Learn How to Start an Entrepreneurial Business in China

This article is sponsored by EMLYON Business School.

Since former Chinese President Hu Jintao’s announcement in 2006 that China would be a world-leading producer of high-tech goods, the country has developed its capabilities in innovation through a series of regulations favoring entrepreneurship. As the private sector grew more than 30% per year between 2000 and 2009, according to China Macro Finance, entrepreneurship in China faces new opportunities, as well as ongoing challenges. Students of the Global Entrepreneurship Program – a dual degree from EMLYON Business School and Purdue University’s Krannert School of Management – have the unique opportunity to spend a semester at Zhejiang University in Hangzhou, focusing their entrepreneurship studies on family business, which dominates this world region, as well as completing an in-company business project to develop their experience in Asian business issues.

The history of entrepreneurship in China

Up until 1978, business in China was dominated by state-owned enterprises (SOEs), with ‘entrepreneurship’ only existing as very small-scale activities in retail and services such as street vendors. Throughout the 1980s, agriculture was de-collectivized, opening up the market to foreign investors, and entrepreneurship was actively encouraged through the creation of patent laws and more investor-friendly environments. During the 1980s and 1990s, China focused its activity around exporting low-price goods to the international market and importing popular Western goods to Chinese consumers.

In recent years, the government has put measures into place to develop innovation in order to provide a more sustainable future for business in China. For example, China has invested heavily in the development of its R&D and high-tech sector, introduced tax incentives and local investment opportunities, and encouraged Chinese students to pursue engineering degrees.

25% of adults in China are entrepreneurs

As a result, according to the Global Entrepreneurship Monitor, nearly 25% of China’s adult population are entrepreneurs, twice as many as in the US. Well-known Chinese entrepreneurs include Jack Ma, the 18^th richest man in the world – a self-made billionaire and creator of Alibaba, a China-based B2B marketplace website which currently serves over 79 million members from more than 240 countries. Ma has an estimated net worth of $29.7 billion, according to Bloomberg Billionaires Index.

However, there are still many obstacles to the development of China’s entrepreneurial sector. Due to relatively high corruption levels in the Chinese courts, private entrepreneurs who lack government support can be disadvantaged, with small organizations usually losing court proceedings against large state firms, as well as a highly bureaucratic and time-consuming process for starting a business in China. More access to entrepreneurial studies and training is needed, as well as access to business incubators. And on a cultural level, there can be an incompatibility between traditional Chinese Confucian values, such as obedience and respect for authority, which can be at odds with entrepreneurial values. However, steps are being introduced to facilitate access to credit for private entrepreneurs and to create a more investor-friendly lending environment.

Future growth areas for entrepreneurship in China

According to research by Wharton University of Pennsylvania, three main sectors are set to see an increase in entrepreneurial activity in China in the near future:

High-tech: In 2012, 45% of Chinese venture capital investment financed the high-tech industry, totaling $4.7 billion. China has the largest number of internet users in the world, with over 640 million in 2014 – more than twice as many as the US – and the world’s biggest online gaming market. With thousands of Western websites such as Facebook and YouTube blocked, there are many opportunities to develop online products and services. For example, Robin Li, founder of China’s largest search engine, Baidu, holds over 80% market share, and this is the second largest independent search engine in the world.

Healthcare: With an ageing population, there are many opportunities for entrepreneurship in China to offer innovative products and services to improve quality of healthcare.

Renewable energy: The Chinese government has set energy targets to generate 15% of the country’s energy from non-fossil fuel sources by 2020. Entrepreneurs have new opportunities to deliver innovative solutions within water treatment, lighting, gas-fire generation, and environmental services.

Develop your entrepreneurial skills in China, with a focus on family business

As a student of the Global Entrepreneurship Program, you have the unique opportunity to spend a semester studying at Zhejiang University, located in Hangzhou, China. The purpose of this learning experience is to examine the entrepreneurial process outside of the Western world, in order to analyze the opportunities and challenges in the Asian business environment. This gives you an understanding of the challenges that international companies face when doing business in China, requiring you to develop your cultural awareness and cross-cultural communication skills.

During the semester in Asia, your entrepreneurship studies will focus on family business, which according to Chen Ling, Vice President of Zhejiang University, accounts for over 80% of all private business holdings in China. China has recently overtaken the US to become the world’s biggest economy, according to figures by the IMF released in October 2014. The report stated that by the end of 2014, China would make up 16.5% of the world's purchasing-power adjusted GDP (or $17.6 trillion), whilst the US would account for 16.3% (or $17.4 trillion). Add to this the fact that 85% of China’s private companies are family businesses, in which an individual or a family controls at least 50% of the firm, according to a study by the All-China Federation of Industry and Commerce in collaboration with Zhejiang University in 2010. Studying this aspect of entrepreneurship will therefore give future entrepreneurs a better understanding of how family business will grow in importance in the future world economy.

By studying family business as part of the Global Entrepreneurship Program, students interested in developing their own family business in China or elsewhere in Asia will have the chance to master entrepreneurship in a safe environment. As Program Director Pablo Martin de Holan states, if you make the wrong decision in your family business, this can be extremely costly and damaging.

Today, many Global Entrepreneurship Program graduates are working on the expansion of their family’s business. Program alumnus Abhinandan De’s family has been running educational institutions across India for 25 years, while Madhav Padia is working on expanding his family’s business, specialized in the trade of diamond tools.

The cohort also has the chance to complete an in-company project with a business in China during their time at Zhejiang University. This business project allows you to navigate the Asian business environment, put your intercultural skills into practice and gain practical learning and working experience in an international setting. Speaking of her semester of studying entrepreneurship in China, Global Entrepreneurship Program graduate Alison Passat says: “You really need to live and experience the country to understand it. You can literally feel the country’s energy and growth, and it is definitely a rite of passage for any budding entrepreneur.”

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