Start-up bug infects students, but ridding state sector of patronage proves challenge
Print Edition
CONDUCT a survey of the hottest buzzwords in China these days and one would likely find “innovation” ranked at the top.
Indeed, the term is so heavily bandied about in public discourse that it has given rise to what some call a “cult of innovation.” In the opinion of some observers, however, the national movement toward innovation should not blind us to its unintended consequences.
Such consequences include what has become known as “innovation bubbles,” meaning a plethora of unproductive innovative endeavors.
Nowhere are these bubbles more evident than at universities, where innovative-minded youngsters are being led away from their studies to open start-ups.
At a recent gathering of entrepreneurs and EMBA alumni, Lu Xiongwen, dean of Fudan University’s School of Management, dismissed the mania for innovation among students.
Expressing doubts about the wisdom of vigorously encouraging student “innovation,” Lu argued that “with no work experience, no source of income, and little hope of getting venture capital funding with no more than a few fancy ideas, students can only turn to parents or friends for financial support.”
As many as 99 percent of these endeavors will fizzle out since the majority of start-ups are doomed to fail, said Lu, who added that it is wrong to flatter the vanity of these Zuckerberg or Gates wannabes.
Educators should not equate an adventurous spirit with entrepreneurship, said Lu, for there is a lot more to entrepreneurship than just courage, willingness to take risks and thinking outside the box. In the case of China, entrepreneurship often means a determination to give up what one already has and leave the warm embrace of the state system.
Few illustrate this determination better than Qin Shuo, former editor-in-chief of China Business News, which he co-founded in 2004 as the flagship publication of Shanghai Media Group, a local state-owned media conglomerate.
Sacrificing comforts
To the surprise of veteran media observers, Qin quit his job early this year and started his own new media business at 47, an age usually considered too old to be entrepreneurial. He left behind a stellar career in print journalism spanning 25 years and many perks.
“I used to earn 500,000 yuan (US$77,222) a year, plus bonuses and perks such as having a personal chauffeur. Life was comfortable,” said Qin.
His decision was motivated by what he said were years of witnessing the inefficiency of the public sector. For example, art troupes perform heavily subsidized shows, and loss-making state-owned entities continue to receive financial support. Disillusioned, Qin could not but wonder, why can’t these failures be forced out of business?
Entrepreneurial spirit sometimes entails sacrificing comforts and interests given to insiders of the “system.” In a dig at himself, Qin said his departure from print media helped reduce the financial loss incurred by the state.
He also warned that the future would be gloomy for those in distress who instinctively try to milk the state rather than look for solutions on their own.
Years ago, during an economic downturn, civil servant was a coveted job. Now many are abandoning public office due to a lack of incentives, heavy bureaucracy and the ongoing frugality campaign.
Citing the economic slowdown this year and economists’ dire predictions of more hardship to come in 2016, Qin claimed that “five percent growth is better than ten percent if it is of better efficiency and quality. What matters is value creation.”
The obstacle to value creation lie in misallocation of resources in sectors where output is low yet a steady trickle of funding flow their way.
Qin recalled a Powerpoint slide he saw at a seminar. The slide showed an old woman carrying a parcel on her back, another in one hand and two babies in the other. This, he said, is a fitting metaphor for a China burdened by myriad economic difficulty.
Think twice about largesse
Against this backdrop, the state should think twice about its largesse because those on the receiving end are the least likely to have entrepreneurial spirit.
After all, what incentives are there if businessmen risk losing their shirt, only to pay taxes that are used to prolong the lives of those living off state subsidies, he asked.
No longer able to execute massive bailouts or stimulus packages, the government ought to feel no shame about saying that innovation, entrepreneurship and self-help are the way out for businesses that fall on hard times, he claimed.
Lu, the Fudan dean, concurred. No matter the extent of entrepreneurship, it has no hope — at least until now — of breaking the monopolies still deeply entrenched in resource-oriented industries, said Lu.
Therefore, in these challenging economic times, everyone needs entrepreneurship — but nobody needs it more than state-owned entities, he noted.
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