Companies on the list of the China Top 500 Enterprises in 2006 posted total operating revenues of 14.14 trillion yuan (1.77 trillion U.S. dollars) last year, accounting for 77.6 percent of the gross domestic product.

The China Top 500 Enterprises 2006 Analysis Report said here Saturday that the Top 500 reaped combined profits of 642.8 billion yuan (80.4 billion U.S. dollars) in 2005, up 22 percent year on year.

Sinopec was ranked number one with operating revenues of up to 823 billion yuan (102.9 billion U.S. dollars), up 29.75 percent from 2004, and profits of 21.9 billion yuan (2.7 billion U.S. dollars), up 108 percent.

The report by the China Enterprise Confederation (CEC) and China Enterprise Directors Association (CEDA) said the proportion of operating revenue of the Top 500 to dross domestic product, although not a direct indicator of contribution to the national wealth, reflected the important role and influence of the Top 500.

It rose steadily from 55.7 percent in 2001 to 73.5 percent in 2004.

According to the report, the petrochemical, natural gas extraction, banking and ferrous metals industries represented profits of 313.8 billion yuan (39 billion U.S. dollars) in 2005, accounting for nearly half of the total profits of the Top 500.

Second to fifth rankings went respectively to the State Grid, the China National Petroleum Corporation, the Industrial and Commercial Bank of China and China Mobile.

The report said the high profits in the petrochemical and natural gas extraction industries, accounting for 20.6 percent of the Top 500, resulted from monopolistic market positions, strong demand and price increases. Meanwhile, the high profit in the banking industry, accounting for 19.6 percent, was due to share-holding reforms in recent years.

The profit-generating capacity of the country's enterprises were generally weak.

"To develop enterprises able to compete with their international peers, the country should spare no efforts to promote innovation, encourage enterprises to expand internationally and develop modern logistics," Liao Xiaoqi told the Top 500 Forum held on Saturday in Zhenzhou, central China's Henan province.

Eighty-four enterprises with profits of over one billion yuan (125 million U.S. dollars) accounted for 85 percent of the Top 500profits.

The average profit growth rate of the Top 500 was 20.14 percent with trade and wholesale, retail, aviation and enginery sectors over 100 percent, but just 474 enterprises were in profit and 21 were in the red.

The report revealed that 349 enterprises in the list were state owned, accounting for nearly 70 percent of the total. Their combined assets reached 39 trillion yuan (4.87 trillion U.S. dollars) at the end of 2005, accounting for 95 percent of the total.

It showed that state-owned economy remained dominant and controls the leading industries in the national economy.

The number of private owned enterprises in the list rose slightly by 1.6 percent year on year to 87 with total assets of 712.7 billion yuan(89 billion U.S. dollars).

Critics said many of the Top 500 are monopoly enterprises unfairly gained competitive advantages and had no real ability to hold their leading positions.

Yang Du, professor with the Renmin University, on the other hand, held the view that monopoly behavior, rather than monopoly enterprises, was supposed to have an adverse impact on the market. In fact, the monopoly position of an enterprise would help it run smoothly and, to a certain degree in an industry, would enhance the efficient utility of resources.

Yang said the production concentration in China was far lower than the United States where there were mega businesses in every industry.

The CEC said the list had 19 enterprises making their way into the World Top 500 while there were 11 in 2002.

Editor: Yan