing cases, most of the enterprises accessing finance are small-scale enterprises with low loan amounts. Therefore, it is suggested that: (1) the blockchain right centre should be given more access to central enterprises, state-owned enterprises, other core enterprises, listed companies and financial institutions, in order to solve the problem that it is hard for listed companies to ensure their accounts receivable right, easing the financing of listed companies; (2) accelerate the promotion and application of the blockchain right centre in the city in order to benefit more enterprises.

1.2.3 Seize the Opportunity of Capital Market Reform and Explore the Opportunities for Enterprise Development In 2019, the country continued to promote capital market reform. On the one hand, through a series of measures such as the launch of the Sci-Tech innovation board, the pilot registration system, the issuance of the Provisions on Piloting the Subsidiaries of Domestic Listed Companies, and the Decision on Amending the Measures for the Administration of Major Asset Management and Restructuring of Listed Companies, A-shares reversed the downward trend and market valuations were repaired. On the other hand, the expansion of MSCI, the inclusion of A-shares in the FTSE Russell Global Index, and the launch of the Shanghai-London Stock Connect accelerated the convergence of the domestic capital market with the international capital market. Against this background, ZLCs have performed well in the past year. In 2019, the

28

1 The Development Report of ZLCs in 2019

total market capitalization of ZLCs is 6.60 trillion yuan, an increase of 44.10% yearon-year. Since 2020, the implementation of the new securities law, the reform of the ChiNext registration system, and the release of the Announcement on the Arrangements Relating to the Domestic Listing of Red Chip Enterprises in the Innovation Pilot have marked the comprehensive deepening of capital market reform. Based on this, it is recommended that ZLCs seize the important window period of capital market reform to further explore the opportunities for corporate development. The specific recommendations are as follows. First, it is recommended that assets related to high-tech industries and strategic emerging industries in line with the national strategy be reorganized and listed on ChiNext Board to promote the optimization and integration of resources and the transformation and upgrading of high-quality enterprises in Zhongguancun. On October 18th, 2019, China Securities Regulatory Commission (CSRC) officially released the Decision on Modifying the Measures for the Administration of Major Assets Reorganization of Listed Companies (hereinafter referred to as the Restructuring Measures). Aimed at promoting quality enterprises to achieve optimal integration of resources and transformation as well as upgrading, the Restructuring Measures mainly reforms in these five major areas—the simplification of restructuring and listing identification criteria, shortening the “cumulative first principle” calculation period, industry restrictions, restoration of restructuring and listing of ancillary financing and enrichment of major asset restructuring performance compensation agreements, and commitment to regulatory measures. Therefore, it is recommended that Zhongguancun enterprises that listed on the ChiNext Board, especially high-end emerging industries such as electronics, artificial intelligence, 5G communications, medicine and biology, be reorganized and listed on the ChiNext Board to promote the optimization and integration of resources and the transformation and upgrading of high-quality enterprises. Second, it is recommended that subsidiaries of ZLCs that meet certain conditions be spun off and listed in China to achieve business focus and balanced development. On December 13th, 2019, the CSRC officially issued the Pilot Provisions on the Domestic Listing of Listed Companies Splitting Their Subsidiaries (hereinafter referred to as Certain Provisions). The Certain Provisions indicate that listed companies that have reached a certain size may split their subsidiaries whose businesses are independent and meet the conditions to be listed on the Sci-Tech innovation board in accordance with the law. For listed companies, after the spin-off of subsidiary businesses, listed companies can focus on their main business and improve the operational efficiency of enterprises. For the spin-off of subsidiaries, subsidiaries can get independent financing and higher valuation premium in the capital market. Thirdly, it is suggested that some enterprises of China concept stocks in Zhongguancun should return in an orderly manner. On the one hand, the enterprises with China concept stocks are facing a difficult situation due to the strict scrutiny by the US regulators. On the other hand, China’s capital market is strongly embracing the return of China concept stocks through the reform of the capital system. Therefore, it is recommended that enterprises of China concept stocks in Zhongguancun that are with high political and technological risks should return to Hong Kong or be listed in A-shares.

