China has seen a great rise in startups in recent years, especially in 2015. According to China’s state-run Xinhua News Agency, in 2015, over 12,000 new companies registered per day in China. It’s been a huge year.
So what’s the entrepreneurial environment like in China? What are the main characteristics of young Chinese entrepreneurs?
The Global Entrepreneurship Monitor (GEM): China Report, a report released in January by the national Entrepreneurship Research Center, Tus-Holdings and the Tsinghua University Research Institute for Innovation, provides answers to these and other questions.
Overall entrepreneurial environment and analysis
According to the report, China’s index of entrepreneurial activity is higher than that of other developed countries including the USA, the UK, Germany and Japan. The index of early-stage entrepreneurial activity of Chinese youth (ranging from 18 years old to 34 years old) is 18%, also higher than that of other countries and regions monitored.
The report says two-thirds of Chinese entrepreneurs are opportunity-motivated. They choose to pursue an opportunity as a basis for their entrepreneurial motivations rather than starting out of necessity.
Chinese women are also taking a greater role in entrepreneurship. According to the annual Hurun Rich List report, 23% of new tech billionaires added to the 2016 list are Chinese women while women only account for 16% of the total Chinese people on the list.
Relatively low education level
The number of young entrepreneurs with undergraduate degrees in China is low. According to the report, among young Chinese entrepreneurs between 18 and 24 years old, only 24% have undergraduate education while the percentage globally is 53%. For those between 25 and 34 years old, 34% have undergraduate education in China while the figure is 46% globally.
Young Chinese entrepreneurs are focusing on new technology and innovation. 65% think their products feature novelty and 12% use new technology in their startups, but in terms of “using new technology in products” and “developing new markets”, the Chinese indexes are far below other developed countries at 25.63 and 24.6, ranking 50th and 69th respectively.
Sources of start-up funding for young entrepreneurs
Young Chinese entrepreneurs also face financial challenges. According to the report, only 9% have successfully obtained a loan from banks or financial institutions while most of them, finding it hard to get a loan, are using their family savings.
Despite the Chinese government’s advocacy of entrepreneurship in the past few years, the social support for entrepreneurs in the fields of finance, education and culture are still relatively low, which has worked to prevent young Chinese entrepreneurs from getting assistance directly from banks.
In contrast, Chinese people attach much importance to family bonds and, to some degree, children are everything to a family. According to the Chinese Academy of Social Sciences, the number of only children in China reached 145 million in 2013 and will reach 300 million in 2050. With a great number of single-child families in China, it’s understandable that families tend to support young entrepreneurs and will even pour the family savings into a venture.
China has definitely experienced a more vibrant entrepreneurial environment over the past few years. More and more ambitious young people are actively engaging themselves in the huge tide of startups, pursuing their vision to create the next Google or BAT.