Survey report on survival environment of chinese entrepreneurs

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The 11th Annual Meeting of Yabuli Chinese Entrepreneur Forum was held at Yabuli Town of Heilongjiang Province February 15-17, 2011. The theme of this year’s meeting was “New Decade, New Ideas, and New Power.” It was during this meeting that the Survey on Survival Environment for Chinese Entrepreneurs in 2010, jointly compiled by China Entrepreneur Forum Development and Research Foundation, Taikang Life Insurance Company Limited and Horizon Research Consultancy Group, was published. Hundreds of domestic entrepreneurs, economists, journalists, and financial experts attended, as well as over 20 US entrepreneurs. Attendees reviewed the ups and downs of Chinese economic development for the past decades and also discussed key areas for improvement in the entrepreneurial environment in the next decade. Moreover, they probed new opportunities and challenges faced by Chinese entrepreneurs.

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Survey report on survival environment of chinese entrepreneurs

  1. 1. Survey Report on Survival Environment of Chinese Entrepreneurs 2010 Yabuli China Entrepreneurs Forum Development Research Foundation Taikang Life Insurance Co., Ltd Horizon Research Consultancy Group
  2. 2. - 2-
  3. 3. Main Research Findings This research on entrepreneur survival environment is mainly aimed to research entrepreneurs subjective understanding, judgment and evaluation of three dimensions: social environment, commercial environment and individual environment. This study is supported by research on entrepreneurs’ values and behaviors.  Entrepreneurs generally hold positive view of economic development policies and economic trends, but the “three rushes” have highlighted deterioration of the entrepreneurial environment.  Entrepreneurs generally show much concern about fairness and stability of policies. Social environment  Most entrepreneurs are satisfied with local government Commercial administration but dissatisfied with specific land, water, and electricity policies. environment  Private enterprises are universally confronted with issues of Individual tax burdens, talent shortages, internal management; medium-environment sized and small enterprises face especially severe issues,  Entrepreneurs are highly satisfied with their personal lives, but they have no group identity or sense of security, leading to potential migration tendencies. - 3-
  4. 4. Finding #1: Entrepreneurs generally hold positive views of China’s economic development. - 4-
  5. 5. A majority of entrepreneurs are optimistic about China’s economicdevelopment policies. 68% Of entrepreneurs hold positive views of China’s economic development policies, and think that economic trends are favorable for development of their own enterprises. - 5-
  6. 6. Over 40% of entrepreneurs think highly of policies on seven emergingindustries 1 Positive influence 42.8% Influence of planning on seven strategic emerging industries as proposed in 2 Adverse influence 2.4% 41.9% attached “Suggestions on 12th Five-year Plan” on 3 It’s hard to judge presently. private enterprises 4 No influence 10.5% Entrepreneurs optimistic about targets for energy saving and emissions reduction There will be new market opportunities 45.7 Influence of industrial Upgrading will be achieved by taking 24.8 structure adjustment and advantage of those opportunities Increased costs due to increasing achieving targets for energy 25.2 investment in energy saving and emission saving and emissions Will be confronted with heavier pressure for 14.3 improvement. reduction as proposed in No influence 18.1 “Suggestions on 12th Five-year Plan” on private enterprises. Not clear 1.9 0% 10% 20% 30% 40% 50% - 6-
  7. 7. Finding #2: “Three rushes” highlightdeterioration of market environment - 7-
  8. 8. The civil servant rush; participation has exploded and civil servant hasbecome the most popular occupation. 1,420,000 365,000 Number of Number of applicants in 2010 applicants in 2006 The application-to-acceptance ratio is 87.5:1. A certain position in the National Energy Administration had a ratio of 4961:1. Horizon’s survey on lifestyle and consumption of Chinese youth in Why? 2010 shows: Impossible to be dismissed. First, stability Starting a White-collar /civil business servant Second, high remuneration Subsidies and benefits are key Taxation and customs are Third, seeking power 18% VS 76% the hottest. Fourth, highly coveted I want to have a try even I will not be successful. - 8-