Chapter 2

Report on Profitability of ZLCs in 2019

Abstract This chapter analyzes the profitability of listed companies in Zhongguancun, describes and analyzes the overall profitability of listed companies in Zhongguancun from five main indicators: operating income, gross profit, net profit, return on total assets and return on net assets, and makes in-depth research from multiple dimensions such as capital market and industry, so as to comprehensively and carefully reflect the profitability of enterprises. The report shows that the operating income, gross profit and net profit of Zhongguancun listed companies still maintained a relatively high growth rate, and their profitability was still relatively strong in 2019; At the same time, the return on total assets and return on net assets of Zhongguancun listed companies are steadily declining, and the overall asset utilization ability needs to be further improved. Keywords Zhongguancun listed companies · Profitability · Asset utilization

2.1 Revenue Situation 2.1.1 Overall Revenue Situation of ZLCs in 2019 In 2019, the total revenue of ZLCs was 6348.9 billion yuan, with a year-on year growth of 14%, up 801.8 billion yuan from 2018 (see Fig. 2.1). Among them, the total revenue of newly integrated ZLCs1 was 78.34 billion yuan in 2019. Going-concern ZLCs’ revenue reached 6,071.606 billion yuan in 2019, an increase of 706.295 billion yuan from 5365.311 billion yuan in 2018, with a year-on year growth of 13.16%, an increase that was essentially unchanged from 2018. As can be seen, the growth in revenue of ZLCs was significant, in addition to the amount of revenue growth contributed by the newly integrated companies in 2019, the business performance of ZLCs with continuing operations also grew steadily, contributing 88.09% of the 1 Among

the newly integrated ZLCs, the total revenue of 11 listed companies that listed on the Sci-Tech innovation board was 6.272 billion yuan, accounting for 8.01% of the total revenue of the newly integrated ZLCs. © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Zhongguancun Listed Companies Association, The Competitiveness Report of Zhongguancun Listed Companies (2020), Current Chinese Economic Report Series, https://doi.org/10.1007/978-981-33-6908-5_2

29

30

2 Report on Profitability of ZLCs in 2019

Fig. 2.1 Revenue and its growth rate of ZLCs from 2015 to 2019. Source Wind, compiled by ZLCA

growth amount. What’s more, 145 domestic ZLCs disclosed their overseas revenue,2 with a disclosed size of 346.5 billion yuan, accounting for 10.99% of the total revenue of such enterprises, up slightly from 2018. The data shows that in the atmosphere of science and technology innovation, where the capacity of science and technology innovation continues to grow and high-end factor resources are concentrated, ZLCs, in spite of the increasing pressure of economic downturn and the risk of continued weak global trade, continue to breakthrough innovation and make efforts, seeking new growth points. In terms of the proportion of revenue in each capital market, domestic listed companies contributed to a majority part of the total revenue of ZLCs, followed by HK listed companies and then US listed companies. As for the growth rate of revenue, US listed companies ranked first, followed by domestic listed companies and US listed companies. To be more specific, the revenue of domestic listed companies was 3567.1 billion yuan, accounting for 56.18% of the total and increasing by 14.56% y-o-y. The revenue of US listed companies was 892.9 billion yuan, accounting for 14.06% of the total and rising 17.55% y-o-y. The revenue of HK listed companies was 1888.9 billion yuan, accounting for 29.76% of the total and increasing by 12.85% y-o-y (see Figs. 2.3 and 2.4). From the growth point of view, in 2019, among 308 continuingly operating ZLCs, there were 212 ZLCs achieved positive growth in revenue, accounting for 68.83% of the total number of ZLCs that continued to operate. Of the 212 ZLCs with positive revenue growth, 9 enterprises’ revenue growth rate exceeded 100%, accounting for 4.24%; 11 enterprises with 50–100% growth rate of revenue, accounting for 5.19%; 28 enterprises with 30–50% growth rate of revenue, accounting for 13.21%; 36 enterprises with 20–30% growth rate of revenue, accounting for 16.98%; 128 enterprises with 0–20% growth rate of revenue, accounting for 60.38%. The data shows that close 2 Due

to the different disclosure standards for annual reports of listed companies in domestic and overseas capital markets, this report only analyzes the overseas revenue of domestic listed companies.

