China's technology companies are closing the gap with their foreign rivals in productivity, positioning themselves to become a bigger threat to multinationals both in China and abroad, The Wall Street Journal reported on Friday.

The report, which quoted a survey by McKinsey & Co. and China's Tsinghua University, said Chinese tech companies are gaining ground on multinationals in terms of size and in terms of the efficiency of their operations, as they learn to fine-tune processes that in the past relied strictly on China's abundance of cheap labor to compete.

It also found that Chinese tech companies are increasingly moving up from low and mid-price product segments, which they have long dominated, into higher-end product segments that foreign companies have long dominated, said the report.

Several Chinese tech companies, such as PC vendor Lenovo Group Ltd. and telecommunications-equipment giant Huawei Technologies Co. , have begun competing in foreign markets.

One of the survey's more unexpected findings was that privately owned Chinese companies have sharply increased their productivity, as measured by revenue per worker, to levels that match or exceed their foreign counterparts, the report quoted McKinsey executives as saying.

Improved productivity enables companies to expand more quickly and can lead to greater profitability.

Among tech companies with annual revenue of at least 10 billion yuan, or roughly 1.25 billion dollars, private Chinese companies averaged revenue of 421,000 yuan per worker in 2005, while their foreign counterparts in China averaged 439,000 yuan per worker, said the report.

"That marked a change from 2001, when Chinese companies averaged 226,000 yuan in revenue per worker, while foreign companies averaged 501,000 yuan," the report added.

Source: Xinhua