Published 16 August 2016 Category: Startups

Chinese startups going strong but there’s a need for flexibility

While investors in the European Union and United States have cut their stakes in startups amid global uncertainty, China’s government-backed venture capital funds are going strong.

The world’s second largest economy has channeled $338 billion into startup investment funds, almost 10 times spent by venture capital firms on Chinese startups in 2015 ($32.2 billion), according to Fortune.

China has reportedly raised around 1.5 trillion yuan ($231 billion) in state-backed venture funds through 2015, according to Zero2IPO. This is to slowly ease the heavy industry-focused Chinese economy into a consumer-based economy. The amount comes mostly from tax revenues or state backed loans, and is funneled into some 780 funds across the country.

As China’s economic expansion hits its slowest pace in 25 years, more startups are increasingly found in second or third tier cities such as Chengdu. Beijing remains the capital for startups, followed by Shanghai.
It is also reported that provinces across the China create special zones where new startups can tap funding opportunities and other incentives. While the number of technology startups remain strong, more medical research firms are being founded, and this is an interesting trend to watch out.

China launched a campaign to encourage entrepreneurship in 2014 and this helped to create numerous small startup across the country.  For instance, it was reported that the local government in Chengdu has set up seven start-up focused funds backed by private capital to promote industries like telecommunications, health and biotech, which amounts to 700 million yuan. In addition, many Chinese cities are launching similar programs as well.

An exponential increase in new startups has also triggered a stronger demand for office space, in which benefits the local and global mobile office providers.

But it is interesting to see if the start-up trend is sustainable in the long run, as the non-democratic country has many restrictions and state-owned companies.