2.1 Revenue Situation

31

PHARMARON ADISSEO GIGADEVICE SDICZL XC-TECH NORINCO INTERNATIONA COMPLANT-LTD SMEI HBP Shuzhi THUNDERSOFT TEAMSUN ZHONG KE SAN HUAN SINOMINE NET263 COL BOE ULTRAPOWER CAMCE SGMICRO SANLIAN HOPE KUNLUN OURPALM CONST JCHX BYKJ BDSTAR NAVIGATION CASC AT&M HANVON 0.00

86.75 86.61 82.39 82.23 80.97 76.58 72.23 70.11 60.49 55.99 55.54 54.48 54.18 51.16 50.99 49.59 48.78 48.60 47.86 47.61 45.23 42.77 40.87 39.42 39.40 39.04 35.39 34.63 32.02 31.91 20.00

40.00

60.00

80.00

100.00 (%)

Fig. 2.2 The Top 30 proportion of overseas revenue of ZLCs in 2019. Source Wind, compiled by ZLCA

to 70% of the enterprises have achieved revenue growth, and among the enterprises with revenue growth, the growth rate of 40% enterprises exceeds 20%, reflecting the increasing strength of the overall level of ZLCs, and there are many high-growth enterprises among them. As for the scale of revenue, among the 344 ZLCs, the number of enterprises with revenue of 100 billion yuan or more and the scale of revenue were 11 and 4418.913 billion yuan respectively, accounting for 3.20% and 69.60% of the total number of ZLCs and the scale of total revenue respectively. The number of enterprises with revenue of 50 billion yuan–100 billion yuan and the scale of revenue were 5 and 395.551 billion yuan, accounting for 1.45% and 6.23% respectively. The number of enterprises with revenue of 10 billion yuan to 50 billion yuan and the scale of their revenue were 44 and 881.537 billion yuan, accounting for 12.79% and 13.88% respectively. The number of enterprises with revenue between 5 billion yuan and 10

32

2 Report on Profitability of ZLCs in 2019

Fig. 2.3 Composition of ZLCs’ revenue in 2019. Source Wind, compiled by ZLCA

2017

2018

revenue(billion)

4000

2019 3567.1

3500

3113.7

3000 2500

2191.4

2000

1673.8

1500

1888.9

1211.6

1000

585.5

759.6

892.9

500 0 Domes c listed companies

US listed companies

HK listed companies

Fig. 2.4 Revenue of ZLCs in each capital market (2017–2019). Source Wind, compiled by ZLCA

billion yuan were 34 and 256.108 billion yuan, accounting for 9.88% and 4.03%, respectively. Revenue in 1 billion yuan to 5 billion yuan of the number of enterprises, revenue scale was 142, 341.013 billion yuan, respectively, accounting for 41.28%, 5.37%. Revenue in less than 1 billion yuan of the number of enterprises, revenue scale was 108, 55.750 billion yuan, respectively, accounting for 31.40%, 0.88%. The data shows that there are large differences in the revenue of ZLCs, enterprises of the hundreds of billions yuan and above revenue scale, accounting for 3.2%, have nearly 70% of the revenue. Enterprises of the 5 billion yuan and below revenue scale, accounting for 72.68%, have less than 7% of the revenue (See Fig. 2.5) (Fig. 2.6).

