Reporter's Notebook: Returnee Entrepreneurs in China, Part I

I’m on a two-week fellowship in China and am taking advantage of it to report on entrepreneurship here in a series of blog posts. Check back for more in the coming days.

I arrived in China last week and it is not difficult to be impressed by the rapid economic progress this country has made. The sheer scale and speed of the transformation is indisputable. In Beijing, massive buildings soar into the hazy yellow sky while underground five new subway lines were put into operation in just the past year alone. Still, this is a developing country and outside the gleaming metropolises of Beijing and Shanghai it is clearly a land in transition. In Inner Mongolia, where I am currently, the countryside doesn’t seem to have changed much in centuries. Its brush with modernity appears to be the number of coal plants and nuclear power plants that dot the landscape. And in the endless stretch of the grasslands horses and cows graze among the six wind power farms and the hundreds of windmills — generating hundreds of millions of clean kilowatt power annually.

On the plane from Beijing to Hohhut in Inner Mongolia, I sat next to Toyota’s chief representative here who commented on the distinct difference between Japan, a country in economic distress and China which despite the global crisis remains in growth mode.

Of course it is China’s centralized government that is largely responsible for the growth that is visible at nearly every turn. Here big business is just that – big and in most cases the enterprises (cars, telecommunications, and other giants) are joint ventures with the government. However, at the moment when China stands shoulder to shoulder with the U.S. as an economic power burrowing its way at lightening speed into the 21st century, there are signs that entrepreneurship is emerging as a presence here – or at least it is trying to make itself known.

While in Beijing, I had the chance to talk to a few “returnee entrepreneurs.” These are Chinese individuals who were educated in the west and stayed there working in companies, while some went on to started their own firms. Lately however, many have begun to return to China in order to launch their own outfits here. They cite a number of factors. For starters, despite the dominant central government and its attendant red tape, the economic reforms have created great opportunities for new business that were not even remotely possible before. Increasingly, the government has made strides at embracing new ventures by offering start ups tax breaks and other business incentives. Also making starting up attractive: there is a well-educated, highly skilled workforce here. Moreover, the cost to launching a company is considerably cheaper than launching one in the U.S. Next up say these returnee entrepreneurs there will be a rapid rise in the infusion of venture capital.

One of the returnee entrepreneurs I met is Hao Hong. Hong went to the U.S. in the 1980s where he did post-doc work at the University of Georgia and then returned to China before coming back to the U.S. for good in 1988. An organic chemist by training, Hong taught and then worked at a few small bio-tech firms before starting his own company in 1994. Five years later, armed with the experience and training he received in the States, Hong arrived in Beijing with about $250,000 to launch the first of what would eventually become four pharmaceutical manufacturing companies. Today, Hong’s Asymchem, has 1,000 employees and is involved in drug discovery and commercialization. “Things have changed here considerably,” Hong told me. “And they are still changing.” Hong said that ten years ago when he started out, the entrepreneur was a rare creature. Not today, “when I came here,” he says, “there weren’t many. Now there are 100 times more entrepreneurs.” He added, “to start the same size company it would cost 25% more in the U.S.”

Currently, most of these returnee entrepreneurs are involved in high tech and bio tech ventures and finance, consumer goods, and real estate but as the country moves from a predominantly export manufacturing oriented economy to developing its domestic market to a more consumer-oriented society, there will be an increasing diverse number of new ventures.

At the Guanghua School of Management at Peking University, the leading business school in China whose dean, Weiying Zhang seeks to innovate the practice of business and management here (including seeking private funding sources outside of the government) entrepreneurship is becoming a more important part of the curriculum. The MBA program has increased the number of entrepreneurship courses and this fall will launch an entrepreneurship major. According to Hongbin Cai, the school’s associate dean (who earned his PhD at Stanford University), Guanghua actively seeks to increase the level of entrepreneurial activities into the curriculum. “We have mentors who help graduates set up businesses,” he explained. “The entrepreneurial spirit is high among our students, 40% of our MBA students are successful entrepreneurs.” For instance the founder of Baidu, considered China’s Google is a Guanghua alumni.

Interestingly, unlike the entrepreneurial culture in the United States where many drop out of college in order to pursue their fledgling businesses (Michael Dell, Bill Gates, Mark Zuckerberg come to mind) here the opposite holds true. According to Cai and Zhang, a good deal of China’s entrepreneurs return for their MBA’s after launching successful businesses. Says Zhang: “Successful entrepreneurs develop small businesses that become big businesses. They find it difficult to manage. The main reason they come here is learn the system of management. To start a business you need to be brave. There is risk in the beginning. But after there is more risk, you need more knowledge to maintain and grow it.”

Stay tuned for more…