  9. 9. The immigration rush – potential immigrants are growing rapidly. 4.8% of respondents have immigrated. 2.9% of respondents are going through 18.6% of respondents immigration procedures haven’t yet applied for immigration, but intend Living environment Investment Generally, their wife and children are to immigrate Clear water and blue abroad, and they are shuttling between sky, safe foods. overseas and home. Why? Children’s education Sense of security Better primary education and Tax evasion, policy change, public famous colleges. voice - 9-
  10. 10. The investment rush – Housing and stock markets are most favored byentrepreneurs for investment. Investing in real estate Investing in stocks 70% 62.9 60% 50% 40% 50 31.4 50% 31% 30% 20% 14.3 14.3 11.9 9.5 9 8.6 5.7 10% 1.9 0% ise tat e ks d rk ts elr y al e bt lea r rpr es oc fun wo uc pit ranc de tc t uity rt d ew ca a l nte al S A p ro old j re Ins u on No t oe Re eq c ial G ntu ati y in ate an Ve N ctl Pr iv fin Dir e nk Ba Top 10 investment environments, Guangdong 1st, Shanghai 2nd 50% 40 36.7 40% 30% 20.5 20% 14.8 9.6 7.6 10% 5.2 4.8 4.3 3.3 0% Guangdong Shanghai Beijing Zhejiang Jiangsu jiangxi Tianjin Hainan Chongqing Shandong - 10 -
  11. 11. Finding #3:The predicament of privateenterprise reflects flux between public authority and the market. - 11 -
  12. 12. Most entrepreneurs feel pressured by competition. Entrepreneurs feeling stressed Why ?Figure: Sources of pressure on entrepreneurs in competition with state-owned and foreign enterprises Tilt of government policies 34.2 Non-market 67% Support of preferential policies 15.7 factors Cost increases 35.7 Talent contest 22.9 Market prices 20 18.9% of of entrepreneurs feel Brand popularity 20 highly stressed. Technical innovation 15.7 Unconventional competition approaches 12.1 Enterprise management 7.1 Market factors 50% Product quality 5 Of entrepreneurs detect Others 2.1 unfairness in government’s Not clear 2.1 different policies toward state-owned and private 0% 10% 20% 30% 40% enterprises. Note: it is a multiple-choice question, with the total adding up over 100%. - 12 -
  13. 13. Policy change is biggest challenge for private enterprises Influence of state policy change on enterprises 78% Of entrepreneurs think the influence is high, and among them 24.3% think the influence is very high. So, entrepreneurs need to The survey shows that influence of policies on Study policies: immerse themselves even more deeply in studying policy orientation. industries quite differs from each other. Among Obtain voice, taking all reasonable measures to get their 21 real estate enterprise leaders in the survey, voices heard by relevant government authorities. 19 of them (90.4%) express that policy Make contact with government, taking more energy change has high influence on their in socializing with government officials in actual policy enterprises. implementation. - 13 -
  14. 14. Finding #4: Entrepreneurs both optimistic and pessimistic about thelegal environment, and show concern about enforcement of laws. - 14 -
  15. 15. Over half of entrepreneurs hold positive view toward existing legalprotections 51% Of entrepreneurs think the current Enterprise Laws can protect enterprises’ interests Entrepreneurs in service industry are seeking protection of intellectual property rights. Protection degree of laws on patents and intellectual property rights The ratio of entrepreneurs in such industries as real estate, computer service and software, 44% VS 51% information transmission, commercial and technological service who think that protection Not Established established of intellectual property rights are not established is higher than those in other industries. - 15 -
  16. 16. Dual effect of new labor laws Operations are more standardized. 41 Positive effect Labor cost have increased 68.6 Staff turnover increased 17.1 Adverse effects Staff made mistakes, slowdowns 16.2 Discouraging effect on foreign capital 3.8 No influence 5.2 Not clear 1 0% 20% 40% 60% 80% Large enterprises better adapted to new labor laws 50% Operation is more standardized. 62% Labor cost is increased. Other adverse effects account for less than 10%. - 16 -
  17. 17. Finding #5: Public opinion puts some entrepreneurs in awkward position. - 17 -