2.1 Revenue Situation

33 130.00

80.00

100 billion yuan and above

30.00

20.00

11companies 3.20%

50 billion to 100 billion yuan

5companies 1.45%

5 billion to 10 billion

34companies

Less than 1 billion yuan

170.00

881.54Billion yuan 13.88% 256.11Billion yuan 4.03%

9.88%

341.01Billion yuan 5.37%

142companies 41.28%

1 billion~5 billion

120.00

4418.91Billion yuan 69.60% 395.55Billion yuan 6.23%

44companies 12.79%

10 billion~50 billion

70.00

55.75Billion yuan 0.88%

108companies 31.40%

50000.0040000.0030000.0020000.0010000.00

Revenue/Billion yuan

0.00

10000.0020000.0030000.0040000.0050000.00

Quan ty

Fig. 2.5 Distribution of ZLCs’ revenue scale in 2019. Source Wind, compiled by ZLCA

Industrials

2704.906

Informa on Technology

1706.774

Consumer Discre onary

1130.829

Material

418.54

Health Care

143.095

Telecom Service

80.176

Energy

48.067

Public U li es

42.978

Consumer Staples

37.62

Real Estate

34.706

Financials

1.182 0

500

1000

1500

2000

2500

3000

(Biliion yuan) Fig. 2.6 ZLCs’ revenue in different industries in 2019. Source Wind, compiled by ZLCA

2.1.2 Industry Distribution of Revenue According to the first-level industry classification standard of Wind, Industrial, Information Technology and Consumer Discretionary became the three pillar industries of ZLCs in 2019, with the revenue reaching 2704.906 billion yuan, 1706.774 billion

34

2 Report on Profitability of ZLCs in 2019 Average Revenue by industry

Overall average revenue

34.24 Industrials Telecom Service 26.73

Financials

Material 26.16

Health Care 1.18 4.21 Energy

6.87 7.16 7.52

Public U li es Consumer Staples

23.08 Consumer Discre onary 12.10 11.57 Informa on Technology Real Estate

Fig. 2.7 The average revenue of ZLCs in 2019. Source Wind, compiled by ZLCA

yuan and 1130.829 billion yuan respectively, accounting for 87.30% of the total listed revenue. From the perspective of average revenue of various industries, the average revenue of Industrials (34.239 billion yuan), Telecommunication Services (26.725 billion yuan), Materials (26.159 billion yuan) and Consumer Discretionary (23.078 billion yuan) was higher than the average revenue of ZLCs (18.456 billion yuan) (see Fig. 2.6). In terms of average revenue growth by industry, the top 3 industries with higher revenue growth in 2019 were Telecommunication Services (up 2777.6% year-over-year), Energy (up 205.70% year-over-year), and Information Technology (up 25.45% year-over-year). The four major industries of Real Estate, Materials, Consumer Discretionary, and Industrials also had average revenue growth rates greater than 10%, respectively 20.19%, 15.03%, 13.31% and 10.2%.

2.1.3 Revenue Ranking Status In 2019, the top 30 ZLCs’ total revenue reached 5261.518 brillion yuan, accounting for 82.87% of the total revenue of ZLCs. Compared with 83% in 2018, there was no significant change in the proportion of the top 30 companies’ revenue. Among them, there were 11 listed companies with operating revenue of more than 100 billion yuan, which increased by 1 company with revenue of more than 100 billion yuan compared with 2018, namely BOE. Compared with 2018, in addition to CHINA TOWER, TAL EDUCATION and CNOOC replaced DBN, JIHUA GROUP, and TPV TECHOLOGY in the top 30, there was no significant change in particular in the remaining 27 enterprises ranking top 30 companies, which suggested that the ZLCs’ overall situation of leading enterprise development especially the head was relatively stable (see Fig. 2.8). In terms of industry, the top 30 enterprises in terms of

2.1 Revenue Situation CHINA RAILWAY CRCC JINGDONG CCCC LEGENDHOLDING LENOVO GROUP CNBM XIAOMI-W BAIC MOTOR BOE BAIDU MEITUAN-W BBMG CHINA TOWER SANY UNIS FOTON AVICHINA CHINA CRSC CHINA MEHECO AISINO CORPORATION CNOOC CHALIECO IQIYI CMEC BLUEFOCUS CHINA LONGYUAN PKU RESOURCES THTF TAL EDUCATION

35 850.88 830.45 576.89 554.79 389.22 359.33 253.40 205.84 174.63 116.06 107.41 97.53 91.83 76.43 75.67 54.10 46.97 42.12 41.65 35.28 33.90 33.46 31.06 28.99 28.30 28.11 27.54 24.13 23.04 22.50

0

100

200

300

400

500

600

700

800

900

Biliion

Fig. 2.8 The top 30 revenue of ZLCs in 2019. Source Wind, compiled by ZLCA

revenue were mainly concentrated in three industries: Information technology (6), Industrial (6) and Consumer Discretionary (6).

