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Entrepreneurship is a double-edged sword
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QUITTING her job as a receptionist, joining rock bands and chancing her tattoo-sleeved arm at small business ventures would once have branded college graduate Ding Jia as a rebel in China. Now she can claim state endorsement as a “creative.”
“I haven’t had a formal job in years,” said Ding, 31, sitting in her tiny coffee and cocktails bar on a trendy Shanghai street.
She has no regrets, but no illusions either.
“Entrepreneurship can be a really hard experience,” she said. “Profits can be so thin.”
In the week she spoke to Reuters, she and dozens of nearby businesses were forced to close temporarily by city officials on a regular sortie to enforce rules.
While most parents might warn their children off high-risk, low-reward self-employment, preferring jobs in government or state-owned enterprises, Ding says her Shanghai nurse mother and cab driver father were supportive.
That attitude finds an echo in high places; recent graduates who start their own businesses are being hailed in state media as a new creative class that will build China’s Silicon Valley.
“Creatives show the vitality of entrepreneurship and innovation among the people, and such creativity will serve as a lasting engine of China’s economic growth,” Premier Li Keqiang said in January. “I will stoke the fire of innovation with more wood.”
Many are receiving training, subsidies, free office space and other support from district governments and universities.
Optimists hope the next Jack Ma or Mark Zuckerberg will emerge from this pool, but skeptics say the policy is setting up inexperienced kids for failure.
The aim is to help shift China’s factory-based economy toward knowledge-driven services, and address unemployment among Chinese college students. Most private employers have little use for fresh graduates from crowded domestic universities, who may earn less than skilled factory and construction workers.
A Peking University study found that entry-level salaries in Shanghai averaged just 3,241 yuan (US$511) a month — a pittance in a city with one of world’s 10 most expensive property markets.
Chinese surveys show 20-30 percent of college students now aspire to entrepreneurship or self-employment, and Cui Ernan, labor analyst at Gavekal Dragonomics, said official data suggest they are following through.
The University Students Venture Park in northern Shanghai was designed as an incubator for college students eying a startup.
The free rent, accounting services and Internet access helped Jiang Gongbao launch his Long Ai marketing company.
Jiang said he understands the risks, but regards them learning opportunities.
“Failure is not a bad thing, as the process to start up a business is always meaningful,” he said.
Parker Liu, COO of a mobile technology startup in Beijing, began launching new companies before he graduated. He said district officials regularly scoured entrepreneurship events seeking startups to subsidize, on the understanding the firm would register in their district.
Liu said he had received small subsidies from district governments and helped introduce officials to other startups, but was doubtful about the benefits.
Liu said the support also encouraged too many into sectors with low barriers to entry, such as e-commerce, mobile games, and college prep schools.
“In terms of helping the job market, this sort of thing is of marginal benefit,” said Geoffrey Crothall, communications director at China Labour Bulletin. “They are going to price themselves into the ground, and so the wages they can afford to pay their staff are going to be very low as well.”
While official data are scant, failure rates appear unsurprisingly high.
“They have very poor management skills,” said Cui. “Most of the businesses run by college students I observe, only a few of them succeeded.”
What is needed, critics say, is a dismantling of the policy barriers that make life tough for the private sector, such as weak legal protection for new ideas, restricted access to capital, and labyrinthine regulations that enable corrupt officials to prey on small enterprises.
In a Reuters interview in Shanghai, Robert Zoellick, former World Bank chief, said: “Creating a level playing field is the start. You need to have an effective rule of law and property rights.”
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