China and its Chinese entrepreneurs are entering a new stage of development. Expanding overseas to sustain growth, Chinese companies now threaten the GAFA’s territories.
In the last two years, news on Chinese companies have frequently hit the headlines:
- Telecom equipment giant Huawei fell behind Samsung and Apple in the smartphone market.
- Suning Commerce Group accepted a $6 billion tie-up with Alibaba in online-to-offline efforts (read GMIC conference in Beijing).
- Tencent’s WeChat reports $50 billion transactions as of 2016.
- Group-buying website Meituan merged with booking and review app Dianping and raised another $3.3 billion this year.
Each story comes from one of the four ages of Chinese entrepreneurs as illustrated in Edward Tse’s book “China’s Disruptors”.
Uneducated First Wave of Chinese Entrepreneurs from the 1980s
The first wave of Chinese entrepreneurs often solely owned their businesses and had little formal education.
CEO Haier Group Zhang Ruimin did not attend university since the Cultural Revolution shut many educational institutions. Instead, his career accelerated during his time at the Qingdao refrigerator plant in 1982. Realizing that poor quality of goods deterred company growth, he demonstrated his commitment to high quality products through the destruction of 76 faulty fridges in 1984.
Through the formation of Qingdao Haier Group in 1991 and reorganization of human capital into 2,000 self-managed teams among other changes, Haier now owns largest market share for white goods with $32.8 billion revenues reported in 2014.
Founder Ren Zhengfei had just retired from the People’s Liberation Army before setting up Huawei in Shenzhen. Ren continually infused vitality within the company by sharing his passion and establishing structure in the enterprise. His selfless nature showed in his possession of only a mere 1.4% of company’s shares.
Today, Huawei is China’s largest private exporter with two-third of its $39 billion revenues from overseas.
Second Wave of Chinese Entrepreneurs from the 1990s
The second wave of Chinese Entrepreneurs was instigated by Chinese Premier Deng Xiaoping’s “Southern Tour” of 1992. Through consistent assertion of open and liberal economy principles, his actions and words fostered strong entrepreneurial spirit.
During this time, prominent entrepreneurs were holding government positions. Vantone Holdings’ founder Feng Lung used to work for state bodies while Chen Dongsheng, founder of Taikang Life Insurance, the fourth-largest Chinese insurance, was formerly an assistant researcher in the Ministry of International Business and Cooperation in Beijing.
As China progressively opened up, these Chinese entrepreneurs travelled extensively and closed deals involving technology transfer. The breaking of international barriers to the Chinese market and global competition allowed private companies to grow.
The Internet Chinese entrepreneurs of the Third Wave from the early 2000s
As China entered the World Trade Organization in 2001, it began to leverage on Internet-powered businesses. Alibaba’s Jack Ma journey is extensively documented in Alibaba’s former VP Porter Irishman documentary “Crocodile in the Yangtze”.
He understands that the Chinese business landscape can only be adequately evaluated within national borders. Moreover, Ma envisions the creation of bridges between China and the world through the tools of the Internet and online marketplaces.
Chinese entrepreneurs were confident about raising financial capital overseas. Particularly, they were grounded firmly in principles of self-assurance and respect for government leadership.
These companies target Chinese internet users who differ significantly from their Western counterparts. Through their avid consumption of virtual entertainment, Tencent sold $4 billion worth of virtual gaming goods with only $1 billion worth of advertising.
Tencent’s Ma Huateng grew the company from a small game studio in 1998 that eventually launched instant messaging service QQ and WeChat in 2011 and acquired 600 million active users.
Fourth Wave of Chinese entrepreneurs from the 2010s
Methods of running companies have deviated from the traditional top-down system. Kelly Zong, who inherited China’s largest beverage company Wahaha from her father, has revolutionized the company’s leadership style.
Wang Xing, a Chinese serial entrepreneur, first started online business platform Xiaonei that was sold to Facebook in 2005. In addition, his latest venture Meituan, a group discount website, is set to undergo a $15 billion merger with Dianping in 2015.
Lei Jun headed the efforts of Xiaomi to become multi-faceted company many liken to Apple. He was previously CEO of software company Kingsoft. Currently, the value of Xiaomi is over USD$40 billion under his leadership.
Challenges and opportunities of Chinese Entrepreneurs: Success Overseas
Few can emulate elsewhere the success that Chinese entrepreneurs have attained. WeChat has invested heavily in overseas marketing though its effectiveness is only to a limited degree. Xiaomi has ventured into the Indian smartphone market against fierce competition from Huawei and many other manufacturers. Recent figures show a decline in Xiaomi’s sales. Possibly, this could be due to the lack of development of the smart home ecosystem. Inadvertently, it is unable to create sustainable revenue streams.
In 2016, the next wave of prolific growth is unclear. The Chinese market shows signs of slowing down with fierce overseas competition in key markets.