2.2 Gross Profit Situation 2.2.1 Overall Situation of Gross Profit and Gross Margin In recent five years, the gross profit of ZLCs continued to increase steadily. In 2019, the total gross profit of ZLCs was 1208.7 billion yuan, up 15.65% year-on-year. The company’s average gross profit was 3.514 billion yuan, up 8.93% year-on-year. Among them, the total gross profit of the 308 enterprises in continuing operations in 2018–2019 was 1155.938 billion yuan, up 14.27% compared with the 1011.556

36

2 Report on Profitability of ZLCs in 2019 gross profit

gross margin

1200

20.14

20.05

1209 1045.1

20.00

1000 19.43

800 600

803.5

19.50

677.1

gross margin %

gross profit Biliion yuan

20.50

1400

19.04 18.84

469.4

19.00

400 18.50

200

18.00

0 2015

2016

2017

2018

2019

year

Fig. 2.9 Gross profit and gross margin of ZLCs in 2015–2019. Source Wind, compiled by ZLCA

billion yuan in 2018, maintaining a high rate of gross profit growth. The gross margin of ZLCs was 19.04% in 2019, up 0.2% compared with 18.84% in 2018. The overall profitability of ZLCs was stable and well (see Fig. 2.9). In terms of the proportion of gross profit, domestic listed companies accounted for the largest proportion of the total gross profit of ZLCs, followed by HK listed companies and US listed companies. Hong Kong companies saw the largest yearon-year increase in gross profit, followed by domestic and US listed companies. Specifically, the gross profit of domestic listed companies was 574.24 billion yuan, accounting for 49.51% of the total gross profit of ZLCs, which was 11.06% higher than the 517 billion yuan in 2018. The total gross profit of US listed companies was 237.589 billion yuan, accounting for 19.66, 8.94% higher than 2018s 218.1 billion yuan. The gross profit of Hong Kong listed companies totalled 396.883 billion yuan, accounting for 32.83%, which was 28.03% higher than 310 billion yuan in 2018 (see Figs. 2.10 and 2.11). In terms of gross margin of each capital market, the average gross margin of the US listed companies was significantly higher than that of other capital markets for five consecutive years, and there was little difference between the gross margin of domestic and HK listed companies, which was mainly related to the large number of high-tech companies with new business models gathered in the US stock market. In 2019, the gross margin of both domestic listed companies and US listed companies declined slightly compared to 2018, and the gross margin of Hong Kong listed companies increased by 2.39% compared to 2018 (see Fig. 2.12).

2.2 Gross Profit Situation

37

Fig. 2.10 Composition of the gross profit of ZLCs in 2019. Source Wind, compiled by ZLCA

2017

2018

2019

gross profit(Billion Yuan)

700.00 574

600.00 517 500.00 398.30

397

400.00 310 300.00 218.1

238

232.20

173.00

200.00 100.00 0.00 Domes c listed companies

US listed companies

HK listed companies

Fig. 2.11 Gross profit status of ZLCs in capital market from 2017 to 2019. Source Wind, compiled by ZLCA

2.2.2 Industry Distribution of Gross Profit and Gross Margin In 2019, similar with the distribution of revenue, the gross profit of ZLCs in Information Technology, Industrials, Consumer Discretionary and Materials ranked the highest, 407.997 billion yuan, 345.805 billion yuan, 226.199 billion yuan and 119.539 billion yuan respectively from the angle of industry. These four major industries’ overall gross profit was 1099.54 billion yuan, accounting for 90.97% of ZLCs’ overall gross margin (1208.712 billion yuan) (see Fig. 2.13). In terms of the average

