The Right Stuff for the Business Set

    When entrepreneur Liu Binchun solicited business startup plans from college graduates with a view to providing financial support, he thought he would be buried under the response. To his disappointment, a month later he had received only five, including a kebab roasting stall, an Internet bar, and a traveling performance troupe. Only one plan seemed worth supporting: a telecom-related value added service. "So many people are disinterested in my aid plans," he joked, a bit chagrined. Liu Binchun is a 25-year-old entrepreneur who launched his own undertaking upon graduation.

    The latest survey of MyCos, a human resources information company, shows that the economically developed areas and big cities with the best employment environments have the lowest proportion of college graduates who start their own businesses. Wang Boqing, president of MyCos, said, "Highly suitable college graduates are not willing to start their own businesses as long as they can find a job. Graduates who strike out on their own usually come from the families of private entrepreneurs, and so are imbued with a pioneering spirit."

    The business plans by the inexperienced students reveal weaknesses in business management. Recently, Chengdu in Sichuan Province held its first youth business startup appraisal meeting. Less than 10 percent of the 600 business startup plans submitted made the grade. Experts bemoan applicants' inability to provide a clear explanation of basic issues relating to their businesses, such as the operation mode, profit points, company management and financial analysis. Most worrisome was college graduates' lack of risk awareness, leaving them ill prepared to avoid business failure.

    In a survey of expectations of business startups made by Liu Binchun in five universities, he found that 25 percent of the respondents expected an annual profit of RMB 3 million within three years, 39 percent expected an annual profit of RMB 1 million within three years, and only 5 percent had doubts about surviving their first three years.

    The harsh reality is that the success rate of college graduates who start their own businesses is less than 3 percent. Some people think this is because of the short period that China has had a market economy. China did not begin to move from a planned to market economy until the 1980s, so the contribution of individuals and private enterprises to GDP was not recognized and emphasized until the middle to late 1990s.

The Odds of Success

    In recent years, entrepreneurial education has been gradually popularized, but still a large number of students feel at a loss when it comes to starting their own business.

    In June, the National Statistics Bureau conducted a survey of college graduates in Hunan Province, about their desire to start a business. Among the 2009 college graduates, 85 percent expressed an intention to launch an independent operation, but 90 percent of the respondents knew little about government policies designed to encourage such moves. Only 10 percent claimed they had some understanding and had made inquiries about the relevant policies.

    "As far as we know, the success rate of college graduates who start their own business is less than 1 percent. Because they know little about the relevant preferential policies, and have little experience with the world off campus, they are at a loss when it comes to choosing a business," said Hao Zhiqiang, head of the BIT & CTG Pioneering Center. He emphasized, however, that a lack of capital is the greatest headache for college graduates who want to be their own boss.

    Research data from Tsinghua University shows that 60 percent of private entrepreneurs start their own business with capital of less than RMB 50,000, and 18.2 percent with capital less than RMB 10,000. Most of this comes from non-official investment. Besides their own funds, they mainly rely on capital provided by acquaintances.

    Cheng Yuan, a professor of the Tsing-hua University Pioneering Center who participated in the research project, said, "According to our survey, acquaintances, including family members, relatives, friends, neighbors and colleagues, are an important source of startup capital. Next in importance are financial organizations and government support. The government has not provided effective support to new enterprises.

    As regards venture capital, the most developed countries have a mature enough market to raise adequate funds for high risk enterprises, plus developed information sectors and consultation services. In China, the capital market is backward and venture capital activity is still in its infancy. Risky ventures may have a long wait.

    On the bright side, research at Tsinghua University shows that China has made great progress in improving its startup business environment.