The Link(Old)
The LINK, Mar - Apr 2010
China's Entrepreneurs
--A New Class Emerges
By Charmaine N. Clarke
China's business landscape is teeming with expatriate entrepreneurs whose dreams of success are fuelled by the country's reputation for double-digit growth. Increasingly, however, these newcomers must battle for turf against a 'new wave' of Chinese entrepreneurs: a growing pool of domestic business executives with management skills newly acquired either at business school or through working abroad, often with MNCs. These new skills, coupled with what has been described as an innate sense of personal ambition, have made China's emerging entrepreneurs a formidable force.
"The new wave is more educated, more sophisticated, knows the importance of having the right talent, has a greater appreciation of the value that comes from marketing and the creation of a brand, and they recognise the need to have sound financial management," says CEIBS Professor of Management Juan Antonio Fernandez. These are some of the learnings from research conducted by the CEIBS Spanish Centre of Entrepreneurship and presented in Chinese Entrepreneurs -- Lessons from the New Wave. The book was co-authored by Prof Fernandez and CEIBS Professor of Strategic Management Per Jenster.
Many among China's first wave of entrepreneurs, inspired by Deng Xiaoping's era of reform and opening up, were hobbled by the Cultural Revolution (1966-1976), which disrupted the education and careers of an entire generation. Prof Fernandez identifies the "second wave" of China's entrepreneurs as those launching businesses within the past five to ten years. This group, he says, benefitted from the opportunity to pioneer into formerly closed businesses and markets, and from China's growing global importance.
Future "waves" of Chinese entrepreneurs will not be so lucky, Prof Fernandez says. He predicts that China's third wave of entrepreneurs, emerging over the next 10 to 15 years, will face a more mature China market offering fewer chances to strike it rich through first-mover advantage. Instead, this third wave will battle against established and sophisticated second wavers --who have gained expertise through learning from both their foreign and domestic predecessors.
But even as the environment for entrepreneurship cools down, Prof Fernandez expects enthusiasm for launching business ventures to stay hot. "Entrepreneurship is an energy that you can see in China. It's very clear," he says. "China's dynamic entrepreneurial spirit is a combination of this energy and opportunity. The Chinese, almost instinctively, see business opportunities and they don't want to miss them."
The urge to be one's own boss has boosted China's economy. A report on the Development of China's Private Sector estimated that, by 2005, half of the country's GDP came from privately owned businesses in which mainland Chinese residents had invested. Since 2006, in China's urban areas, the private sector has employed more people than state owned enterprises (SOEs).
"The public sector, represented by the SOEs, is still important; but the private sector is occupying a more and more important part of the country's economic activity," explains Prof Fernandez. But just how "entrepreneurially friendly" is China, a country in the throes of transforming itself into a market economy? "China still has work to do, in order to facilitate those who want to create a company and start generating wealth," he says.
In 2008, among the World Bank's ranking of the ease of doing business for entrepreneurs in 178 economies, China rated number 83. While China placed above all the other BRIC countries (Russia ranked 106, India 120, and Brazil 122) the rating was a far cry from the stellar performances of two other economies with similar cultures to mainland China's --Singapore (#1) and Hong Kong (#4). The World Bank report also flagged China's weak points in attracting entrepreneurs: the nation received low ratings in "getting a business off the ground" (#135), paying taxes (#168) and licensing (#175). "There are often complaints that China's legal environment is too complex, which either paralyses those who want to start a business, or creates an opportunity for corruption," says Prof Fernandez. "To facilitate entrepreneurs, China -- like many other countries with these problems -- needs to clarify its regulations." In fact, the World Bank reports improvement for China from 2007-2008 in several areas -- ease of doing business, obtaining credit, paying taxes and closing a business -- but reports a worsening environment in terms of starting a business, registering property, protecting investors and engaging in cross border trade.
In Chinese Entrepreneurs -- Lessons from the New Wave, the authors use nine case studies to track the growth phases of a start-up, offering a detailed look at what it means to launch, grow and sustain (or lose) a business in China's fiercely competitive market. Most cases feature companies started by CEIBS alumni -- clearly members of the well-educated, more sophisticated new wave of Chinese entrepreneurs.
It is the challenges, Prof Fernandez says, which create the opportunities in China. "When societies are well regulated, when the rules are clear... there are less opportunities -- because every opportunity is already taken. China is still in this growth process, this process of discovery that makes it a fascinating country for entrepreneurs."
Fascinating but also risky. Thus those who do attain success in the volatile China market are clearly worth watching. With this in mind, this month's cover of TheLINK highlights three shining examples of entrepreneurial acumen among CEIBS alumni. Read on for profiles of:
• Zhou Ye (EMBA 2000), CEO of China PNR (page 28);
• Carlos Moncayo, CEO of ASIAM (DIMP 2008) who was voted by BusinessWeek readers as Asia's Best Young Entrepreneur of 2009 (page 34); and
• Judy Hua, Owner of Dragon City Fashion Design (EMBA 2008), whose designs received rave reviews at the 2009 Shanghai Fashion Week (page 40).