38

2 Report on Profitability of ZLCs in 2019 Domes c listed companies

US listed companies

HK listed companies

40.00% 35.00%

33.60% 29.55%

29.07%

30.00%

28.71%

26.61%

25.00% 20.00% 15.00%

18.30%

18.38%

19.16%

16.70%

17.81%

18.18%

2015

2016

2017

21.01% 18.62%

16.60%

16.10%

2018

2019

10.00% 5.00% 0.00%

Fig. 2.12 Gross margin of ZLCs in capital market from 2015 to 2019. Source Wind, compiled by ZLCA

Informa on Technology

408.00

Industrials

345.81

Consumer Discre onary

226.20

Material

119.54

Health Care

56.52

Public U li es

14.74

Telecom Service

12.94

Consumer Staples

10.71

Energy

9.54

Real Estate

4.56

Financials

0.16 0

Biliion yuan 50

100

150

200

250

300

350

400

450

Fig. 2.13 Total gross profit of various industries of ZLCs in 2019. Source Wind, compiled by ZLCA

gross profit of all industries, the average gross profit of Materials (7.471 billion yuan), Industrials (4.616 billion yuan), Consumer Discretionary (4.377 billion yuan) and Telecommunication Services (4.313 billion yuan) ranked higher than the overall average gross profit (3.415 billion yuan) (see Fig. 2.14). In terms of the average gross profit growth rate of all industries, the four industries with larger growth rates were Telecommunication Services, Utilities, Energy and Consumer Discretionary, up 689.83%, 529.63%, 64.04% and 18.51%, respectively. The two largest industries,

2.2 Gross Profit Situation

39

Fig. 2.14 Industry average gross profit of ZLCs in 2019. Source Wind, compiled by ZLCA

Information Technology and Materials, had the second highest gross profit growth rate after Consumer Discretionary at 17.63% and 14.87% respectively. As for the average gross margin of all industries, the average gross margins of Health Care (39.50%), Utilities (34.29%), Materials (28.56%), Customer Staples (28.48%), Information Technology (23.90%), Consumer Discretionary (20.00%) and Energy (19.84%) were higher than the overall average gross margin (19.04%). The most important reason for above-average gross margins in many industries was the larger share of revenue in industries with lower gross margins (see Fig. 2.15).

2.2.3 Ranking Status of Gross Profit and Gross Margin In 2019, the total gross profit of the top 30 ZLCs was 884.687 billion yuan, accounting for 73.19% of the total gross profit of ZLCs. Among them, 21 enterprises’ gross profit reached more than 10 billion yuan. ORIENTAL YUHONG, FOTON, LI NING, CHINA LONGYUAN and CHINA TOWER replaced TRT, CHINA MEHECO, TPV TECHNOLOGY, AISINO CORPORATION and TDTEC to rank in the top 30 of gross profit, and there were no more special changes with the overall ranking being relatively stable. From the perspective of industry segmentation, high gross profit

40

2 Report on Profitability of ZLCs in 2019

Fig. 2.15 Industry average gross margin of ZLCs in 2019. Source Wind, compiled by ZLCA

enterprises were mainly concentrated in Information Technology (12), Consumer Discretionary (12) and Industrials (6) (see Fig. 2.16). In 2019, the gross margins of the top 30 ZLCs were all above 70%, and there were 5 enterprises with gross margins above 90%, including BES (96.46%), KONRUNS (94.59%), ASK PHARM (92.56%), BALANCE MEDICAL (91.04%) and CHANJET (90.69%). From the perspective of industry segmentation, the top enterprises in gross margin mainly focused on Information Technology (15) and Health Care (10). These two industries had relatively higher technical threshold, certain technical patent requirements and higher core competitiveness of the industry, which usually made their gross margin high (see Fig. 2.17).

