China Promoting Student Startups: A Smart Decision?

China Promoting Student Startups: A Smart Decision?
飽受高考制度煎熬的學生步出考場,如釋重擔,喜出望外。Photo Credit: Reuters / 達志影像

Compiled and translated by Yuan-ling Liang

In China, more than 20 provinces are encouraging their college students to start businesses, including in Guangxi, Fujian, Beijing, Shanghai, Guizhou and Inner Mongolia. Schools are allowing students to extend their school years and establish their own companies without being kicked out of school.

Last May, the State Council of the PRC suggested there was a gap between academic training in higher education and practical experience, and that could be narrowed by teaching students how to operate their own businesses.

Schools provide funds and courses related to startups, and allow students who want to establish startups to extend their school years. The extended time ranges from two to eight years, which means that students can suspend school for more than two years and establish a company before they graduate. The time of absence counts as required school hours in terms of “practical training.”

Da-wei, a sophomore who set up an e-commerce company that sells produce, says “Suspending school let me stay focused on my business so I can do better,” says Da-wei. [Quote translated]

Will the young founders succeed?

Questions remain as to whether the businesses will turn out to be successful, as most of them are operated by inexperienced people.

In 2014, a survey conducted by China Youth Daily showed that 61% of young people found success in businesses difficult to achieve. Problems these young founders encountered included “not having complete long-term plans” and “lacking management experience.”

Ding Jun-feng, founder of the Fablab-O Shanghai, a lab in the College of Design and Innovation at the Tongji University, opposes starting business at a young age. Ding thinks that educating students to think independently is more important. He also says creating an innovative environment is key, because it would be easier for students to establish their businesses.

China’s current startup environment

While the Chinese government is expecting the new policy to alleviate part of the youth unemployment issue, China’s startup environment faces challenges.

Since 2005, Chinese officials have been promoting entrepreneurship and the country’s startup industry started to grow rapidly. In a 2014 survey analyzing startup activeness, China even surpassed the US.

In 2015, the Chinese government invested about 1.5 trillion yuan (approximately US$231 billion) in startup businesses, which is historically the highest amount of venture capital raised within a year. Most of the funds raised were poured into the high-tech startup industry and more than a thousand incubators were opened.

However, the sprawling growth may soon face headwinds.

Some investors see a looming bubble in China’s technology industry resembling that of Silicon Valley. In recent years, investors in the US have been switching from the traditional markets to technology startups. However, recent results show that many investors who poured money into the Silicon Valley’s startup industry may not regain their capital. There are fears this could happen in China.

According to experts, China’s inflexible capital sources are mostly owned by the government, and low thresholds for applying for funds and the lack of useful support from regional incubators may lead to limited progress.

The China Youth Daily survey also shows that high-tech startups in China view their products as “innovative” while they’re actually not, and therefore the companies find it hard to develop new markets for their products.

Edited by Olivia Yang

Education China
Bloomberg: Inside China's Historic $338 Billion Tech Startup Experiment
China Youth Daily
Vanity Fair: Is China Starting Its Own Tech Bubble?
Tech Node: Is China’s Startup Incubator Bubble Set To Blow?