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Astonishing 17,000 companies being founded a day in China

Wang Jasen, CEO of Makeblock is seen at the company's office in Shenzhen in this recent photo. (Mainichi/Kiyohiro Akama)

BEIJING -- A surprisingly large number of companies are being founded in China each day -- some 17,000 to be precise, about 50 times the figure in Japan.

Wang Jasen used 100,000 yuan, or approximately 1.6 million yen, which he had collected from friends and acquaintances to establish a company in the spring of 2011. He set up the office of his firm, Makeblock, at a corporate foundation support facility in Shenzhen, a coastal area of China, to begin developing a robot that children can assemble as they learn programming. He was 25 years old at the time and had just graduated from university

"In China, there are many venture capitals that provide funds to startups. Even firms that have no record of achievements can receive capital if they are deemed promising," Wang said.

Makeblock successfully raised about 2.5 million yen in 2012. The company has since repeatedly raised hundreds of millions of yen on several occasions, and has developed into a major venture company that has about 500 employees and sells products in 140 countries.

"There is an environment in Shenzhen in which you can make your dreams come true just like in Silicon Valley in the United States," he said.

Even though most of the newly founded companies shut down within five years, a handful of successful entrepreneurs have created new business fields and brought vitality to China.

Shogo Ikemura, 23, from the western Japan city of Kobe who only moved to Shenzhen in September, was recently seen preparing to start his own company at a corporate foundation support facility in Shenzhen. He is developing an application and device that can analyze people's emotions from their voices.

"I've been able to cultivate relations with entrepreneurs and venture capitalists through smartphone apps and exchange events. I was surprised at the pace at which things progress here," said Ikemura.

In China where there are many manufacturers, there is a desirable environment for commercializing his ideas, he pointed out.

More than 8,000 people that aim to start businesses are registered with the Shenzhen facility, about 30 percent of who are from overseas. Young people aiming to start up are inspired by the enthusiasm to pursue the "China dream."

-- Investing in business trends that suit the times

In the Zhongguanchun district of Beijing, there are many prestigious schools such as Peking University as well as high-tech companies. In other words, the district is an "incubator" for venture companies.

The office of the Unique Way travel agency, which is popular for its advanced reservation system using artificial intelligence, is seen in this recent photo taken in Beijing. (Mainichi/Kioyohiro Akama)

Tony Wang, 47, co-founder of venture capital firm ZRC based in Zhongguanchun, was talking with 34-year-old Wang Zhiyuan, CEO of the travel agency Unique Way in 2012. Tony Wang immediately decided to invest in Unique Way after Wang Zhiyuan explained that the company would provide travel plans meeting the needs of customers at low prices using artificial intelligence.

"It took only two to three weeks (for Tony Wang) to decide to invest," said Wang Zhiyuan. Unique Way's plan has proven successful. Currently, over 200,000 customers use the company that has 300 employees and the average age of its workers is only 26.

Tony Wang, co-founder of venture capital firm ZRC, is seen in this recent photo in Beijing. (Mainichi/Kiyohiro Akama)

ZRC receives requests for investments in thousands of business plans a year. But the company deems that only about one in 20 such plans is worth investing in.

Tony Wang said, "We don't mind making massive investments if business proposals suit the trends of the times and business operators have enthusiasm about realizing them."

Venture investments are highly risky operations because an overwhelming majority of business plans end in failure, as an executive of a venture capital firm says. Nevertheless, such companies are being formed one after another and invest massive amounts of money in venture business schemes. This is because projects in which such businesses are highly successful in the large Chinese market become sources of massive amounts of funds for investors.

Online shopping giant Alibaba Group Holdings, IT giant Tencent Holdings Ltd. and internet search giant Baidu Inc. are actively investing in venture projects. These businesses invest in popular projects quickly, flowing massive amounts of money into the venture market.

-- Emerging industries developed by private firms revolutionizing economy

In China, so-called "unicorn" companies -- newly emerging firms worth $1 billion, or some 110 billion yen -- are being formed one after another.

TikTok, an application that allows users to create a 15-second video clip with their favorite music is highly popular mainly with younger people in Japan. The app is run by ByteDance, a Chinese company founded in 2012. The firm's news app for smartphones has proved highly popular in China and TikTok has attracted numerous users overseas.

According to U.S. survey company CB Insights, ByteDance's corporate value is $75 billion, or approximately 8.3 trillion yen, surpassing Uber Technologies Inc. which is valued at $72 billion, to become the world's largest unicorn company.

Over 80 of some 300 unicorn companies in the world are Chinese firms. Even though the number is below that of the United States at about 140, Chinese unicorn companies are rapidly increasing.

In China where most companies had been run by the state, newly emerging industries developed by private companies are revolutionizing the economy.

Venture capitals provide funds to venture companies and there are believed to be over 2,000 of the latter in China. They are catching up with U.S. venture companies in terms of the total amount of investments.

-- Gov't-led development of businesses intensifying competition

The Chinese government is orchestrating the boom in the establishment of new businesses. The government is enthusiastic about finding a new driving force behind the economy as the country's trade war with the United States is intensifying.

"Entrepreneurship and innovation play an active role in increasing the vitality of markets and creating jobs, and we must promote this," Premier Li Keqiang said at an event held in Chengdu, Sichuan province, on Oct. 9.

The Chinese government is endeavoring to strengthen domestic industries after learning lessons from the country's export-oriented sectors having been hit hard by the global economic crisis triggered by the collapse of the Lehman Brothers investment bank.

One of the cores of such work is the development of venture companies based on entrepreneurship and innovation policies. The Chinese government has more than 400 programs to that end. They include tax privileges to venture companies that support the homecoming of Chinese people enrolled in overseas universities or working in foreign companies and offer a variety of subsidies according to the developmental stages of companies.

Local governments and state-owned enterprises have provided funds to venture capital firms. Facilities to help people, mainly the young, launch companies and come in contact with venture capitalists are being established across the country.

"The Chinese government, which is aiming to trigger technological innovation, is tolerant toward new business projects launched by venture companies and applies loose regulations. There are many people who think the situation gives them an opportunity and try to launch new business projects without fearing risks," said Yusaku Nishimura, professor at the University of International Business and Economics in Beijing.

"This synergy effect has turned China into an experimental field for new technologies," he added.

Bicycle sharing businesses, which became a hit almost at the same time as venture businesses started to thrive, has demonstrated not only the surge in venture businesses but also their risks.

The first such service, which was launched in 2015, became popular with consumers because of its convenience and spread throughout the country. These businesses received capital and operators aggressively expanded their activities.

However, due to price competition triggered by intensifying discounts, the operators of such services suffered chronic losses. Large companies have gone under while others sold their bicycle sharing division. New business fields that are created in China are facing difficulties.

"Chinese entrepreneurs tend to pursue short-term profits. There are far fewer entrepreneurs who launch innovative business projects than in the United States," said Wang Jasen of Makeblock that is aiming to be a unicorn company.

Chinese venture companies are being tested over whether they can constantly produce new unique services.

(Japanese original by Kiyohiro Akama, China General Bureau)

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