China’s Push To Develop Startup Hubs

(Image via International Business Times)

(Image via International Business Times)

With its share of the global economy growing at a steady pace, China is poised to delve further into new industries in the coming years. As recently as last week, with the conclusion of its Central Economic Work Conference, senior officials in the Chinese government set a plan for future growth centered upon the services industry, prompting a slight shift from the manufacturing driven formula which has led to double-digit growth rates for years on end.

One of the main components of this plan is a $6.5 billion investment into startup enterprises. The funds, drawn from both public and private sources will be used to create a number of venture capital firms aimed at picking out the most promising new entrepreneurial ideas in the domestic market, and providing those businesses with the tools they need to grow into industry giants.

The investment is part of a trend which has seen the Chinese government pass reforms specifically geared for the SME market. As Reuters states, “last month regulators issued new rules to allow insurance companies to invest their huge pool of premiums in venture capital funds for the first time”. This comes on the back of the Chinese government ceasing their long-standing ban on IPO’s just a few months ago.

Growing Market

While the Chinese VC market is still small in comparison to that of the United States, in recent years it has begun growing at a much more rapid pace. According to Tech in Asia, 2014 was a booming year for capital investments in the country with 83 new private venture capital firms being created, with a total value of $6.5 billion. Outside interest is ripe as well, with $5 billion from foreign funds being invested into Chinese startups in the same time span.

In recent years, Chinese startups have been able to make an ever more significant impact globally, with the most notable of which being Xiaomi. The Beijing based firm is introducing quality, low-cost smartphones to the international market on a massive scale, and is valued at over $10 billion. Given its success, the government looks to further compound the tech-centered approach to new business development.

Given the country’s reputation as a major manufacturing hub, and corporate center for some of the world’s leading companies, a push into the tech industry coincides with the its economy’s general movement towards a service focused production strategy.

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