  18. 18. Entrepreneurs think that media are not objective, and considerthemselves a disadvantaged group Table What do you think of the relationship between entrepreneurs and the media? Entrepreneurs think media reports 1. Entrepreneurs are somewhat vulnerable and hardly have are not objective. a voice in face of media. 28.6% 43% 2. They have the upper hand and can influence the media 2.4% 3. Their rights to speech and influence differ for different events. 68.1% Over 30% entrepreneurs are subject to adverse influence of public opinion. Table: The public has raised hot 1 It creates some moral pressure. 19.0% discussion of “original sin” and 2 It damages my personal image and the 15.7% “heartless wealth” of collective image of entrepreneurs. entrepreneurs. 3 It has influenced my work and life. 2.9% - 18 -
  19. 19. Only 10% of entrepreneurs think “All-out donation” merits imitation. Table: what do you think of “All-out donation” behavior? 1 Fortunes are entrepreneurs’ individual accumulation, I do not agree with this behavior. 5.2% 2 Profits made by entrepreneurs should be used for reinvestment, raising returns to the community. 22.4% 3 I think it is a personal action, and should not considered necessary for all entrepreneurs. 59.5% 4 I think it is worthy of imitation; more entrepreneurs should do this. 11% - 19 -
  20. 20. Finding #6: Entrepreneurs hold positive views of local government administration. - 20 -
  21. 21. Most entrepreneurs view administration behavior of local governmentpositively Of entrepreneurs think that local 61% government’s administration concepts, efficiency and behavior have positive effect on enterprises. However, Of entrepreneurs think that local 61% land, water, and electricity policies are unfavorable for enterprise development. - 21 -
  22. 22. Finding #7: Four difficulties of private enterprises: tax burdens, financing, talent, and management. - 22 -
  23. 23. Problem #1: tax burdens are generally heavy. Entrepreneurs feel that tax burdens are heavy 54.8% “somewhat heavy” 80% + 24.8% “very heavy” Entrepreneurs’ view High tax rate and diversified Eastern regions Western regions tax categories 26.3% 17.9% Incomplete taxation system VS Haven’t enjoyed rights Service sector Industrial sector and status they deserve 28.7% VS 19.3% Lacking government trust - 23 -
  24. 24. Problem #2: private enterprises cannot easily get loans, especiallymedium-sized and small enterprises. Main financing channels 60% for private enterprises Entrepreneurs who find it difficult to Bank loans (50.5%) get bank loans Private sector borrowing (26.7%) 13.8% say “very difficult”. Equity financing (25.7%) Listing on stock market (15.2%) Attracting venture capital (10%) Large Medium and small Trade financing(7%) enterprises enterprises Financial lease(2.9%) 2.9% VS 15.9% - 24 -
  25. 25. Four reasons why private enterprises have difficulty getting loans “Banks are only willing to make a loan to state-owed big companies, even they would suffer great losses”. “Banks do not believe in the strength of private enterprises”. “Identity of private enterprises” “Policy trends” Identity“Complicated review and approval procedures” discrimination “Little understanding and confidence in the “Long review and approval time” industry” Complicated review Industry constraints and approval “Banks mainly support the real estate “Complicated procedures” Collateral is industry and give a little support to hard to find other industries” “Risk evaluation unscientific” “No collateral for IT industry” “No loans are offered to enterprises with small capital funds” “You need fixed assets and properties” “Physical collateral is required. And sometimes we may owe RMB 1 “Only collateral loans, no loans on credit” million for materials and worker’s salaries in a project, So how can we provide so valuable physical collateral?” - 25 -
  26. 26. Problem #3: Over half of private enterprises are troubled with talentproblems, three types of talents are most lacking. What is lacking? 54% Of entrepreneurs think current Lack of marketing talent Lack of professional technicians. Lack of middle management personnel 32.4 39 48.6 Staff turnover rate is high. 18.1 labor market cannot meet Staff are universally not very active. 9.1 enterprises’ demand for talent.  Lack of marketing talent Business concept of top management is 6.2 inconsistent with enterprises strategic  Lack of professionalEntrepreneurs’ view Unharmonious relationships among 4.3 technicians management team  Lack of middle management Divorce of higher education from society Others 1 personnel Enterprises’ human resource None 1.4 Job seekers are blundering principle are biased Not clear 2.4 Enterprises Enterprises’ training systems expanding greatly are incomplete. 0% 10% 20% 30% 40% 50% 60% Note: multiple-choice question, with the total summing to over 100% - 26 -