2.3 Net Profit Situation 2.3.1 Overall Situation of Net Profit In the past five years, the net profit of ZLCs had shown a steady rising trend, with the number of profitable enterprises accounting for more than 80%, and the overall profitability of enterprises was relatively strong. In 2019, the total net profit of ZLCs was 212.4 billion yuan, 8.7 billion yuan more than the 203.7 billion yuan in 2018, up 4.27% year on year. Among them, there were 277 companies made profits in 2019,

2.3 Net Profit Situation

41

Fig. 2.16 Ranking of ZLCs in gross profit in 2019 (top 30). Source Wind, compiled by ZLCA

accounting for 80.52% of the total number of ZLCs, with a total net profit of 284.333 billion yuan. 67 companies were in the red, accounting for 19.48% of the total number of ZLCs, with a total loss of 71.886 billion yuan.3 From the perspective of net margin, in 2019, the net margin for ZLCs was 3.35%, a decrease from 3.67% in 2018. The data shows that a small number of huge loss-making enterprises lower the overall net profit size of ZLCs. On the whole, the science and technology innovation enterprises in Zhongguancun have strong resilience and growth potential (see Fig. 2.18 and Table 2.1). Judging from the changes of net profit of ZLCs that had been operating continuously for two consecutive years in 2018 and 2019 of different capital markets, the net profit of domestic listed companies increased in 2019, while the net profit of US listed companies and HK listed companies4 declined to varying degrees. Among them, the total net profit of domestic listed companies was 114.709 billion yuan, which was 3 Among the 67 loss-making listed companies, there were 16 companies with losses of 1 billion yuan

and above, with a total loss of 58.271 billion yuan, accounting for 81.06% of the 67 loss-making companies’ losses, including Xinwei Group with a loss of 18.673 billion yuan, IQIYI with a loss of 10.277 billion yuan, and BEIGENE with a loss of 6.631 billion yuan. 4 In order to objectively reflect the general profit status of ZLCs in 2018, MEITUAN (3690.HK) is exclude from the calculation of net profit in this report. MEITUAN (3690.HK) reported a loss of

42

2 Report on Profitability of ZLCs in 2019 96.46 94.59 92.56 91.04 90.69 88.60 88.45 87.77 87.37 87.14 86.80 85.58 85.53 85.15 84.58 83.38 81.94 81.62 81.39 79.44 79.42 77.19 77.15 76.31 76.26 76.10 76.07 74.66 74.55 73.12

KONRUNS BALANCE MEDICAL AUTOHOME STAIDSON BIO FANG KINGOFTOFFICE SCIENCE SUN BEIGENE BEIJING ZUOJIANG TECHNOLOGY SL PHARM SINA GRIDSUM TONGTECH GSX TECHEDU HOTGEN 0

20

40

60

80

100

120

%

Fig. 2.17 Ranking of ZLCs in gross margin in 2019 (top 30). Source Wind, compiled by ZLCA Net profit

growth rate

63.08%

203.70

212.45

60%

200.00

Bilioon yuan

167.80 150.00

100.00

50%

147.10 40% 30%

90.20 21.39%

50.00

growth rate %

Net profit

70%

250.00

17.30%

20%

14.07% 10% 4.29% 0%

0.00 2015

2016

2017

2018

2019

Fig. 2.18 Net profit and growth rate of ZLCs from 2015 to 2019. Source Wind, compiled by ZLCA

2.3 Net Profit Situation

43

Table 2.1 Profit and loss statistics of ZLCs from 2015 to 2019 Year

Profitable enterprises

Loss-making enterprises

Total

Number

Proportion (%)

Number

Proportion (%)

