Editor’s note: this article was translated and edited from an article that appeared on banyuetan.org. It looks at the story of young entrepreneur named Li Rui. Though currently working at a bank, Li previously struggled for three years trying to set up his own travel company, ultimately finding it too difficult to get the company off the ground after failing to obtain a loan from the bank or local government. The article goes on to discuss the main reasons why so many young entrepreneurs in China are struggling to succeed, then suggesting that universities should provide them with better platforms for starting up businesses before they begin on their own.

After trying his hand at entrepreneurship for three years, 26 year-old Li Rui was forced to quit his venture of starting up his “Fresh Life Travel” company. He eventually accepted a job at a bank, which despite meaning he wasn’t able to achieve his own career aspirations, did at least meet his parents’ expectations of him finding a stable job.

In 2009, Li Rui was studying in his final year at the Southwestern University of Finance and Economics in Chengdu. It was during this time that Li, along with three like-minded classmates who all shared a passion for travel, began dreaming of becoming entrepreneurs in the travel industry. Together, they managed to obtain 100,000 RMB in start-up capital and rented out a small shop next to the university, which they named the Fresh Life Travel company. Recalling the next few years after he set up his company, Li explained that the strongest feeling he had was that “each step forward was not easy.” During this time, Li’s company applied for loans at several places to be used for start-up capital, but due to reasons such as an “immature management style”, they were repeatedly turned away. 

Li Rui: a case among many

Li’s case of dreaming about becoming a successful entrepreneur but ultimately failing is one of many. According to media statistics, only 0.3 percent of graduates from universities in Hebei province become successful entrepreneurs, while the highest rate of successful graduate entrepreneurs in China came from Zhejiang, with under 4 percent. And Guangdong, the province in China with the highest GDP, only saw 1 percent of its graduate entrepreneurs ending up successful. Furthermore, it’s become apparent that the higher the level of an individual’s education, the smaller chance that he or she will be willing to venture into an entrepreneurial career—among 3,865 Guangdong entrepreneurs who graduated in 2011, only 113 of them were finishing post-graduate degrees, while 1,550 had bachelor degrees, and 2,202 had high-school qualifications. Meanwhile, all of these figures are vastly overshadowed by the U.S., which sees an average of 30 percent of graduate entrepreneurs going on to be successful.

From beginning to end, funding is a key part of the entrepreneurial process that young business people have to overcome. According to the results of a recent survey asking young Chinese entrepreneurs where they’ll source their funds from, 48.5 percent of respondents said that they planed to borrow money from the bank, 41.2 percent said they expected to apply for funding from the government, while 22.7 percent hoped that they would be able to attract venture capital. According to a survey undertaken by the Ministry of Education however, the figure of young entrepreneurs who successfully borrowed money from banks was only 5%, while only 1% managed to acquire funding from venture capital or through the government. It seems for certain that many young entrepreneurs in China are still looking to their families for financial support.

Many policies in place to help, though no action      

There are currently many policies in place to assist young Chinese entrepreneurs in setting up their businesses. However, actually acquiring funds is a difficult procedure, as many banks lack the motivation to invest in potentially high-risk start-up companies. Many young entrepreneurs are not even able to pay the registering fee that comes with borrowing money from banks to set up a business. Additionally, entrepreneurs who do manage to get their businesses up and running will eventually face similar funding issues when they want to enter into the market.  
 
Analysts have pointed out that despite there being a wide range of different policies are designed to support young entrepreneurs in China, the process of applying for and actually acquiring this support is actually very long and arduous. As a result, many young entrepreneurs in China simply choose not to go down this route.

Fu Jiangfeng, who works for a venture capital company, explained that venture capital is supposed to be for self-employed entrepreneurs or university students. However, in reality, “Many university students often look to setting up businesses that belong to so-called “low-end” industries like internet cafes and restaurants, and businesses such as these are completely unable to achieve the income levels that are required by venture capital companies,” says Fu.

Another reason why young entrepreneurs in China are struggling to get their feet off the ground is because it can be tough to obtain a sufficient amount of trust and experience when forming a business team either during or right after university.      

Furthermore, a lack of general market resources and business connections often proves to get in the way of young entrepreneurs looking to set up a business. According to Gao Yazhou, the head of Changsha Vision Goods Recycling Company, “For entrepreneurs still at university, connections are very important. If you don’t have enough connections, it’s very difficult to get your business going, especially in urban areas.”

Is it down to universities to get budding entrepreneurs off the ground?

In one survey, many young entrepreneurs expressed that they feel universities should do more to help them get started. Since these entrepreneurs still at university don’t have much in the way of contact with society, the schools should be setting up platforms for them, not only to provide resources for these budding entrepreneurs but also to serve as spaces where they can meet and share their business ideas.

Source: banyuetan.org 

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Keywords: young entrepreneurs in China graduate entrepreneurs entrepreneurs in China