China wants to create a new economic model but it is risky.
University students’ interest
Nowadays, in China, the idea of building a new start-up is mostly inside students’ mind. In their opinion, there are 2 missions before graduating. The first one is to invest into the domestic stock market. Indeed, recently, it seems like investment is the best way to earn money quickly. The second mission is to build a new start-up hoping to be the next Jack Ma with its Alibaba website. This stems from the “Founder Mythology” idea and how he/she started from nothing to reach unprecedented heights of wealth and power.
Good dream but risky bet
It seems really risky for them because they are too young and unskilled. But actually, there are not alone. Indeed, the Chinese government is supporting them, it even tells them to not worry about their studies because if they have a really good start-up idea, studies come next. Thus, if you are studying in China, you can stop university for 1 or 2 years in order to build a new company.
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According to a survey, 40% of university students say they are willing to stop their studies to start their own company.
A new economic model
If the government is supporting university students to build their start-up, it is only because it needs them. Indeed, the government is doing so because they need a new economic model. China can’t only count on exportations, foreign investments and cheap labour industry.
Worldwide, the digital world is already really popular and China doesn’t want to miss this trend. Globally, the success top, on 1 to 3 years is really low. Only 10% of the new start-up survived. However, most of them are going bankrupt or are resold to more successful societies at a discount. This is a worldwide figure.
If building its own start-up is a new trend in China, it’s still risky. Don’t be surprised if you can read on headlines, stories about Chinese young start-up bankruptcy or lacking of capital support and a rise of bad loans from the Bank.
Some new companies can succeed, but you still have to keep in mind that a failure can still happen. People that are not aware of that are more willing to panic when it really happens. Nevertheless, panicking can have an impact on the Chinese economy.
Recently, Shanghai top officials said they wanted to launch a new plan in order to build the city as the new worldwide science and innovation leader within the next years. Some officials are making fun of this idea and are thinking about it as a new propaganda.
Opportunities & Threats
Building your company in China can be a good idea but you have to be aware that it won’t be an easy task. As any other countries, in order to start your very own society, it exists some requirements.
Firstly, about the income tax. This tax exists everywhere but at different levels. In China, this tax is about 25% percent of your earnings. That’s pretty high. That must be why some foreign start-up in China are built illegally. Or it can be also because of a lack of protection for intellectual property. You have to be aware that China is a country where the word copyright does not really exist.
But recently, Chinese government decided to make it easier to build a start-up. Indeed, they change the necessary requirements for company registration by reducing it.
China needs startups and love them… with a high rate of bankruptcy. Most of the new startups in China are built by university students graduate or not.
What about foreigners?
Foreigners can find China highly disorienting at first but full of opportunity on the long run. It’s a win or fail situation but still, it’s a country worth taking into account when you want to be in a fast paced for a fast growing environment.
Register your company in Hong Kong is a safer and less time consuming bet.
I’m a foreigner and I built my digital marketing company in China, if you want to know about my story, click here.