Small Business

A Chinese Welcome for Entrepreneurs


When Helen Wang left the eastern Chinese city Hangzhou for the U.S. in 1989, she was looking for a brighter future than her homeland could offer. So after finishing a master's in international development at Stanford University, she became a software project manager in Silicon Valley and never seriously considered returning to the mainland. "I was thinking, 'I don't want to go back. I'm in the U.S., the country of opportunity,'" she says.

Lately, however, China has started looking more and more like a country of opportunity. With the changes that have swept the country in the past decade, thousands of Chinese entrepreneurs are heading back home. Wang has spent the past year laying the groundwork for a venture she calls e-Mobilizer. The company is creating an online marketplace, accessible by mobile phones, for jewelry makers and other artisans in China.

SLOW CHANGE. For decades, China was one of the least-hospitable places on the planet for entrepreneurs. Following the establishment of the People's Republic of China in 1949, the Communist Party snuffed out everything but the smallest independent street stalls. Even when China started to open in the late 1970s, the transition happened slowly. State-owned monoliths continued to dominate the economy, and few people had the opportunity -- or the incentive -- to strike out on their own. Until the mid-1990s, few university students were allowed to choose their jobs and were simply assigned to government work units upon graduation.

In recent years, though, entrepreneurs have started to get more respect. Since the early '90s, the government has sought to stimulate entrepreneurship, developing high-tech zones, science parks, and business incubators. Though registering a company still requires reams of paperwork from government bureaucracies, it has been streamlined substantially, and in many cities agents-for-hire can handle most of the legwork for you. In a symbolic shift, the Communist Party in 2002 changed its bylaws to allow entrepreneurs to become members.

That has helped small business flourish in China. Today, it has nearly 24 million small independent companies -- a number that's growing at 15% to 20% annually. Real estate agencies, car repair shops, and many other categories of service businesses are mostly private today. Though virtually nonexistent a few decades ago, small to medium enterprises are responsible for 75% of new jobs, Hong Kong-based CLSA Asia-Pacific Markets estimates.

"In the modern business world you have to work independently," says Robin Yang, a 25-year-old who runs a language training school in the Western capital of Xi'an. "If you work for someone else, then you can't enjoy life very much."

NEW WAY OF LIFE. Still, reviving entrepreneurship in a country where it was virtually eradicated hasn't been easy. People who have spent most of their careers at big state-run factories may never warm up to the idea, especially in the underdeveloped west.

Yang Bao Ming, for instance, has worked as a senior engineer at a state-owned research institute in Xi'an for more than a decade. After seeing many colleagues laid off in recent years, he has considered opening his own business. Yet he hesitates. "If you have the time, the money, and the energy, then maybe you could open a company," he says. "But usually for people like me it's just impossible."

For those who proceed, obstacles such as the difficulty of finding capital, murky property rights, and a culture of copycatting make life difficult. Guangzhou exporter Soleil China has exported pet toys -- rubber steaks, fluorescent pink mice filled with catnip, and plastic chickens -- from the southern city of Guangzhou for the past decade. Soleil originally made products designed by its customers, but with 200 or so other factories in China that make similar items, everything was quickly knocked off by rivals.

"All the factories had the same things," says Soleil general manager Kate Feng. So a few years ago, Soleil started designing its own products, which has helped it stand out from the crowd.

COMING BACK HOME. Much of the new entrepreneurial spirit is coming from so-called sea turtles. These are the 200,000 or so Chinese who have returned to the mainland after working or studying abroad. Many provinces and cities offer preferential policies and tax breaks to lure them back home. In 2003, China had more than 110 industrial and high-tech parks designed to serve returnees. Together they had attracted more than 6,000 enterprises that generated $4 billion in revenues, the Personnel Ministry estimates.

One of them is Chelsea Qi Huai. The native of Zhejiang Province got her MBA from Stanford last May and turned down several offers from top American companies in favor of heading back to China to launch a venture working on software for managing and organizing digital music.

"The whole environment is improving," says Huai, 28. "If you want to be an entrepreneur and do something yourself, in China I think there's opportunity literally just everywhere," she says. "That's how exciting it is."

NAME GAME. Now, she's busy hiring employees for her Beijing-based company. Returning to China after just two years away to complete her MBA, Huai says she finds people are more open to entrepreneurs and small businesses.

And while companies still face plenty of bureaucratic hassles in registering, she's paying one of the city's new service outfits to do it for her. The process has been so smooth, she says, that the hardest part has been figuring out what to call her new product. Sasy Huai: "All the good names are registered already."


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