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12,000 startups are being created every day in China [video] (youtube.com)
96 points by da02 on Mar 4, 2017 | hide | past | web | favorite | 69 comments

Fascinating documentary, thanks for sharing! If I understand the business model correctly, isn't the 融道网 (Roadoor.com) 9.00% guaranteed principal + interest mentioned in the documentary considered a Ponzi scheme in the US? How much of the return on capital is from RoI from investment into companies (exits, dividends, organic growth) vs. just increased AuM from (老百姓) investors?

Edit: just realized that businesses requesting loans to 融道网 are screened prior to being made available to public investors, so the deal flow appears to be capped by available business opportunities.

Yeah, just like mortgage lending prior to 2008 was "capped" by the availability of quality debtors.

9% pa. guaranteed by a bank is amazing in a strong currency like the yuan.

It is not a ponzi per se since money actually flows into real investments; however there is probably a "systemic" risk at the level of the Chinese economy as whole.

Funny that this excellent documentary is made by the Japanese national TV channel NHK. There is quite contrast between China and Japan today wrt. speed, risk taking and growth.

So I had some doubts about the numbers at first, but a rough quick calculation 12,000 / (1.3 billion (people) * .5 (age 25-54)) ≈ 0.002% of the available population a day creating a startup (1 in every 50,000) which does not seem too far-fetched, but still seems a bit high to be honest.

The documentary is about fintech innovation driving funds to SMEs. Their examples are a kiwi producer, a fish farm, and and a steel welding company. What they probably mean is that 12,000 businesses are started in China every day, not necessarily all tech related.

Yes, that's it. And a 'business' can also be a small contractor, a restaurant, or a hot-dog stand.

It's difficult to firmly characterize the difference between such business, but it's probably not fair to refer to every registered business as a 'startup'.

They are startups. It's just that the use of the term has shifted a bit. What we commonly refer to as "startups" today used to be called "high-growth-startups" (or -ventures, or -businesses) not so very long ago, and the unqualified noun referred to any new business.

This is actually important, as, for example, the Lean Startup methodology is applicable to almost any new venture that has to deal with significant uncertainty, regardless of whether it is a high-growth venture, an SME such as a VAR, or non-tech lifestyle businesses.

That the lean startup methodology might in some ways apply to other businesses, does not make them startups.

A single hot-dog stand will not do something that will change the economy, create 10K jobs, attract investment, R&D etc..

> A single hot-dog stand will not do something that will change the economy, create 10K jobs, attract investment, R&D etc.

Well, you never know (McDonald's was once a small new company).

But that was exactly what I was trying to say: High-growth companies with those sort of ambitions are not the only kind of startup. ALL new ventures are startups, even if they are not intended to grow much, and including quite a few that aren't even necessarily businesses at all.

it's a lie, much like the government's made up 7% gdp growth.

"China's liaoning province admitted that it inflated GDP figures from 2011 to 2014"


Now, this I have been wondering for a long time. Chinese authorities, especially on a local level, aren't exactly known for their honesty and high moral standards. At the same time, they have a lot of incentives to over-report one particular metric: population.

So, when people are talking about 1,5 billion Chinese - have these figures have been independently confirmed, or just taken straight from the government?

If anything, the population is underreported. The 2010 census claims it to be around 1.3 billion. But it is widely accepted as a fact that a lot of people in the countryside weren't included in the census because they are "illegal" additional children born in defiance of the one-child policy, and were simply hidden in the basement during the census, as they are hidden whenever any government check is happening.

Those children have no rights, and according to the state, don't exist. They can't go to school, get an official job, etc. They are born to do physical work on the fields and support their parents into their old age.

Genuinely curious, what are the incentives to over report population?

Doesn't it determine budget distribution from the central authorities?


And the US government saying there's no inflation, and the recovery is real - just a little slow. ;-)

I probably only know a few hundred people here, and there are multiple people starting businesses every year.

1 in 50,000 per day = 1 in ~136 per year. That sounds about right, perhaps even low.

I would think on average a startup starts with more than one person.

What do they use as investment? Personal savings, loans, VC?

It depends upon the business. Startup costs are low here, and some businesses can be started and validated without registration or paperwork. Where formalization is a requirement, agents can register companies as cheaply as a couple of hundred USD, including a registered address. At the low end people use personal savings and family loans. At a slightly larger level friends tend to group together to reach capital requirements. Banks do loan but that's not as easy as it once was. There are government payouts available for specific sectors or achievements (eg. if patents are registered). At the higher end there is strong VC availability right now due to a combination of a relative crisis of faith (ie. no longer "it can never lose money!") in real estate, which was formerly the medium to long term investment traditionally considered most accessibly performant, and increased controls on cross-border capital flight.

