Rise of Startups in the Middle Kingdom
There is an old Chinese proverb saying “It is better to be a chicken’s head than a phoenix’s tail” and no, we are not talking about an ancient folklore but the ancient Chinese entrepreneurship’s spirit which existed 4000 years ago. The ancient consensus belief that every Chinese person wants to be his own boss still remains very true to this day.
The transformation of China’s economy towards a socialist one began from the moment the communists came to power in 1949. The whole economy was centrally planned. Industry was nationalized, agriculture was collectivized, and entrepreneurships were eliminated. During the Great Leap Forward and the Cultural Revolution, all economic activities were determined by the state from production to distribution, maintaining a monopoly across all sectors, creating vast inefficiencies in the market. Many have rather considered it as a “Great Leap Backwards”, a total failure, causing millions of death from widespread violence and severe famine. Instead of seeing the inefficiencies as they were, some entrepreneurs saw opportunities and the chance to capitalise on the situation.
Fast forward to modern day China, startups and entrepreneurship are thriving, once again to their former glory before the Cultural Revolution. The success was mainly the result of Deng Xiaoping’s market reform in allowing foreign trade and instituting “Four Modernisations”, improving major industries.
Anyone who does a quick “google” search will be able to find supporting data, suggesting the rapid economic modernisation happening in China. However the point I am bringing your attention to is the proliferation of the Chinese economy. It has and will continue to produce a number of prominent firms. Just to name a few: Tencent, Alibaba, Baidu and Xiaomi (note that I am only naming tech industries). Similarly in the US, a nation which has produced a great number of valuable firms such as Colgate, Dupont or State Street which can be traced all the way back to 18th century, not to mention many other great companies that came along in different eras such as Levis, Ford, GE, Disney, Microsoft, Google Apple, and the list goes on. As China advances, if following the trajectory of western nations, it will also produce a great number of valuable firms. Nonetheless, whenever a country experiences growth, setbacks will also come along. It is inevitable for China to experience downturns as well. Setbacks can be seen as a self-cleansing mechanism in order for the economy to grow by producing “only the strong” firms and weeding out the weak.
We are only just starting to witness the rise of the Middle Kingdom; China will undoubtedly produce great companies just as every great nation once did. As Napoleon Bonaparte once opined “China is like a sleeping giant. And when she awakes, she shall astonish the world”. Let us wait and see how China will astonish us all.
