“The Chinese government is more pro-business than Singapore”

While many adventurous Singaporean entrepreneurs have taken a crack at the Chinese market, I am surprised that quite a number of them have prospered. Not that I’m putting down my own countrymen, but China is after all well known for being a hyper-competitive and brutal market.

The challenges, however, did not stop these two Singaporeans from succeeding in their businesses: James Tan, co-founder of 55tuan.com, one of China’s largest group buying sites, and James Tong, founder of Suzsoft, a China IT development firm.

Together with Cyril Ebersweiler, an investor who founded Chinaccelerator, they were the speakers at Closing the Entrepreneurial Gap 2, a panel discussion held in the National University of Singapore’s Unversity Town on 18th November, Friday evening.

The event was organized in conjunction with Global Entrepreneurship Week.

For James Tong, one of the surprising things he’s learnt is that the Chinese government is actually more pro-business than Singapore.

“The Chinese government gives even more grants than the Singapore government. In many cities, you can get 300,000 yuan (US$47,000) to 1million yuan (US$157,000),” he said.

Government agencies are pouring money into Chinese startups hoping that some of them will turn into a commercial success.

For example, The National Development and Reform Commission, a powerful planning agency, launched venture capital funds totaling 9 billion yuan (US$1.4 billion) in 2009. A sizable proportion of the funds came from central and local governments.

Here’s another quirk about China: PhD students somehow have a better chance at getting government money, Tong said. ”It’s their culture,” he told me while shrugging, “over there they really value education a lot.”

So I surmised that China is actually somewhat like a Singapore-plus. More funding, and more emphasis on education.

The panelists also brought up other pointers about doing business in China.

1) Do look at other places besides Beijing and Shanghai

There are so many cities in China with a population greater than Singapore that you can play connect-the-dots on a map. Tong estimates that there are about 70 large cities in China alone, which means an abundance of choices outside of Shanghai and Beijing.

Tong started his company in Suzhou, a city of about four million, which is under five times smaller than adjacent Shanghai. “I believe in being a big fish in a small pond,” he said.

Serial entrepreneur Stephen Wang, who co-founded movie reviews site Rottentomatoes.com in the US and XMFish.com in China, picked the city of Xiamen,which has around five million people. He shared his experience via webcast from Beijing.

Xiamen was picked because of his business partner’s connections and relationships with the people there. This strategy turned out to be a mixed bag.

While they were able to scale up quickly, they soon reached a plateau due to Xiamen’s small market size. To survive, they had to acquire a popular website and build a team around it. They succeeded and the site became the largest of its kind in the province.

2) Don’t be too smug just because you’re Singaporean. Don’t dismiss them as mere copycats either.

Group buying guru James Tan dished out a dose of reality to Singaporeans that night.

“Keep your arrogance in check. We’re not as fantastic as we think we are. We have to accept that we’re in different country, and respect them for who they are.”

He noted that the Chinese are hungry and very competitive, and that an entrepreneurial culture has begun to develop.

Tong echoed these sentiments. “Having an open mind is very important; people criticize China too easily. They have the right to be proud, since they’re doing very well,” he said.

An audience member asked if the ‘copy culture’ in China is something to worry about. The consensus among the panel was that while the Chinese are good at copying, micro-innovations are present. In fact, in China, copying is seen as the first step to invention.

Tan added that having copycats can be a good thing.

“[The 55tuan team] were hoping there were more competitiors. We needed more competitors to open the [group buying] market and make it hotter, more vibrant. If there are no competitors, there’ll be no press coverage and no people complaining,” he said, “so if nobody’s copying you, that’s a problem by itself.”

Tan also said that Chinese companies don’t just stop at copying. They localize and evolve the product.

“Look at Sina Weibo. They now have features that Twitter copied. Like uploading photos.”

Cyril, investor at Chinaccelerator, believes that investors have a part to play in creating this copy culture, due to their fear of taking risks. Nonetheless, he believes more innovation will eventually come out of China.

“Everyone’s been grabbing the low-hanging fruit. But people are moving up the ladder and the Chinese market is going to be huge because China is changing extremely fast.”

He believes B2B IT services are going to be the next big thing in China. While local firms were hesitant about adopting software as a service, rising labor costs in China would force them to look for alternatives.

On the consumer front, e-commerce was virtually non-existent among the Chinese ten years ago. But now, “part of their DNA” is to buy stuff online, said Cyril. They’re even buying intangible items and digital content like music and e-books, which was “unthinkable”.

So it’s not true that the Chinese are merely blatant copiers and not innovators.

3) Do become localized

People have the automatic assumption that finding a Chinese partner is essential to doing business in China. It really depends.

According to Cyril, if you’re building something that is extremely localized, for instance a group buying site that requires you to partner with many local merchants, having a co-founder who knows the place and people is a definite advantage.

The other option is to really spend time in China and get to know the market. That is the approach taken by Tong, who has spent many years living and working in China.

“They practically treat me like a local,” he said.

I asked him if being Chinese has given him an advantage, and he said yes.

“While having the ability to speak Mandarin is really important, it’s a bonus if you’re Chinese as well, as they tend to see you as one of their own.”

Government grants also do not place much distinction on citizenship in its eligibility criteria, unlike Singapore where Singaporean ownership in a company is often necessary for getting government money, Tong noted.

So, with the right understanding of local culture, Singaporeans do have a decent shot of succeeding in China.

Photo: Matthias Rosenkranz

 

This event was part of Global Entrepreneurship Week 2011.

 

SGE is proud to be the Official Online Media partner for GEW 2011.

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