China’s incredible growth over the past two decades has seen it transform from an isolated, economically stringent society to a multi-faceted, market-oriented economy. China’s technology sector has become so strong that many western media organizations feel it has become a threat to the dominance of Silicon Valley, and companies like Facebook, Google, Amazon, etc.
Economic Growth in China
When looking at the sheer population in China, companies from the West tend to salivate at the potential rewards of capturing even a small share of the Chinese consumer market.
However, the growing private sector in China is being fueled by entrepreneurial companies with little fear of failure and a host of ambitions. China is by no means an easy market to penetrate, with plenty of red tape. While some western countries are active in helping startups and entrepreneurs to achieve success in the technology age, facilitating growth is not seen as a priority for the Chinese government.
Chinese Entrepreneurs Leading the Way in Tech
For all of China’s challenges, the country is quite prosperous. Particularly if you look at what some of the companies like WeChat, Xiaomi, and Didi Dache are doing. For those unfamiliar with Chinese startups, WeChat is like WhatsApp, while Xiaomi makes smartphones, and Didi Dache is a taxi-hailing app, much like Uber.
When looking at China from the outside, it is easy to get lost in the Association of China and low-cost, low-quality products. Without regulation to protect product quality, anything coming out of China isn’t considered to be dependable. While iPhone covers and other low-involvement consumer products rarely require a high level of performance’, products such as LED lights and items used for building apartments or houses that aren’t of high quality can be very risky to source.
However, sourcing products from China can be great for businesses seeking a competitive edge. I have friends who have traveled to China to set up relationships with factories in some of the outer provinces. These relationships have enabled those businesses to purchase products on the cheap and either sell directly to market or make alterations before sales. In all occasions, the low-cost products out of China have enabled the people I know to establish profitable businesses that would otherwise have been impossible to maintain.
Western Entrepreneurs Moving to China
Recently, many Western entrepreneurs (and aspiring entrepreneurs) have been making the move to China to pursue their dreams. The reason? Technology and manufacturing are dominant. A land where tech and manufacturing collide is an entrepreneurs dream.
Before making the move to China to chase your dreams, it’s important to understand what type of country you are entering. There are as many cultural reasons to go to China as there are for professional prosperity.
1. China has a beautiful, pristine rivers and lakes that leave you breathless. Working in China allows you to not only chase your dreams but soak in an unbelievable culture, enriched with traditions that are almost as intriguing as they are admirable
2. Chinese architecture is fascinating. While living in one of the big cities wouldn’t mean you are situated next to a serene and peaceful temple, this is all accessible by commute.
3. The hard-working, obedient nature of the Chinese is truly refreshing.
4. Chinese food is downright the best food in the world (yes, you know it too).
5. You are in the homeland of Feng Shui. This means you can undertake some of the world famous practices that help ensure good health and fortune.
6. The cost of everything is also much cheaper. If you are from the US, you can expect that your living standards will improve if you take up residence in China.
7. You will become worldly. Yes as cheesy as that sounds, experiencing other cultures is likely to give you a greater appreciation for that culture. It also makes you understand the way of life of a completely different country. Knowing this, whether in business or conversation, is knowledge that may be important some day!
That gives you a good snapshot of what China can bring you from a personal standpoint. It’s important to remember that every new country you visit will bring with it a wealth of experiences. However, from a personal growth standpoint moving to a country like China is completely different to say, a country like England or Germany. Understanding Chinese values is what will win you over in a foreign country like China, which is why living there and understanding the culture before you engage in business is highly recommended.
But back to what’s happening in China with regards to the tech and manufacturing industries. Because the fact of the matter is China is making waves around the world for its untapped potential.
For those wanting to get real experience and fast track career growth, working in China presents a wonderful opportunity to work with companies that require your knowledge. If you do your research, you will find that many of the elite US colleges are sending kids on exchanges to China. Some of these exchanges have resulted in the students/graduates staying in China or heading back there at the end of their courses.
Because in doing so, the colleges (such as Yale and Stanford) can provide their brilliant minds with expert mentorship, seed money, office space, links to supplier networks and provide knowledge of the local business ecosystem. Providing access is key to enabling young entrepreneurs to thrive. The universities that have done this, however, understand what an incredible market China is to visit for their elite students. Apparently, more than 100 foreign tech startups have arisen from some of these programs.
The interest in China doesn’t stop there. You have startup incubators now building presences in Beijing, and setting up networking communities (Chinaccelerator) and hack-a-thons (HAXLR8R). The surest sign of where the focus lies is to follow these startups and incubators around and see where they set up shop. Known for their testing, iterating, and learning fast models, there is no better place than to learn than ground zero. Being in China presents the best path to success, a lesson aspiring entrepreneurs should learn. If you want to be successful, be able to create something, and utilize technology, then go to where the action is happening. Right now that’s China.
