China and its Chinese entrepreneurs: the rise to progress
The past two decades have seen unprecedented entrepreneurship growth in China, steering the transformation of its national economy from a predominantly state-run system into a globally significant power with ever more influence on the global order. In my new book, China’s Disruptors (published by Portfolio/Penguin) I explore this subject from its development in stages, showcasing examples of a variety of entrepreneurial companies, exploring the broader socio-cultural, political and economic dynamics, and how China’s entrepreneurs and their businesses will impact the world for years to come.
First, people should examine the unique characteristics of Chinese entrepreneurs which have led to their successes to understand the dynamics of their foundation. Fundamentally, companies now focus on high quality in terms of their products/services, moving up the supply chain to deliver tertiary services and sophisticated products which provide real value for customers.
To sustain competitive advantage, companies must reinvent themselves, not only sporadically or when competitive threats arise, but continually and proactively to stay ahead of the game. Companies grow in times of fierce competition beating against the odds by treating challenges as opportunities to push for new innovative solutions to outperform rivals.
After achieving domestic growth, Chinese companies often go global, expanding both organically also acquiring well-established foreign businesses. Chinese expansion is now not only in emerging markets, but increasingly in the US and Western Europe. Fosun is a prime example, who acquired Club Med earlier this year, along with multiple financial institutions and pharma companies in Germany, US, Portugal and more pending. Moreover, these entrepreneurs aspire to not only lead in the domestic market, but envision global market dominance. As Jack Ma said, “We don’t want to be ‘Number One in China’. We want to be ‘Number One in the World’”.
To scale up, Chinese entrepreneurial companies often adopt a “Jump Strategy”, moving away from traditional core competency focus, penetrating sectors beyond their original business scope to accelerate growth. Many have built “ecosystems” with all-encompassing products and services related to their original core business. Business model innovation is also critical for companies to disrupt the market, where players both new and established, big and small constantly challenge one another.
China’s entrepreneurs already assume a leading role in driving the nation’s growth in the coming years. The Government is showing support for entrepreneurship and innovation with ongoing reforms, deregulation and restructuring. The essence of Chinese entrepreneurship goes beyond business – many see this as a shared vision and goal among citizens and the government to see China reclaim its global leadership in creating scientific ideas and technological advances.
Given China’s scale in our interconnected world, changing China will inevitably mean changing the rules of global business. As China’s entrepreneurs grow, they must also tackle global issues, including environmental and economic pressures. With further global integration while China grows in its global position, nations must also rethink how to engage China, and vice versa.
Rather than seeing China as a sheer threat, the world should see the benefits which their entrepreneurs bring with their renaissance of innovative solutions for the world in a range of fields.
A unique phenomenon is taking place in China right now. Unlike its historically a top-down Government system, leading private companies – especially in the internet industry – are young and dynamic, with more resemblance to Silicon Valley in terms of culture, mindset and structure, than their traditional counterparts. China’s entrepreneurs is entering a new renaissance, with direct impact and influence on the world as China further opens up its economy.
At present, China’s economy faces multiples challenges: stock market volatility and currency devaluation following an already slowing economic growth over the past few years, which have affected the global economy. However, the reality is not necessarily entirely bleak. While China’s GDP may hover at around 7% for the next couple of years, or may even go down slightly, several drivers may yield new dividends to the economy. These include the restructuring of sectors especially plagued by overcapacity and inefficiencies, the shift to consumption-led economy, the state-owned enterprise reform, and the prevailing push for private sector-led growth. At the same time, China’s currency is relatively stabilized and it looks like major volatility in the short to medium-term is rather unlikely.
As the economy stabilizes, IPO plans and fund raising are likely to resume for private companies, as there is still propensity in the capital market to invest. So while China’s growth is slowing, its businesses are far from ending. The market, like all others, will experience highs and lows, where some waves are more pronounced. Such volatilities are a test of resilience – many may not last, but those who do will ultimately shape the force that carries the country forward in the global order.
Dr. Edward Tse is founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China. He is the author of the newly released China’s Disruptors (Portfolio/Penguin).