Start a Business in China: Why and Why Not?

Couple weeks ago at an event discussing China’s startup ecosystem and opportunities hosted by National University of Singapore, Casper Johansen, the lawyer turned investment banker turned entrepreneur gave an insightful speech on both the advantages and disadvantages of starting a business in China, with the conclusion that in general it’s a good time to get started a business with China as a base.

The Whys?

Casper listed out several grounds why one should base his/her startup in China, including the market size, product opportunities and local talents.

To many China is always a fertile market with great potential and unexplored opportunities, the sheer market size is exciting enough to entice innumerable multinationals as well as entrepreneurs to do the gold-mining here. According to a report out in this June compiled by CNNIC (China Internet Network Information Center), as of H1 of 2011, there’re more than 485 million internet users and 318 million mobile internet users in China, and the number is still growing fast.

Secondly, of course there’re a bunch of excellent and innovative Chinese internet products out there such as Tencent QQ, Tencent Weixin, Tencent QQ Mail, Sina Weibo, Sogou Input Method, 360 Safe Browser and the list can go on and on, but it seemed to Casper that the best is yet to come, and they’re coming with innovations outside of China serve as inspirations plus local teams’ efforts in localizing these ideas to make them fit into the Chinese websphere.

The Why Nots?

On the disadvantages side, Casper pointed out competition, infrastructure, funding and talent as the major pitfalls that concerned entrepreneurs the most.

The endless, fierce as well as unrelenting competition is really a turn down for Casper. Another setback according to him is relatively inferior infrastructure such as labor law, internet connection, developer service and resources and so on.

Funding is another problem, as angels are scattered within the country and some are relationship-centered, well, you might have heard of how much Chinese values relationship, or Guanxi (关系). if this is the first time you read this word, well, check it out by searching keywords “Chinese guanxi business” you’ll have fruitful results that can help you understand how China’s business world operates.

The last one is talent. It’s known to all that China is occupied by low cost talents as compared to those in the States, well, cost for Chinese local talents is still affordable, but probably just for now as the country is undergoing serious inflation. And even though local talents are not that expensive, loyalty is another challenge for startups as how to retain them in the team is a whole other thing.

Even so, Casper’s conclusion on “Why and Why not base your company in China” is: Yes, just do it. His conclusion echoed by Coca-cola chief exec Muhtar kent who thought that China is a better place to do business than the United States now. You can check out the whole story here. So, if you’re still wondering whether you should start your business in China? Just come over and do it.