  27. 27. Problem #4: Internal management structures are bottleneckconstraining development of private enterprises. Completeness of internal management structure in the eyes of entrepreneurs Medium and small Large enterprises enterprises 82.3% VS 50.6% 56% 44% Eastern regions Central and “Complete” “Incomplete” western regions 57.9% VS 46.2% Effect of entrepreneurs’ personal social resources on enterprise development Large Medium-sized and 20% enterprises small enterprises 79% “Very great effect” 91.2% VS 76.8% “Great effect” - 27 -
  28. 28. Finding #8: Medium-sized and small enterprises in tougher struggle for survival. - 28 -
  29. 29. Small and medium-sized enterprises (SMEs) are more pessimistic about the macro-economy. SMEs are more extremely influenced by policy environment. SMEs feel less protection of laws. SMEs express lower recognition of local governments policies. Small & Medium-sized Large enterprises enterprises(%) (%)Economic development trend are unfavorable for development of 35 17.6their own enterprises.The government is quite unfair in terms of policies respectively for state- 15.2 2.9owned enterprises and private enterprises.Change of state policies has great influence on enterprises. 11.8 27.6Policies do not have favorable effect on protection of patents and 54.5 35.3intellectual property rights.The enterprise law cannot protect their enterprise’s interests. 46 36.3New labor laws have led to increased labor costs. 69.9 61.8Local government’ s administration concept, efficiency, and behavior 36.7 20.6have caused adverse influence on enterprises.Local land, water, and electricity prices are unfavorable for 63.3 35.3enterprise development. - 29 -
  30. 30. Finding #9: Entrepreneurs are highlysatisfied with their lives but dissatisfied with their property security and personal safety. - 30 -
  31. 31. Entrepreneurs are generally highly satisfied with theirlives. Entrepreneurs Common citizens Overall satisfaction VS 55% 76% Source: Horizon’s research on “Life Quality Index of Chinese Residents” in 2010 Large Medium-sized and enterprises small enterprises VS 91% 73% - 31 -
  32. 32. Entrepreneurs have low satisfaction with their property security andpersonal safety. Entrepreneurs Common citizens29% of them worry about property security! VS 11% think the public is unsafe.38% of them worry about personal safety. Source: Horizon’s research on “Life Qualify Index of Chinese Residents” in 2010 - 32 -
  33. 33. Conclusion – Contradictions and confusions among China’sentrepreneurs 1. Entrepreneurs are aware of huge development opportunities from the development of China’s market- oriented economy. But the intervention of public authority into the market has led to failure to achieve expectations and increased entrepreneurs’ feeling of uncertainty. As a result, entrepreneurs in China hope to avoid intervention of public authority into the market, and on the other hand they also actively make efforts to link forces with the public authority to make more profit. The latter route always makes them more dependent on public authority and deeper intervention into the market, trapping them in a cycle of dependence. 2. Entrepreneurs have emerged to accompany the development of China’s market-oriented economy. They share fortunes with the market-oriented economy, feel a sense of accomplishment brought by market innovation, and are also respected by society. However, their function in the market are not fully recognized, and even have yet to enjoy the power they deserve as taxpayers. Hence, in combination with a lack of public voice, entrepreneurs have no feeling of corresponding social identity. In addition, policy changes, criticism from public opinion, and other factors sap their sense of security with respect to their property and lives. Thus Chinese entrepreneurs often feel that they are treading upon thin ice. - 33 -