I agree. Even if the number is too high, I wonder about the failure rate.

my friend went there and opened one a few years ago. it's relatively easy to open one I was told

but it's super painful to close that, even though it's a small startup and financially clean, still do not know how he could ever close that, many procedures, paperwork, financial check everything he could not supply as a small player,etc. it's just impossible to close i guess.

basically it looks to me that it's a easy-in-hard-out process.

Why would any foreigner want to start a company in a country that

- requires you to give up 50% to a local partner

- blocks internet access to foreign websites (thus foreign customers)

- can take away your business/assets/customers without trials

- treats foreigners as a mere entity to steal technology and clients from?

As an American that has 100% ownership in two China legal enterprises, not sure where some items in your bullet list are coming from. Yes, there are unique difficulties. No, communist hard-liners are not setting over my shoulder plotting to take my business without a trial.

It seems a lot of people still have this old idea about China. The 51% Chinese ownership requirement hasn't been a thing for almost 20 years.

That's only if your company is a Wholly Foreign-Owned Enterprise (WFOE), which come with its own special set of deliberately roadblocks which are not there if a Chinese partner is involved.

What cities/towns are the enterprises located in? What was the most difficult thing you encountered so far?

Likely the allure of so many potential customers that are otherwise inaccessible. (I'm not saying this is a valid reason to ignore the above, but potentially why some might.)

Its high risk but the potential return is also great.

China's economy is crashing. no free lunch anymore. just look at their reserve and debt ratio

I'm not an economist, so could you elaborate how this indicates a crashing economy?

if the Chinese economy is crashing, I think it is a pretty good thing. Just imaging when it is not 'crashing'.

> - requires you to give up 50% to a local partner

Chinese people. Don't worry, there's plenty. And they do not have subpar education, nor do they have less intellectual capacity (hell, most studies seem to conclude they have -just a little- more, on average).

> - blocks internet access to foreign websites (thus foreign customers)

I think you'll find that inbound commerce (or outbound commerce) is not all that restricted. Some movies, yes. And newspapers (do they still exist ?). That's about it. Other than that, it's not more restricted than in the west (ie. large amounts expenditures require government/irs/... approval one way or the other).

> - can take away your business/assets/customers without trials

It's not like Japan did it for 30 years before that ... By the way ... how did the US get started on it's industrial base ? Could it have been copying ?

> - treats foreigners as a mere entity to steal technology and clients from?

Again, one wonders how Europeans think about America in this area. Yep, similarly.

> And they do not have subpar education

you seem to be wanting to argue about something which I did not even bring up. internet is not a place you start arguing with yourself.

> it's not more restricted than in the west

Yeah....you keep telling yourself that. I don't think you've actually been to China where foreigners struggles to hit youtube/facebook/google using a variety of VPN tools every day

I think I'll stop...there's too much cognitive dissonance here

The answer is obvious: They want to tap into the largest growth market in the world.

And in many ways it is a plus that is not heavily regulated and dominated by a few american tech giants.

It's unfortunate you're being downvoted. I highly recommend the book, Bad Samaritans [1] as it shows that all developed countries followed a similar pattern of IP theft and protectionism.

1. https://www.amazon.com/Bad-Samaritans-Secret-History-Capital...

Sidenote: Jeff Tucker mentioned how the US in the 1800s enforced American authors' IP, but not British. So school teachers ended up using the cheaper British authored books instead of the Americans. Leading to more British authors becoming famous in the US.

100% agreed. I would never try and start a business in such a poisonous environment.

Yeah its relatively easy, but its way more competitive than other environment in Asia. "Connections"matter.

"but it's super painful to close"

China the Hotel California of SME's

And yet just today...

"China’s sprawling Internet censorship regime is harming the country’s economic and scientific progress, a senior official has said in a rare public rebuke of long-standing Chinese Communist Party (CCP) policy."


So they're creating alot of startups that probably are just copycats of what's existing. Not surprising considering China really isn't known for innovations.

It's most likely a jumping off point. One way to learn painting in the past was to copy paintings made by masters. So as the economy develops and more people can afford to take risks, innovations should be more common (unless govt intervention prevents it). Japan was viewed upon as a land of where cheap imitations were made.