Number

2015

201

84.45

37

15.55

238

2016

247

85.76

41

14.24

288

2017

263

84.29

49

15.71

312

2018

262

80.86

62

19.14

324

2019

277

80.52

67

19.48

344

Source Wind, compiled by ZLCA

6.895 billion yuan higher than 2018, up 6.40% year on year. The total net profit of US listed companies was 9.575 billion yuan, 12.578 billion yuan lower than 2018, down 56.78% year-on-year. The total net profit of HK listed companies was 77.996 billion yuan, 0.889 billion yuan lower than 2018, down 1.13% year-on-year. Further analysis showed that the decline in net profit of US listed companies in 2019 was greatly influenced by the losses of two enterprises, IQIYI5 and BEIGENE,6 which together accounted for 66.20% of the losses of US listed companies with continuous operation for two consecutive years in 2018 and 2019. In 2019, the number of US listed companies with continuous operation was a total of 31 and there were 18 lossmaking companies7 (58.06% of US listed companies), whose net profit is −25.540 billion yuan (see Fig. 2.19). From the net profit scale and net margin distribution status, in 2019, ZLCs’ net profit scale was mostly concentrated between 0 and 1 billion yuan, there were 115.5 billion yuan in 2018, which was mainly caused by the fair value realization of preferred stock (104.6 billion yuan) after listing, rather than actual loss. 5 IQIYI (IQ.O) posted a loss of 10.277 billion yuan in 2019, mainly due to an increase in main business cost, which was 30.348 billion yuan for the full year of 2019. Meanwhile, IQIYI’s revenue in 2018 was 25 billion yuan, with cost close to 27.1 billion yuan. 6 BEIGENE (BGNE.O), which posted a loss of 6.631 billion yuan in 2019, is a global, commercialstage, R&D-based biotechnology company focused on the research of molecularly targeted and immuno-oncology therapies, with both US and HK shares listed on the stock exchange. The main reason for the company’s loss is the highly speculative nature of investments in drug development. This involves significant upfront capital expenditures and a huge risk that a drug candidate will not receive regulatory approval or achieve commercial viability. The vast majority of the company’s operating losses are attributable to costs incurred in connection with research and development projects, as well as business-related selling, general and administrative expenses. 7 Companies with net profit loss from continuing operations of US listed companies for two years in 2018 and 2019: IQIYI (−10.277 billion yuan), BEIGENE (−6.631 billion yuan), BAIDU (−2.288 billion yuan), UXIN (−1.990 billion yuan), BITAUTO (−1.183 billion yuan), TAL EDUCATION (−878 million yuan), GRIDSUM (−537 million yuan), SUNLANDS TECHNOLOGY (−395 million yuan), CHEETAH MOBILE (−374 million yuan), SOHU.COM (−303 million), TUANCHE (−251 million yuan), 21VIANET (−181 million yuan), CHINA ONLINE EDUCATION (−104 million), ORIGIN AGRITECH (−66 million yuan), LIANLUO SMART (−31 million yuan), UTSTARCOM (−27 million yuan), RYB EDUCATION (−15 million yuan), and CHINANET ONLINE (−9 million yuan).

44

2 Report on Profitability of ZLCs in 2019 2018

140 120

107.81

2019 114.71

Net profit

100 78.88

80

78.00

60 40 22.15 20

9.57

0 Domes c listed companies

US listed companies

HK listed companies

Fig. 2.19 Net profits in capital markets of continuing-operation ZLCs from 2018 to 2019. Source Wind, compiled by ZLCA

234 companies, accounting for 68.02%. 67 loss-making enterprises, accounting for 19.48%. 29, 6 and 8 enterprises with net profit of 1 billion–5 billion yuan, 5 billion– 10 billion yuan, 10 billion yuan and above, accounting for 8.43%, 1.74% and 2.33% respectively. In 2019, the net margin of ZLCs was mainly concentrated in the range of 0–10%, with 146 companies, and there were also 80 and 50 companies in the range of 10–20% and 20–100% respectively, indicating that the vast majority of ZLCs had high profitability (Table 2.2). And from the joint situation of net profit and net margin, the profitability of ZLCs is good. From the perspective of growth, there are 221 ZLCs that made profits for two consecutive years in 2018 and 2019, accounting for 71.75% of the total number of companies in continuous operation. These enterprises are in sound operation condition, with strong profitability and great growth potential. Among the 221 companies that have been profitable for two consecutive years, there are 7 ZLCs with an average net profit of more than 10 billion yuan, 5 ZLCs with an average net profit in the range of 5 billion to 10 billion yuan, 27 ZLCs with an average net profit in the range of 1 Table 2.2 Distribution of ZLCs’ net profit scale and net margin in 2019 Net profit scale distribution