It's not the institutional environment, taxes, or ease of hiring. To explain the country's astronomical entrepreneurship rates, Scott Shane digs into the data.
As MIT political scientist and China expert Ed Steinfeld says, "China [is] one of the most entrepreneurial places on earth." Perhaps this observation doesn't surprise you, given what's been happening to the Chinese economy in recent years. But you might not recognize how widespread entrepreneurship is in China, or why the country is so full of entrepreneurs.
What the Data Show
The latest numbers from the Organization for Economic Cooperation & Development (OECD) show that China's rate of self-employment far exceeds that in the U.S.—51.2% versus 7.2%—a gap that hasn't changed much since 2001.
Lest you think that self-employment represents something other than entrepreneurship, consider some other statistics. According to the 2009 GEM report, China exceeds the U.S. in its rate of nascent entrepreneurship, rate of ownership of new businesses, and rate of ownership of more established businesses.
China Has More Growth-Oriented Entrepreneurs
China doesn't just have more small business owners than the US; it also has more growth-oriented business founders. China had the highest rate of high-expectation entrepreneurship of any country covered by the study. More than 4% of the Chinese working-age population is engaging in high-growth-expectation entrepreneurship.
Furthermore, China scores higher than the U.S. (and many other nations) on realized rates of new business growth. So it's not just how much people expect to grow, but also what they accomplish in creating jobs that marks China's entrepreneurial activity. In China, the number of people plan to become entrepreneurs is 23%.
China Has Vibrant Financing Markets for Entrepreneurs
The 2009 GEM report also shows that the informal capital market is extremely vibrant in China. Approximately 6% of Chinese people between ages 18 and 64 made an informal investment in the past three years, compared with less than 4% in the U.S. One place where the U.S. remains ahead of China is in venture capital.
Why Is China So Entrepreneurial?
It isn't because of the size of the country's private sector. It also isn't the ease of business formation, favorable institutional environment, tax system or hiring employees.
Getting Rich Is Good
Keming Yang, a sociologist at Durham University, and author of the book Entrepreneurship in China, thinks the high rate of entrepreneurship in China results from a national focus on getting rich. "The Chinese people have a very strong desire, perhaps the strongest among all nations in the world, to lead an enviable material life," he explains. "It is a life-long struggle as they constantly compare their standard of material life with that of others around them."
The 2007 GEM Report supports the notion that Chinese entrepreneurs are motivated by the desire to make money. The GEM data reveal that fewer than 40% of Chinese entrepreneurs start businesses to have more independence, and more than 60% start businesses to increase their income.
Plus according to Steinfeld: "Chinese entrepreneurs, whether because of cultural or other factors, have consistently proven willing to establish businesses … in a number of high-risk, deeply unstable environments."
Maybe it shouldn't surprise anyone that China is so full of entrepreneurs. But the evidence that China is a go-to place to see entrepreneurs suggests we might learn something from studying Chinese attitudes toward starting businesses.
What the Data Show
The latest numbers from the Organization for Economic Cooperation & Development (OECD) show that China's rate of self-employment far exceeds that in the U.S.—51.2% versus 7.2%—a gap that hasn't changed much since 2001.
Lest you think that self-employment represents something other than entrepreneurship, consider some other statistics. According to the 2009 GEM report, China exceeds the U.S. in its rate of nascent entrepreneurship, rate of ownership of new businesses, and rate of ownership of more established businesses.
China Has More Growth-Oriented Entrepreneurs
China doesn't just have more small business owners than the US; it also has more growth-oriented business founders. China had the highest rate of high-expectation entrepreneurship of any country covered by the study. More than 4% of the Chinese working-age population is engaging in high-growth-expectation entrepreneurship.
Furthermore, China scores higher than the U.S. (and many other nations) on realized rates of new business growth. So it's not just how much people expect to grow, but also what they accomplish in creating jobs that marks China's entrepreneurial activity. In China, the number of people plan to become entrepreneurs is 23%.
China Has Vibrant Financing Markets for Entrepreneurs
The 2009 GEM report also shows that the informal capital market is extremely vibrant in China. Approximately 6% of Chinese people between ages 18 and 64 made an informal investment in the past three years, compared with less than 4% in the U.S. One place where the U.S. remains ahead of China is in venture capital.
Why Is China So Entrepreneurial?
It isn't because of the size of the country's private sector. It also isn't the ease of business formation, favorable institutional environment, tax system or hiring employees.
Getting Rich Is Good
Keming Yang, a sociologist at Durham University, and author of the book Entrepreneurship in China, thinks the high rate of entrepreneurship in China results from a national focus on getting rich. "The Chinese people have a very strong desire, perhaps the strongest among all nations in the world, to lead an enviable material life," he explains. "It is a life-long struggle as they constantly compare their standard of material life with that of others around them."
The 2007 GEM Report supports the notion that Chinese entrepreneurs are motivated by the desire to make money. The GEM data reveal that fewer than 40% of Chinese entrepreneurs start businesses to have more independence, and more than 60% start businesses to increase their income.
Plus according to Steinfeld: "Chinese entrepreneurs, whether because of cultural or other factors, have consistently proven willing to establish businesses … in a number of high-risk, deeply unstable environments."
Maybe it shouldn't surprise anyone that China is so full of entrepreneurs. But the evidence that China is a go-to place to see entrepreneurs suggests we might learn something from studying Chinese attitudes toward starting businesses.
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