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Valley Girl

The Six Entrepreneurs You Meet in China, Part Two

Editor's note: This is the second of a two-part Valley Girl series on entrepreneurs in China. The second three of six types of businessmen are featured below. When I left my post as a reporter covering business software for BusinessWeek, I thought I'd never again have to write about the unsexy subject of supply chain management. Techies know the term well. It refers to the multistep process of bringing together a product's components and then getting finished goods to their destination. But during a recent trip to China, I was immersed in supply chain management again and encountered startups that are driving innovation in this crucial area. Their founders make my list of the six kinds of entrepreneurs you meet in China. Kings of Supply Chain Management. China's massive factories aren't just for Dell (DELL) computers and Apple (AAPL) iPods anymore. The country is climbing the value chain from electronics assembly to play an increasingly important role in product engineering, design, order fulfillment—even research and development. While in Beijing I met with the folks at Pharmaron, which handles drug development for huge U.S. drugmakers. Down the road, Pharmaron hopes to handle drug discovery for those same big companies. Which ones, you ask? Pharmaron won't let me tell. Western electronics, gadget, and pharmaceutical companies have their brand reputations to protect. They still collect the lion's share of the revenue generated by their products, and they don't want to broadcast the names of the Chinese players that help make them. The Non-Techie. Judging from the way a lot of Silicon Valley venture capitalists invest, you might think the high-growth opportunities in China are all in tech. But they're the minority. Fortunes are being made in everything from locally produced tomato paste to coal mining. Entrepreneurs are also taking on just about any consumer industry you can imagine. An example is Xu Xiong, who started Oriental Fashion Driving School. Chinese drivers have to attend driving school before getting licenses. Xu wasn't happy with the process. Students would pay thousands of dollars and still be expected to lavish teachers with gifts—even wash their cars—to get passing grades. Xu, a lowly hotel clerk, wondered why a school couldn't revolve around the students. Roughly 10 years later, he's training 60,000 students a year at a sprawling campus that boasts cafés, napping areas, convenience stores, its own bus line, and closed training roads. There's even a petting zoo. The company has been profitable since the beginning, and Xu has been innovative at every turn—be it through kiosks to schedule classes or computer terminals that transmit written tests directly to the government so no one can bribe their way to a passing grade. The Legend. Many in the West haven't heard of some of China's biggest and most impressive Web companies because they prize a low profile. One example is Giant Interactive (GA), a virtual game company that began in smaller Chinese cities but grew quickly, thanks to an army of 3,000 kids who go from one Internet café to another challenging each other to try Giant's games. In 2007, Giant went public on the New York Stock Exchange and today sports a $1.7 billion valuation. Of course, I know this mostly from what I've heard and read in Securities & Exchange Commission filings. Can I get an interview with someone at the company? Nope. Can I even get a callback from the PR person? Nope. (By the way, Giant, I'm not giving up.) However, there are exceptions to this unspoken rule to remain discreet, in part because successful entrepreneurs feel a responsibility to be a role model for the younger Chinese generation of would-be founders. Hands down the best-known is Jack Ma of A former English teacher turned CEO, Ma may be well-known in U.S. tech circles, but in China he's taken on rock star status. His face is used to advertise products, and he was a co-host of a Chinese reality show à la The Apprentice called Win in China. Would-be entrepreneurs speak his name in hushed, reverent tones. Kai-Fu Lee, the former president of Google China (GOOG), is another "legend," though he's technically not an entrepreneur, having made his name mainly by working for big U.S. companies in China. While I dined with Lee in Beijing, a person walked up to him and asked for an autograph. Still, I mention him because he's another example of a Chinese legend hoping that public displays of success will have a knock-on cultural effect: giving hope to would-be entrepreneurs—and their worried parents—that they're not necessarily throwing everything away when they quit a job to take a risk.
Lacy has been a business reporter for 10 years and is currently writing a book on global entrepreneurship. Her first book, Once You're Lucky, Twice You're Good: The Rebirth of Silicon Valley and the Rise of Web 2.0, was published by Gotham Books in May 2008. She also blogs for TechCrunch.

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