Going It Alone

Faced with a tight employment market, many college graduates are grabbing every chance to start their own business but very few know how to run their companies and get them on their feet.

THIS Valentine’s Day, Li Wenhao had a date C not a romantic one, though, with the Shanghai Administration of Industry and Commerce, for his business licence.

Since early last year, Li, a Master’s degree student in his last few months at the College of Mechanical Engineering, Tongji University, had been dreaming of the license printed with the name of his new company C Shanghai Quancai Network Technology.

As a post-graduate student Li realized that it was not easy to set up a company, for which he not only neededminimum registered capital of tens of thousands of RMB, but also had to satisfy various rules and regulations. He had to put his plans on hold for nearly a year.

“But when I heard about the ‘zero down payment’ for graduates wishing to make it on their own, I immediately picked up the phone,” says Li. A freshly launched policy by the department of industry and commerce in Shanghai, “zero down payment” allows recent graduates who want to set up a limited liability company with registered capital of less than RMB 500,000 to pay the registered capital in installments over two years. A graduate can select “zero down payment” even to start a one-person, limited liability company. The scheme is also open to graduates from other parts of the country.

Since this policy was implemented on February 9, the department has been receiving about 200 to 300 enquiries every day C via telephone, Internet or in person.

On February 14, Li and seven other graduates were given their business permits covering a wide range of fields such as electronic technology, network technology, business consultation, arts and crafts collection, environmental protection and garment trade.

As these graduates are mostly first-time businessmen, the department of industry and commerce has opened a “green channel” to simplifyprocedures and shorten the approval term for qualified applicants. Once the required documents are verified, permits are granted on the spot.

More Than Passion

According to the department of education, about 6.5 million college graduates in China are on the lookout for jobs in 2009. Starting one’s own company is a big confidence booster in this tight employment market.

The idea of starting one’s own business was not popular with Chinese graduates until the end of the last millennium. In May 1998, Qiu Hongyun from Tsinghua University, winner of the first “Challenge Cup” business plan competition for Chinese University Students, established a company with RMB 52.5 million risk funds, becoming the first Chinese graduate to start his own company.

His success triggered much enthusiasm for similar enterprises. The Tsinghua Pioneering Park was established in August 1999, with more than half of the companies set up by young graduates. But the dot-com burst in 2000 sent many companies bankrupt. There are now only around 30 student enterprises in the park, with very few new ones.

China launched preferential policies to encourage private enterprising among university graduates in 2003, waiving registration and administrative charges for one year. Provinces like Shandong even offered small loans for business pioneers.

More graduates have once again begun to think of starting their own companies.However, they are faced with two difficulties. “What I worry most about is attracting qualified workers and good projects. Besides, the current office environment is not good,” says Li. “I wish the government could increase the subsidy for graduate entrepreneurs and also give tax breaks.’’

The on-going global financial crisis is also having an adverse impact on these new companies. However, Zeng Hongyun, who graduated from Shanghai Jiao Tong University in July 2008, is not too worried. Unlike her schoolmates who become white-collar workers, she set up a business consulting company. Thank to fieldwork in a well-known firm since her sophomore year in college, she has gained much experience.

In light of the financial crisis, last year many with Master’s degrees and even PhDs set up their own businesses. But quite a number of them have no idea about the market and how to run the business in the initial stages. Since there is no special agency to guide such people, Zeng and her partner Wen Ye decided to fill this gap.

“Although we ourselves are fresh graduates, we regard this as our advantage, because we are able to communicate with these young entrepreneurs easily.Besides, I believe the financial crisis will eventually ease and open up many opportunities in the market,’’ says Zeng, who is quick to add that the company will need more capital to carry on.

Specific Guidance

According to a report released by the Ministry of Education in 2004, of the 97 companies established by college graduates, only 17 percent were profitable. Only 30 percent of the companies run by college graduates had survived for more than five years.

Li Junkai, deputy director of the Peking University Student Career Center, advises, “Student entrepreneurs should envisage and try to make up for their financial, technological and managerial weakness, while relevant administrative departments should give follow-up advice, providing additional funding and other services as needed.’’

Professor Klaus Haftendorn, global coordinator of project KAB (Know About Business), International Labor Organization (ILO), believes that appropriate entrepreneurship education is important for the survival of these new companies. “At present, there are few other countries in the world that have so many business opportunities as China. However, many business opportunities are neglected. This might be due to two reasons. First, in China, the infrastructure for business is not mature enough. The legal environment, the financial and investment facilities that are required for doing business are not good enough. Second, people lack systematic training about starting a business.”

The KAB entrepreneurship education project developed by ILO aims to cultivate entrepreneurship awareness and capacity among university students, and has currently been implemented in more than 20 countries.

In fact, entrepreneurship education is known as the third passport by the United Nations Educational, Scientific, and Cultural Organization, after an academic diploma from school and an occupational qualification certificate. The U.S. has a complete system going from elementary and secondary school to undergraduate and post-graduate levels for students to avail of specific business opportunities.

As students in China are exhorted to “study hard and find a good job” since childhood, many are lost when they try to branch off on their own. In China, less than 1 percent of college graduates start their own business, while in Europe and the United States, this figure stands at anywhere between 20 and 30 percent.

However, entrepreneurship education is gradually catching on in China, with eight institutions of higher education including Tsinghua University, Renmin University of China and Shanghai Jiao Tong University launching pilot projects.