A short history of Modern Chinese Entrepreneurship

Entrepreneurship is arguably a new concept in China following the Reforms and Opening up Policy in 1978. Between 1949 and 1978, private ownership and entrepreneurship were largely dismantled and restructured in China as a result of the socialist economic policy to encourage the public ownership of the factors of production. Back then the main focus of the national economy was on industrialisation and also the development of heavy industry in China. The importance of private entrepreneurship was not being recognised by the government in its first few Five Years’ Plan.

However, following the economic difficulties experienced by the government and the people in those years, the government of China realised the importance of encouraging people to start up their own businesses. They believed this measure will add up to the momentum and diversity of the national economy. This is the general political and economic background of the rise of entrepreneurship in Modern China.

The first generation of Chinese entrepreneurs were often from the rural area of the country with only secondary school education attainment. They were mainly active in the 1980s and early 1990s. They were largely inspired by the policy of Deng Xiaoping after 1978. They normally started their businesses in the local counties and towns before expanding to the larger cities. However, given the historical circumstances and the education background of these entrepreneurs, they often lacked access to modern business management. And that was the biggest reason for their inability to grow and expand their businesses.

The second generation of modern Chinese entrepreneurs were mainly inspired by Deng Xiaoping’s “Southern Visit” in 1992. Many of these entrepreneurs used to work in some of the largest state owned enterprises in China and they believed the 1990s was a great period for them to leave the system and starting their own businesses. These entrepreneurs shared a different education background with their predecessors because they were the generations with better education achievement and many of them were educated at universities after the reintroduction of the University Entrance Examination system in 1977. Many of them went to Southeastern China in the 1990s for their first venture capital and became successful afterwards. Many of these entrepreneurs eventually became industry leaders and some of the big names of Chinese business people come from this generation of entrepreneurs. Many of the Chinese business leaders in the real estate industry also come from this group.

During the late 1990s and the start of the new century, the rise of the third generation of entrepreneurs began. This time the entrepreneurs often have overseas experiences and education backgrounds. Many of them came from the third wave of Chinese international students to America in the 1990s. It was in America where they experienced the rise of the Internet and also the development of computers and artificial intelligence. They realised China’s incompetence and backwardness in the field and decided to start up their own companies in those areas. The founders of the Chinese Internet giants such as Baidu, Alibaba and Tencent all started their businesses in that period. And throughout the first decade of the 21st Century, the Internet industry of China continued to grow and companies such as 360, JD and Xiaomi were all founded at the time.

Chinese economy experienced tremendous success in the 40 years of Opening Up and Reforms by becoming the second largest economy and also the largest single market of the world . One of the biggest factors for this success is the rise of private entrepreneurship and innovation. The government of China understands the importance of entrepreneurs to the further development of the national economy and is taking practical measures to improve the business environment in China. Following the First session of the 13th National People’s Congress in 2013, the new State Council under the leadership of Premier Li Keqiang called for “mass entrepreneurship and innovation”. The government is also working on policies to make the access to credit and capital more easier for entrepreneurs, more policies on deregulation and reducing red tape costs and also a decrease in direct taxes for small and new start up businesses. The government has also placed the development of private entrepreneurship as an important component of the government’s structural reforms on the supply side of the economy.