Reporter's Notebook: Returnee Entrepreneurs in China, Part I

Posted by: Stacy Perman on August 7, 2009

I’m on a two-week fellowship in China and am taking advantage of it to report on entrepreneurship here in a series of blog posts. Check back for more in the coming days.

I arrived in China last week and it is not difficult to be impressed by the rapid economic progress this country has made. The sheer scale and speed of the transformation is indisputable. In Beijing, massive buildings soar into the hazy yellow sky while underground five new subway lines were put into operation in just the past year alone. Still, this is a developing country and outside the gleaming metropolises of Beijing and Shanghai it is clearly a land in transition. In Inner Mongolia, where I am currently, the countryside doesn’t seem to have changed much in centuries. Its brush with modernity appears to be the number of coal plants and nuclear power plants that dot the landscape. And in the endless stretch of the grasslands horses and cows graze among the six wind power farms and the hundreds of windmills — generating hundreds of millions of clean kilowatt power annually.

On the plane from Beijing to Hohhut in Inner Mongolia, I sat next to Toyota’s chief representative here who commented on the distinct difference between Japan, a country in economic distress and China which despite the global crisis remains in growth mode.

Of course it is China’s centralized government that is largely responsible for the growth that is visible at nearly every turn. Here big business is just that – big and in most cases the enterprises (cars, telecommunications, and other giants) are joint ventures with the government. However, at the moment when China stands shoulder to shoulder with the U.S. as an economic power burrowing its way at lightening speed into the 21st century, there are signs that entrepreneurship is emerging as a presence here – or at least it is trying to make itself known.

While in Beijing, I had the chance to talk to a few “returnee entrepreneurs.” These are Chinese individuals who were educated in the west and stayed there working in companies, while some went on to started their own firms. Lately however, many have begun to return to China in order to launch their own outfits here. They cite a number of factors. For starters, despite the dominant central government and its attendant red tape, the economic reforms have created great opportunities for new business that were not even remotely possible before. Increasingly, the government has made strides at embracing new ventures by offering start ups tax breaks and other business incentives. Also making starting up attractive: there is a well-educated, highly skilled workforce here. Moreover, the cost to launching a company is considerably cheaper than launching one in the U.S. Next up say these returnee entrepreneurs there will be a rapid rise in the infusion of venture capital.

One of the returnee entrepreneurs I met is Hao Hong. Hong went to the U.S. in the 1980s where he did post-doc work at the University of Georgia and then returned to China before coming back to the U.S. for good in 1988. An organic chemist by training, Hong taught and then worked at a few small bio-tech firms before starting his own company in 1994. Five years later, armed with the experience and training he received in the States, Hong arrived in Beijing with about $250,000 to launch the first of what would eventually become four pharmaceutical manufacturing companies. Today, Hong’s Asymchem, has 1,000 employees and is involved in drug discovery and commercialization. “Things have changed here considerably,” Hong told me. “And they are still changing.” Hong said that ten years ago when he started out, the entrepreneur was a rare creature. Not today, “when I came here,” he says, “there weren’t many. Now there are 100 times more entrepreneurs.” He added, “to start the same size company it would cost 25% more in the U.S.”

Currently, most of these returnee entrepreneurs are involved in high tech and bio tech ventures and finance, consumer goods, and real estate but as the country moves from a predominantly export manufacturing oriented economy to developing its domestic market to a more consumer-oriented society, there will be an increasing diverse number of new ventures.

At the Guanghua School of Management at Peking University, the leading business school in China whose dean, Weiying Zhang seeks to innovate the practice of business and management here (including seeking private funding sources outside of the government) entrepreneurship is becoming a more important part of the curriculum. The MBA program has increased the number of entrepreneurship courses and this fall will launch an entrepreneurship major. According to Hongbin Cai, the school’s associate dean (who earned his PhD at Stanford University), Guanghua actively seeks to increase the level of entrepreneurial activities into the curriculum. “We have mentors who help graduates set up businesses,” he explained. “The entrepreneurial spirit is high among our students, 40% of our MBA students are successful entrepreneurs.” For instance the founder of Baidu, considered China’s Google is a Guanghua alumni.

