Are Start-ups the Answer to China’s Economy?

Published on Author Sam Wilson

In China, as well as many developing countries around the world, the new craze seems to be tech start-ups. The article explains that in China it is becoming more and more often for students to follow the path of Mark Zuckerberg and dropping out of college to start their own business. In fact some universities are encouraging their students to start their own businesses even allowing students to take a leave to do so.

This belief is caused by multiple different facets of life in China, one being that “many young Chinese said they consider Robin Li Yanhong, founder and chief of Baidu, known as the “Google of China”, and Jack Ma Yun, founder and chairman of e-commerce giant Alibaba, their idols.” The other is that China has developed a new “quick-money” culture.

This trend is scaring some economists and businessmen, including American billionaire Mark Cuban (who many of you might know from ABC’s Shark Tank). These people fear that this boom in tech start-ups is eerily similar to the “dotcom bubble and crisis” of the early 2000’s. Cuban even goes as far to say that he thinks that “[this bubble] could be far worse than the tech bubble of 2000.”

In China, however, there have been many higher-ups in favor of the funding and supporting local start-ups. One of these is Lee Kai-fu, one of China’s top angel investors and the former Google China chief. Lee hopes to create 10 million new jobs and envisions that “start-ups will pick up the slack where traditional state-owned enterprises have begun to reduce business expansion amid a nationwide slowdown in economic growth and Beijing’s curbs on pollution related businesses such as large steel mills and coal mines.”


5 Responses to Are Start-ups the Answer to China’s Economy?

  1. As China transitions from the export-based economy to one that is promoting consumerism in goods and services, tech start-ups certainly have the potential to create a lasting impact on this shift. Giants of the Chinese tech industry, Alibaba and Baidu and others, are thus charged with the responsibility to set a precedent in terms of value and practicality. In light of the recent controversy concerning China’s new regulations for foreign tech firms, it will be interesting to see how much they will look to Silicon Valley for “inspiration” if they gain access to their encryption keys.

  2. How do we define “start-ups”? If it means a new firm, there are surely over a million, as even in the US there are many, many new firms started every month!! (The database China Beige Book uses for drawing its sample includes 3 million firms!)

    It’s not clear there’s anything to this beyond Wall Street hype (I-banks wanting fees…). Even in the US silicon-valley type firms account for a small share of the economy. Remember, Apple employs a bunch of people in California, but the overwhelming majority of the manufacturing, including many of the chips, takes place outside the US, and Apple doesn’t pay any taxes in the US. Just because a “US” company has a big stock market valuation doesn’t mean that its a big contributor to our economy.

  3. As a whole can Chinese tech start-ups be as successful as start-ups located in the Silicon Valley? Groups that fund these start-ups seem to prefer to be located near the companies headquarters so that they can easily meet to discuss ways to improve their company. When you have many firms located in one area like the Silicon Valley their tends to be knowledge spillover. This knowledge spillover can benefit firms. I am curious to see if tech start-ups in China will stay in China, or move their business to areas like the Silicon Valley.

  4. It is difficult to say start-up boom among young Chinese generation can be an answer but I think it is a positive sign and definitely uncommon move considering very low participation of younger generation in business sector in East Asian countries especially Japan and South Korea. There is a newly coined term in Japan, Satori Sedai, especially referring to young Japanese who are “free from desires” and therefore refuse to engage in challenging activities or businesses but rather choose to live from day to day. Also in South Korea, there has been many policies and governmental centers to financially assist young generation who want to start their own businesses.