  34. 34. Survey Instructions Qualifications of respondents • Chairman, director, president, vice president or CEO of a private enterprise; • Still engaging in operating management; • The enterprise has reached a certain scale and influence Execution and Sample Size Distribution By January 7, 2011, 229 interviews had been conducted in total for the project of “Survey on Survival Environment of Chinese Entrepreneurs”; 19 were excluded due to enterprise nature, scale, and respondent’s identity, for 210 effective samples total. Table: enterprise scale distribution Enterprise Scale Quantity Percentage (%) Large enterprise 34 16.2 Medium-sized enterprise 169 80.5 Small enterprise 7 3.3 Total 210 100.0 Note: The survey is mainly conducted on large and medium private enterprises. For division of enterprise scale, please refer to the division standard of The National Bureau of Statistics. - 34 -
  35. 35. About HorizonKey
  36. 36. HorizonKey Who Are We? HorizonKey is part of the Horizon Research Consultancy Group founded in 1992, one of China’s first research consulting firms. The Group is a consumer- oriented, data-driven marketing and management solution provider. Today, it is China’s most prestigious domestic marketing research organization. The whole group is a seamless research & consulting services chain With sustainable R&D investment , Horizonkey.com: online studies on cooperation with international institutions, group cultures and accordance with the international professional standards, Horizon Group has grown to become a brand by Horizon Research: Case-based successfully combining global vision and project studies local expertise in research services. Vision Investment: Progress Strategy: Horizon provide China-fit solutions to Projects selection customer-driven advisory consulting solutions international clients. - 36 -
  37. 37. HorizonKey Who Are We? Horizonkey is an international marketing research company specializing in social and cultural research. Founded in 1999, China’s only private marketing research company based on opinion polling and studies of society and culture. Honored by ESOMAR and ARF with awards for best research practices Trustee member of ESOMAR and other academic associations Rapid dissemination of latest research to over 800 local and international media partners Our team  Horizonkey’s employees consist of young and conscientious local and international trained professionals. They have various academic backgrounds including Sociology, Statistics, Psychology, Marketing, Computer Science, Economics and Law. Over 90% of full-time researchers have master or higher degrees. More than 60% of them have had four or more years of experience in professional social and culture research or policy study. - 37 -
  38. 38. HorizonKey Our ValuesChina-based, global vision Profound insight, agile analysis Accumulate and innovateFor the last ten years, Our deep understanding of We believe understandingHorizonKey has provided Chinese society offers a change in China and aroundconnections between China unique perspective on the the world requires bothand the world. We use fundamental changes accumulation and innovation.objective, original data to happening daily. Our firm Therefore, we activelyopen windows onto Chinese grasp of up-to-the-minute incorporate previous researchsociety and consumers, developments allows us to to reveal underlying patternssimultaneously seeking to share “Key” moments with and adopt advanced researchbroaden China’s access to our partners worldwide. techniques to solve newthe rest of the world. problems. - 38 -
  39. 39. HorizonKey The Horizonkey difference Public Opinion Tracking Index Research The only research company with The only research company to experience tracking Chinese develop broad industrial and public opinion across diverse social indices to reliably identify trends over time. issues, multiple sectors and extended periods of time. Cultural Research Philanthropic Research The only research company The only organization capable of offering deep analysis of integrating research, resources lifestyles, values and and action in China’s growing consumer habits across philanthropy sector. different Chinese social groups. Communications Innovative Methods The only research company in We constantly add new methods to China with integrated global our research repertoire. We have communications and media used collaborative workshops to resource distribution. troubleshoot charities and an online lab to study consumer psychology and purchasing habits. - 39 -
  40. 40. Experiencing China with HorizonkeyHorizonKey (A subsidiary of Horizon Research Consultancy Group)Address: F7, Tower A, Gateway Plaza, No.18 Xiaguangli, East 3rd Ring North Road, Chaoyang District,BeijingPostal Code:100027Tel:010-84400011Fax:010-84400010More information, please contact HorizonKey: client@horizonkey.com

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