Interestingly, unlike the entrepreneurial culture in the United States where many drop out of college in order to pursue their fledgling businesses (Michael Dell, Bill Gates, Mark Zuckerberg come to mind) here the opposite holds true. According to Cai and Zhang, a good deal of China’s entrepreneurs return for their MBA’s after launching successful businesses. Says Zhang: “Successful entrepreneurs develop small businesses that become big businesses. They find it difficult to manage. The main reason they come here is learn the system of management. To start a business you need to be brave. There is risk in the beginning. But after there is more risk, you need more knowledge to maintain and grow it.”

Stay tuned for more…

Reader Comments

Vivek Wadhwa

August 7, 2009 11:54 AM

Stacy, fascinating report. But what were you doing in Mongolia?

I would love to hear about any really innovative products under development there. Are there any technologies that may benefit the West? Do you see local companies creating new products for export?

Most of what I saw there during my trips was the adaptation/copying of western technology for local markets. It will be interesting to learn if they are going beyond this.

Anne Field

August 7, 2009 1:00 PM

I don't think it's true that many entrepreneurs drop out of college. There are some big names who get a lot of press, but they're not the norm. It's a myth, but it makes for a good story.

Anne Field
Not Only for Profit
http://trueslant.com/annefield

Prashanth B

August 7, 2009 2:03 PM

Nice article but not much info in it.

john

August 7, 2009 2:45 PM

The world's next great superpower. They hold the economic power (debt) over the United States, and the hold the military advantage (hundreds of millions of conscripts ready to cross the border) over Russia.

Hushiguy

August 8, 2009 3:50 AM

Hello, I am from Hohhot(Hohhut), have you actually been to there, the city is a amazing city just a mini Beijing, please give us some new account of Inner Mongolia, which does not only have endless grasslands and horses

Marek (Slovakia)

August 10, 2009 7:20 AM

I returned from my China business trip just a few weeks ago. The growth is impressive and I also managed to speak to some young people there, who were very optimistic about the near future and possibilities of having their own companies.

Jimmy Wang

August 10, 2009 8:45 AM

Our startup, 8D World, Inc., funded by returnees, is doing some real innovated work in Shanghai. Our educational product, Wiz World Online, is the world’s first virtual world dedicated for global English-as-foreign-language (EFL) learners to improve their spoken English. It does so in a highly motivating environment similar to massive multiplayer online games. This is not copying ideas/technologies from others. ;-)

For details, visit:
www.8dworld.com or www.wizworldonline.com

Jimmy Wang

@ Wadhwa

August 10, 2009 4:09 PM

Wadhwa is probably not the most reliable source of information. This is the same guy who claims that "Chinese engineers are absolute rubbish"

http://www.youtube.com/watch?v=YFIToDy5GuQ

This third world slumdog is so full of it

It's in our blood

August 10, 2009 5:33 PM

Chinese people are born with entrepreneural blood. Even though I grew up overseas, growing up my father would always remind us that the only way to get rich is to start your own business, that you can never get rich working for someone else. Even when I worked for a Big 4 consulting firm and later a major software firm he was not the least bit impressed.

Now after years of working for Fortune 500 companies I am itching to move to China to start my own business. One thing China must do though is to establish clear anti-piracy laws and strictly enforce them. Only then can high tech/bio tech innovations flourish.

There is so much that's readily available in the West that's still not available in China, so many opportunities if you get in early. It's the new frontier.

rob

August 10, 2009 10:10 PM

They may be educated in the West but the Chinese are incapable of absorbing Western values of independent thought. And returning to CHONA, they will feel suffocated by the iron fist of dictatorship. The whole nation will feel like a prison cell.
INDIA otoh has a free society with open contacts with the West. INDIA is far superior.

@John

August 10, 2009 10:23 PM

What are you talking about? That title belongs to India, who has just launched a nuclear submarine and is on the verge of surpassing the US as the world's IT hyperpower.