They've been saying that since the Chinese economy opened up in the 80s, really opened up in the 90s, really really opened up in the 2000s. so far, nothing in 35 years. Japan had so much innovations in way less time. meanwhile China's economy is crashing down, and no more free FDI to fuel any further progress

I have a few anecdotal examples of innovations or ways in which China is 'ahead':

Bike-sharing startups like MoBike: Use their app to find the nearest bike to you, scan a QR code to unlock it, and pay $0.15 for one hour. You can then ride and leave it anywhere. Admittedly, this is only possible due to v. high urban density (China has ten cities with populations greater than London and similar urban densities).

I can order a lot from the same app/interface: takeaway, cinema tickets, hotels, flights, KTV, etc. I find this more convenient than UK. Mobile payment penetration here is very high here too. Almost everyone pays for almost everything with WeChat.

Andrew Ng argues that AI progress in China is underreported due to the language barrier. I suspect this insight applies more generally to all the innovations happening here.


The amount of information available to westerners about the Chinese economy is pretty pitiful. Here in the U.S. there's like four or five talking points that echo around the media about the Chinese economy and those are the only tidbits people bring up.

I've seen a few NHK documentaries about China. Kudos to them for chasing down interesting angles.

Ng may be right, and the article suggests a massive upsurge in papers in the last 3-4 years, but I'm dubious about quality, if the AI field is anything like neuroscience was. When I was back in grad school, I worked with a prominent Dutch researcher who routinely saw his papers translated into Chinese and re-published by Chinese authors as their own.

At first, it drove him crazy, and he tried to get them to stop, issue retractions, etc. But he eventually learned to roll with it. The people involved may have had excellent careers at home, but were contributing no new knowledge, and just taking up resources.

Bike sharing apps are interesting in they can generate more income via interest on the deposits held by users with them than they generate in income.

Wow, the bike rental app is awesome. Do you know how they prevent theft?

You're right: there should have been more innovation by now. I withdraw my comment.

(There should have at least been a few Akio Morita's by now.)

Also not surprising that one of the most effective way to good at something is to imitate how the expert do it.

China really has to do something to create their "own" companies. If they do nothing and the rest of the world decide to move manufacturing, either home or elsewhere, China will go back to be a poor 3rd. world country.

No one will be keeping their business in China due to not being able to get the same quality else where, or because the Chinese is such nice people to do business with. So it makes sense to fund and encourage new businesses so China can start to produce their own product, and not just be a big factory (and copy machine).

China has never stopped being a poor third world country.

Here's an example of one of these startups: https://www.aiadvertising.org/

Is this a parody? It is far better done than most China serious companies with similar delusions.

I saw it listed on AngelList today.

Wow. This is Time Cube level stuff.

And knowing China FinTech, as currently working in it, they could well believe themselves.


A broadcast message to investors: There is no China magic. There is little innovation. There is a lot of following buzzwords. There is a lot of iteration, however. Follow the companies that iterate, even on old-tech like mainframe. They're where value happens.

Extremely accurate and valuable comment, thank you. Your "broadcast message" explains the situation very concisely.

> online marketing optimization articulately convolutes into data analysis stream


>commodiously embeds into Business Intelligence which creates an interurban transcendence


It will be interesting to see how this will evolve and what impact will have it on US in long term.

Definitely skip the first 20 minutes or so. It's not just funding VR and what's obviously bubble areas.

Many investment companies are also making small loans to traditional industries like metals, farm, and fisheries. Fascinating stuff.

Not all businesses are "startups", the way the word is used in the West.

'Startup' comes from 'start[ing] up a business' - so 'startups are being created' doesn't strictly speaking make sense, or at least calling them 'startups' isn't adding anything not provided by 'created'.

You're right that the word is increasingly used to refer to SMEs that have been around years, are stable, etc. - just because it carries weight as a buzzword. But in the context of newly created businesses, that's exactly in-line with proper/original meaning.

(A better title might have been '12,000 new startups in China every day', or equally '12,000 businesses created in China every day'.)

You have it backwards. The term "startup" today commonly refers to what used to be called a "high-growth startup". The fact that new businesses such as SMEs that are not intended as high-growth ventures are using the term is a reversion to the original meaning.

It is no bad thing to have to start using the "high-growth" qualifier again.

I'm sorry, I don't see where we disagree... What do I have 'backwards'?

I said SMEs that 'have been around years, are stable etc.' is a misuse - not newly created businesses (high growth or not).

Ah, I read too much into that bit. My apologies.

There are a few thousand created a day in the US. Given that the US population is a third and more developed/mature, these numbers seem normal.

Again i feel like everybody is using the word start up to replace the word business.

I feel like these people have no clue what they are investing in. Is it just me? :)

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