China’s entrepreneurship can guide other markets
When Uber entered China in 2013, it had little idea of what it was going to face in the next few years. DiDi, China’s homegrown ride-hailing start-up, initially had neither the exposure to global markets nor the technological expertise to give Uber a hard fight. Fast forward to 2018, however, and we can see that DiDi has pushed Uber out of the Chinese market and now holds about 80 percent of China’s ride-sharing market. It has also started deploying cutting-edge technologies to help several other countries in easing their urban traffic congestion. The rise of DiDi is broadly reflective of the rise of Chinese start-ups and the ecosystem that supports entrepreneurship in the country.
But is the Chinese entrepreneurship story consistent with the stories of other emerging economies? Are countries like India, South Africa, Indonesia and Brazil able to follow the same path as China in nurturing and promoting their startups? This may not be the case. In India, for example, Flipkart is the poster-child for entrepreneurship in the country. The e-commerce giant was India’s first unicorn and was recently acquired by Walmart for $16 billion. This amount is considered paltry by many experts who think that given the right support, the company would have emerged as significantly as some of its
Chinese counterparts like Tencent and Alibaba. Sadly, the Flipkart story reflects the dreams of Indian entrepreneurs, who hope to be acquired by global players. This is in contrast to Chinese companies’ dreams of becoming global players themselves.
Other emerging economies are arguably in a worse position in terms of entrepreneurship ecosystems than India.
Brazil – the largest market in Latin America – has a difficult taxation regime and a low tendency to realize deal opportunities. Poor corporate governance in the Philippines combined with low investor protection and a tepid entrepreneurial culture make it a difficult market. Mexico, Russia, Indonesia and South Africa are unable to realize their potential due to their lower than optimal human and social environments. India still needs to cut down on the administrative burden that startups face, along with improving labor regulations.
China outperforms these economies in all these aspects by a huge margin. This has made China the most attractive emerging market economy for investors around the world.
So how does all of this play out on the ground? We can see that India has a long way to go. China has started talking about the next phase of retail e-commerce and a broader convergence of online and offline retailing. This is partly because the cost of customer acquisition online has started exceeding the cost of customer acquisition through physical infrastructure. Meanwhile, India’s e-commerce sector has a share of the total retail market that remains below 3 percent. Online buying is still focused mainly on the country’s larger cities and not in other areas. If the Indian entrepreneurial ecosystem
seems so immature, it is only reasonable to assume that the other emerging economies have even more catching up to do.
Looking at this scenario, it is safe to deduce that the Chinese entrepreneurial ecosystem is at least half a decade ahead of its emerging market peers. In fact, Chinese start-ups are fueling start-up ecosystems in other markets by investing heavily in them. Furthermore, with rapid advances in technologies like artificial intelligence, big data, blockchain and 3D printing, there is a general consensus that China could soon overtake even the US in powering its economy through the development and deployment of new innovations.
The way China has galvanized entrepreneurship can provide significant lessons for other emerging economies. At the moment, even the advanced economies are feeling the heat.
The author is a Schwarzman scholar at Tsinghua University. Before coming to China, he ran a policy advisory firm in New Delhi. bizopinion@globaltimes.com.cn