Chinese cities offer generous incentives to foreign start-ups and entrepreneurs, along with access to a vast market and global talent pool.
The sheer size of the market is a major draw for entrepreneurs looking to gain traction. As the British owner of a ticket-purchase website in Shanghai put it, “Even a niche market in China is a huge one”. A deep talent pool is another advantage to growing a business in China. Market data and insights firm App Annie, for example, was founded by a group of European entrepreneurs in Beijing. It eventually moved its headquarters to San Francisco, but kept its R&D centre there. Stuart Oda, who co-founded agricultural-technology firm Alesca Life in Beijing, discovered young Chinese executives were much more willing than his Japanese compatriots to take a risk with a start-up.
Chinese cities are competing with one another to be a top destination for entrepreneurs. The biggest are Beijing, Shanghai and Shenzhen, which together have more than 100 unicorns – start-ups worth over $1 billion. Yet another growing hub is Chengdu, capital of Sichuan province, where incubators welcome foreign start-ups with a range of complementary facilities such as office space, as well as logistics services and business guidance.
In 2016 Chengdu poured 200 million yuan ($30 million) into an innovation and startup fund specifically for founders from outside China. It grants up to 1 million yuan to well-capitalised foreign start-ups and joint ventures. Founders who are considered “top international talents”, such as Nobel laureates, can be offered as much as 100 million yuan. Similarly Beijing and Zhejiang have opened well-funded centres for foreign entrepreneurs, according to The Economist.
Several hurdles still stand in the way of foreign entrepreneurs and start-ups looking to do business in China, however, not the least of which is obtaining visas. In at least 10 provinces, new policies have been put in place to ease the process, but for the moment, immigration remains a challenge. Secondly, the internet is under tight control, with many services such as Google and Twitter being blocked. Raising finance is tricky, due to capital controls which make it hard for venture capital firms to invest in foreign entities.
Still, an abundant market and global talent are potent lures, and the list of success stories continues to grow. Examples include the popular travel portal Qunar.com, co-founded by an American, Fritz Demopoulos. Dutch entrepreneur Marc van der Chijs co-founded Tudou.com, which merged with Youku, another start-up, in 2012, and has become China’s biggest video-streaming platform.
As to why foreign start-ups are being wooed, Lin Tao, a senior official of Chengdu, said the city wants to become a cosmopolitan city like New York and London, and that “the gathering of global talent is a precondition”. Steven Tong, Chief Executive of Startupbootcamp China, points to the government wanting to develop new technologies as well as cast China in a favourable light – something that is far easier to do with start-ups than established multinationals.