Frank

August 11, 2009 1:54 AM

Respond to Vivek Wadhwa,

I know a company which is working on a revolutional approach to get CT. This innovation will benifit all, except the current CT engineers. Since they want to announce this on Science Magazine, I can't tell more details. You shouldn't wait for too long, less than one year.

China Interest

August 11, 2009 9:33 AM

The growth in the major cities looks very impressive. It is, but once you have lived here for awhile, you realize that there are many problems. Not all is what you see. Thus, I am always a lot more interested in reading the stories from journalists that actual live or spend a lot of time in China. Sorry but you only got a small slice of the story. Go to www.mpettis.com for a more complete story of China.

gabe, san diego

August 11, 2009 12:14 PM

The Chinese worked in the West long enough to steal technology, trade secrets, etc......

Typical

August 11, 2009 12:53 PM

@Vivek Wadhwa, Rob and Gabe, SD(aka Indian in disguise), typical indians, totally jealous of China, out to slam China at every turn. Why don't you Indians just focus on getting those 800 million people out of poverty in India, and stop being green eye monsters to the Chinese who have leapfrogged you since the '80s.

Chinese do. Indians just talk.

Typical.

Taishan

August 11, 2009 1:49 PM

It is this growing free market, technology driven condition, that will launch China into a global consumer society. As these businesses strengthen, China can gain confidence in providing jobs for people with a strengthened reminibi upon free floating the currency. A few years back, China pegged her currency to 8.2 yuans per dollar and has strengthened it to 6.8 yuans per dollar today. I'm convince by 2020, it'll be around 5 yuans per dollar. By 2030, maybe 2 yuans per dollar. It is technology, business, trust in the financial system, that will truely bring China into super power status. Her GDP, I'm convinced, will be on par, with the combined economic output of entire Western world by 2030. I'm so stoked! :)

Taishan

August 11, 2009 3:44 PM

To John: I appreciate your enthusiasm for China, however, I can't help but correct certain misconceptions. China is the largest holder of US debt, nearly one trillion dollars, that's for sure. But you have to keep in mind, the US government is nearly 12 trillion dollars in debt, much it held by Americans. And this is true in Europe and in Japan as well, where they have trillions upon trillions in debt, much of it held by their own citizens. Where China holds the advantage over the developed nations, is not the debt that they hold (cause its minor in comparison to the tens of trillions of dollars in debt the developed nations owes each other and to it's own citizens), but rather, the Chinese government is only a few hundred billion in debt. In the long term picture, over the next 20 years, I cannot see how the developed world can possible sustain the tens of trillions in debt without it putting a major drag on their economies. It will hamper their ability to steer the economies during recessions (we are already seeing signs of that in this recession). China, not having the large debts, can navigate her economy in rough waters until things pick up again. It is the developed world's own indebtedness to themselves that will allow China free reign to grow, grow and grow....and grow...and grow some more :) ...

james

August 11, 2009 4:26 PM

gabe, your comment above only shows your ignorance and prejudice; as you've done so in other reports about China... you may want to stop doing this till you can at least pretend to be an educated person.

David King

August 11, 2009 7:06 PM

I just to work for Fidelity Investments.

One of portfolio managers I worked with visited Shanghai for a weekend.

After coming back, he told me China is paradise.

What a joke! Live there for a while and talk to those helpless and hopeless poors to find a better picture of real China.

If US government can do whatever the China communist regime does such as media control, manipulating economic statistics, disregard individual's rights, I bet US's growth will be much better.

crazies

August 11, 2009 8:26 PM


it's crazy to put racially motivated comments to the people in China and India. Also, it's impossible to summarize about a country in a short article. It's 1 billion+ and 1 billion+ of people, and most are struggling to make a living. Commenters/haters should spend time helping those people. The number of people returned is not unusual, but an expected number (so this is not really a news worthy).

Lee

August 12, 2009 2:42 AM

Stacy, great article. i thought it was a quiet movement only known to the Chinese students studying in top tier american universities. this movement will have gradual impacts in the next 20 yrs. actually america had similar movement when the institutions here attracted those european, largely german, scientists and engineers from late 19th to early 20th century.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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