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China's Startup Culture 2015


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China's startup culture is rapidly expanding to the furthest reaches of society, disrupting the risk-averse traditions of previous generations. The new administration is encouraging startups through funds, incubators, and science parks as the next drivers of growth.

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China's Startup Culture 2015

  2. 2. CHINESE STARTUP CULTURE BECAME A VERY, VERY BIG THING THIS MONTH. “Startup business” is not an unknown term in Chinese society, but the start-up phenomenon hasn’t been anywhere as popular and familiar to the public as in some western countries. Startup culture has been very slowly growing in China for about a decade, but only recently—with the official support from the central government and several extremely successful examples like Alibaba and Xiaomi—have we seen a megatrend of support for start-ups becoming a powerful force in China. China’s premier and 2nd most powerful government leader, LI Keqiang, has stated the importance of and the government's strong support for startups multiple times since 2014. He has introduced a slogan for this new strategy titled “Popular Entrepreneurship and Mass Innovation” (大众创业、万众创新). The slow growth in China’s startup culture has gained a gigantic boost since Premier Li’s “State of the Union” address (the “Government Work Report”) delivered two weeks ago during the annual sitting of China’s congress, the National People’s Political Consultative Congress. Effectively, Premier LI has named Chinese startups as the next major engine for employment and Chinese prosperity. INTRODUCTION
  3. 3. CHINA HAS PLENTY OF VENTURE CAPITAL AND FAST-GROWING INFRASTRUCTURE. 1. More than 1,000 investment agencies fund entrepreneurs in China, holding a capital sum of over USD $56.8 billion. 2. Technology deals in 2014 increased 15 percent year on year to hit CNY 857.7 billion (USD $138 billion). 3. China has 115 university science parks and over 1,600 technology business incubators, which help startup technology companies develop by providing services such as management training or office space. These incubators and science parks are incubating over 80,000 enterprises and hiring 1.7 million employees. RECENT STATISTICS
  4. 4. A BIG STEP FORWARD FOR CHINA. China began its dramatic transition from a Communist, centrally-planned economy to a major market economy—with “Chinese characteristics”—in the 1970’s. Yet it was not until the early 1990’s that Chinese people were encouraged to open their own private businesses. The history of entrepreneurship in China is, therefore, relatively short. It is a seismic shift for China’s premier to announce the government’s full support and encouragement for startups this month. CHINESE CULTURE IS NEWLY READY FOR STARTUPS For many years, the first and best career path for young Chinese was to get a job in the government in a so-called “golden bowl” (financial stabilization and good social status) industry in state-owned enterprises. Families and parents are now more willing than ever to let their college graduates start their own businesses and take risks. Drawing on Alibaba’s Jack Ma and Xiaomi’s Lei Jun as models, powerful Chinese parents are allowing their offspring to try their hand at startup fortune. RECENT CULTURAL CHANGES
  5. 5. IMPROVEMENTS TO CHINA’S INTERNATIONAL REPUTATION AND ‘SOFT POWER’ With Xiaomi and Alibaba as powerful examples of Chinese tech companies that have built excellent worldwide reputations, China has realized that successful startups improve China’s image and soft power projection. A NEW ENGINE FOR CHINA’S ECONOMIC REFORM For decades, China has been the world’s factory, tirelessly producing low-profit and labor intensive products. Startups, mostly in the internet and technology sectors, are now officially seen by the central government as the best “new engine” for China’s economy, and as a critical formula for China’s economic reform. For the central government, “upgrading” China’s economy to a more technological and intellectual property-driven structure is an important strategy to ensure sustainable economic growth. CHINA’S GOVERNMENT HAS ANNOUNCED THAT STARTUPS WILL DRIVE JOB CREATION. Small businesses are newly recognized as the key drivers of job creation. China is entering a new economic phase (the “New Normal”) which calls for slower but more sustainable growth. As economic growth slows, China still needs to keep employment rates up. Startups are viewed as the best solution. STARTUPS GREATLY BENEFIT CHINA
  6. 6. STARTUPS INCREASE COMPETITION IN A HEALTHY WAY. Hundreds of thousands of Chinese startups increase market competition. According to government policies announced in the past two weeks, this will result in a public (especially the younger generation and people from the underdeveloped countryside and low income families) increase of opportunity and build more prosperous livelihoods. LET MORE GET RICH NOW. Chinas’ great and original reformer, President Deng Xiaoping, famously stated that “Reform and Opening Up” policies would “Let some people get rich first”. Under the most powerful President since Deng, President Xi Jinping and his Premier Li Keqiang have unambiguously said “Let more people get rich”. Increasing people’s incomes helps China to achieve its goal of a “moderately well-off society” and eventually realize “the Chinese Dream”, the full rejuvenation of Chinese power and prestige. STARTUPS MAKE CHINESE RICH
  7. 7. HOW WILL CHINA’S GOVERNMENT SUPPORT STARTUPS? It is still too early to tell – all policies have yet to be detailed. What is crystal clear, however, is that China’s central government will play both a supporting and guiding role. China’s State Council (its “Cabinet” of super-powerful ministers) has issued a call for ministries and local governments at "all levels" to support innovation. The State Council vows to provide a better environment for “popular entrepreneurship” and “mass innovation” by: 1. Lowering barriers, which includes the provision of tax benefits and lower rent for startup working space. 2. Strengthening government services, which includes making business registration and licensing much easier. 3. Guiding and promoting investments and funds towards startups, which includes improving the existing system of venture capital and angel investment to sharply reduce bureaucratic “red tape”. 4. Encouraging college students, scientists and engineers to start new businesses. REFERENCES CHINA SUPPORTS STARTUPS