Innovation and Entrepreneurship Seeing More Growth in China
You see for all aspiring entrepreneurs there is one important thing to know. US investment into the tech industry has essentially stalled. On the back of the monetization struggle, many tech startups in the US are now struggling to secure funding without clear monetization models and pathways. Whereas in the past, US venture capital firms were encouraged by companies that would forego profit to re-invest, now they are wary of the companies five-year growth pathways and are becoming much tighter with their funds.
Is this a surprise? Of course, it isn’t. There are companies around the world, from the US to the UK, and even Australia, who are becoming worried with the long pathway to profitability of some startups in year five and six with revenues of more than $200 million which still fail to reach profitability.
What’s it like in China? Well at the moment anyone with a promising idea and some experience can find money. Venture capital firms in China are continuing to fund startups with proven performers in their ranks.
On top of that, the Chinese government sees tech investment and a commitment to startups as a great way to create new jobs, launching a $6 billion fund for startups.
Another thing to keep an eye on is the performance of companies like YY. For those unfamiliar with YY, it engages in managing a social communication platform, enabling users to join real-time online group activities through voice, text, and video. Despite the market spins on the Nasdaq in 2015, YY brought in $580 million, proving that Chinese tech companies can cut it overseas too.
Changing Ideas, Changing Business Climate
The best part about China is the entire country has changed its business culture from one that valued financial security (especially after the early 90’s rise from poverty) to one that has embraced the fail fast, learn quick ethos. Where failure was once seen as punishable, it is now valued in China as a necessary step on the path to success.
Incredibly, while Chinese tech firms are out there challenging the big tech firms of the West, it appears that opportunity is rising for western entrepreneurs to go and work in China. Entrepreneurs are now flocking to China to collaborate with local factories and accelerators to bring ideas to fruition faster.
When the opportunity arises, it brings with it plenty of intrigue. Much like tech did to Silicon Valley; tech is now doing to China. The difference? Companies in China can develop prototypes for much less. Oh, there’s one more difference. China has more than 1 billion people. India, a culture with similarities to China in that it’s an underdeveloped rising world power with a huge population, is another market Chinese companies feel they can capture.
Which begs the question, if you could choose between Silicon Valley now, or Silicon Valley of 5-6 years ago, which would you choose?
I ask that question because at the moment; China is a booming market for tech. This is a market that has access to some of the best coders in the world. I am talking about work ethics that you just do not find in other countries. On top of that, you have facilities that can manufacture products on the cheap. For aspiring entrepreneurs, this presents an incredible opportunity. Not only will you be able to get your ideas built and turned into products on the cheap, but you can also test and at a low cost. This means that if you are following concepts such as those provided by Eric Reis in the Lean Startup, you can fail your way to success at a much cheaper cost than you would in a country like the US.
Also, whether you are launching products in the US or China, starting from within China makes it easier to access the Chinese Market. Why is this important? Well, the Chinese market is filled with companies that have strangleholds on certain industries. Assuming you are from a country outside of China, you are immediately seen as a threat. Being a company from inside of China means that you employ Chinese people, pay taxes in China, and generally will understand the way things work. You may not be able to climb through the market with ease, but you will have greater success being at a company based in China.
The last key point about China is that unlike Silicon Valley, the market you are initially launching to isn’t a tick over 300 million, its more than four times that. China’s population currently stands at over 1.35 billion people. More than 1 billion people than the US. So when you talk about wanting to gain a small % of market share, you are still talking about big numbers.
Innovation ad Entrepreneurship: No Longer Just a Catch-Up Country
Historically China has very much been a country of catch-up entrepreneurship, whereby it replicates products already on the market and manages to produce competitive offerings that can either beat existing players on price or value. This is something many entrepreneurs would consider a red ocean strategy, which refers to competing with organizations in your industry based on either price or value.
While this was an effective strategy in the western world for some time, at the end of the day you can only lower price so much without actually destroying the whole industry. This is what globalization has done for many foreign countries. The access businesses now have to cheaper products in China has made companies, particularly in manufacturing, unable to compete with Chinese counterparts. China can simply do it far cheaper than its competition, and has been successful. But there comes a point where that has to end.
Now China is operating more of a blue ocean strategy model where it focuses on value innovation; creating products that are not already on the market and have no direct competitors. This resembles the US market of the early 2000’s where companies were able to leverage technology to build blue oceans and capture large market share.
If I am an entrepreneur, that’s the market I need to be in. Blue ocean strategy means big money, and big dreams.
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