China is undeniably the dragon of the current economic world order. In a nutshell, China’s GDP represents around 14% of the world’s economy, and by 2025, 100 new Chinese cities will be among the top 600 that will hold 60% of the global GDP. There is no denying the intrinsic weight of this giant, but China has suffered an unbalanced fast-forwarded evolution that has thrown an archaic political system and a closed society into the vertiginous world markets.
No wonder China is the land of contrasts: imposing skyscrapers that overlook deteriorated shikumen are the picture of a country battling modernity and an isolated past.
It was only 34 years ago that China’s economy was stagnated, inefficient, centralized and controlled in a poor, ironclad regime. After 1979, once China opened up for foreign trade and investment, the country soon started to make up for the lost time at break neck speed. Now China is the world’s second largest economy and the one that singlehandedly could tip all trade balances, for better or worse.
China’s investments can be tracked down to most countries around the world. China is pushing the real estate market in the U.S., the renewables market and luxury goods in Europe, and infrastructure development in Africa. It has proved to be a Goliath of resources, and while at the beginning of its economic opening China devoted its time to absorbing from the West, now it’s time for China to shine.
Helping to foot this huge leap forward is a group of Chinese and foreign entrepreneurs who are turning China into the new land of opportunity and a cradle for innovation. Entrepreneurship is by no means new in China. As a matter of fact, Chines people are probably the most entrepreneurial people on the planet. Over the years, immigrants from China have done a masterful job building businesses in every Asian country they have landed in. As these businesses grew, they have become the dominant economic and political force in country after country. This improvement of the overall financial situation has led many Chinese parents to send their children to be educated abroad in some of the best universities that the Western world has to offer.
The perception of entrepreneurship within Chinese society is also changing. Although high-performing Chinese students (and their parents) are still likely to choose careers in finance or government, the tech industry and entrepreneurship are gradually gaining prestige. Thanks to the increasing visibility of ultra-wealthy tech entrepreneurs, such as Jack Ma of Alibaba and Robin Li of Baidu, entrepreneurship is becoming an increasingly acceptable and desirable career path.
Entrepreneurship in China
As a result of the dynamics of the Chinese entrepreneurial ecosystem and the unique profile of those who start businesses in China, entrepreneurship takes a different form there than in Western economies. The Chinese version has three key components. First, those who succeed have mastered “integrated innovation.” They reinvent an existing business idea to meet the demands of Chinese consumers. Chinese entrepreneurs often start with Western-inspired products that fill local market needs but, after many iterative loops and localization, the end product differs significantly from the Western inspiration. Companies that only copy existing models are likely to fail.
Second, Chinese entrepreneurs have a deep knowledge of life in China and can identify unmet needs of the Chinese economy. With the Great Firewall and other government interventions, Chinese markets remain relatively closed to the rest of the world. Nevertheless, Chinese citizens continue to find ways to circumvent barriers and procure ideas from abroad, creating pent-up demand for goods and services ranging from vitamins to Facebook. Successful entrepreneurs flock to fill these gaps.
Finally, Chinese entrepreneurs carefully consider the role of government intervention. To avoid unpredictable policy changes, some entrepreneurs choose to enter regulation-light sectors. Others run toward key sectors identified in China’s Five-year Plans, which outline the government’s strategic directions for the country. These entrepreneurs hope to align with China’s industrial policy, which, when publicly announced, will be less susceptible to radical changes.
As China enters what could be a significant economic slowdown in 2014, there are a number of indications that the role of its entrepreneurs will expand. The country’s 12th Five-year Plan, released in 2011, announced that the education, financial services, health care, and logistics sectors would be deregulated, creating competition with state-owned enterprises and space for new firms. Shanghai recently launched a new free-trade zone in Pudong, which has already been likened to the country’s economic experimentation of the 1980s. In addition, improvements in credit systems and financial transparency should increase access to funding. China has abundant resources to create new institutions that support entrepreneurship and perform the regulatory functions required for fostering new entrepreneurial activity. For the foreseeable future, there will be a growing need in China for entrepreneurs who will no doubt play a pivotal role in the country’s future economic growth.