Whether you are a villager using e-commerce to find new and more profitable markets or a middle-class urban woman reselling luxury goods, the entrepreneurship journey is never easy – global financial crises, the US-China trade war and the Covid-19 pandemic have all taken their toll. Lin Zhang also argues that rather than being liberating, digital entrepreneurship has perhaps also reinforced traditional Chinese ideas.

Whatever the conclusion, it’s a very Chinese story – one you’ve probably seen played out on the roadsides, shopping malls and wet markets of China – but never given detailed thought to. Paul French caught up with Lin Zhang, currently an assistant professor of communication and media studies at the University of New Hampshire, to talk grassroots digital entrepreneurship.

Your book turns many assumptions about China on their head. For example, you give so many great examples of technology and the digital economy opening up small-scale entry-level entrepreneurship opportunities. You call this phenomenon ‘reinvention’. Can you explain what is going on with the ‘labour of reinvention’?

By centring on the analysis of the “entrepreneurial labour of reinvention”, I am trying to problematise not only our traditional understanding of labour and entrepreneurship but also how the global phenomenon of digitalisation of labour has usually been conceptualised. We have always considered labour and entrepreneurship as two completely different activities and identities, if not belonging to two different classes.

Echoing many scholars of flexible and digital labour, I argue that recent technological and social transformations have rendered the distinction between the two increasingly blurred. For example, most of the participants of my ethnographic fieldwork see themselves as entrepreneurs, whether they are peasants doing e-commerce or college graduates starting up their own tech ventures. But if you examine their work experiences as either based on monopoly digital platforms or being dictated (and if they get lucky, eventually bought out) by venture capitalists, you see how in reality their desire for autonomy and flexibility has been channelled to restructure and redefine labour experiences and relations.

By highlighting this broader transformation as “reinvention” while focusing on the Chinese experiences with entrepreneurial labour, I emphasise the embeddedness of this new entrepreneurial labour regime in pre-existing social relations and institutional structures. I have underlined how entrepreneurial labour practices both build on and transform the multilayer and multi-pronged roles of the state in the economy and the family-based and gendered division of labour at the foundation of the Chinese economy.

You give a wide and fascinating range of examples of ground-level entrepreneurialism – from rural villages experiencing an e-commerce boom, to middle-class women reselling luxury goods. Could you perhaps give us a few examples of these reinventions that particularly caught your attention while travelling around China?

One example of booming tech entrepreneurship in China is the Garage Café, a café-style incubator/coworking space for early-stage entrepreneurs in Beijing’s high-tech district Zhongguancun. It was founded in 2011 by a venture capital manager turned serial entrepreneur. I situated the story of the Garage Café in Zhongguancun’s history as China’s science and technology centre reaching back to the socialist 1950s. As a prototypical example of reinvention, the Garage Café emerged as one of the new generation entrepreneurial spaces modelled after successful examples in the West. The café’s later struggle to stay competitive while holding on to its founding vision of supporting “grassroots” and early-stage entrepreneurs, complicated by the local state’s involvement in promoting it as a “model mass entrepreneurship and innovation site”, is reminiscent of ZGC’s troubled socialist experiments during the years of Great Leap Forward and Cultural Revolution.

Another example is the handicraft “Taobao Village” in which I did extensive fieldwork and lived among rural entrepreneurs for months. The county in Shandong province in which the Taobao village is based boasts more than 1,000 years of history in making handicrafts out of bulrush grass. The family-based gendered division of labour evolved as the villages in the area transitioned from subsistence economy to socialist county-owned collective enterprises to post-reform export-oriented family firms. Since around 2008, the villagers have embraced the entry of digital platforms like Alibaba and Pinduoduo into the countryside.

Both stories of entrepreneurial reinvention have captured how the articulation of historical legacies and digital/high-tech disruptions has shaped entrepreneurship in China’s new digital economy.

You also talk about how the surge in digital entrepreneurialism has occurred against the backdrop of global financial crises, the US-China trade war, and the Covid-19 pandemic. How have small-scale entrepreneurs avoided these massive problems to survive?

The 2008 global recession, the trade war and the pandemic represented both crises and opportunities for these entrepreneurs. The 2008 crisis led to massive layoffs in export-oriented factories, which forced many migrant workers to return to the countryside. This large-scale return of “migrant birds” converged with e-commerce platforms’ (e.g. Alibaba, JD, and later Pinduoduo) expansion into the rural market, which contributed to the post-2008 boom in rural e-commerce and digital entrepreneurship.

The US-China trade war has created some barriers to Chinese exports to the US market. It has also destabilised mutual venture capital investment and put sanctions on many more established Chinese high-tech companies. However, the sanctions and trade barriers have also facilitated an unprecedented shift in the Chinese IT startup scene to prioritise the domestic market, indigenous innovation and Chinese (and sometimes state) capital. One Zhongguancun chip design firm founder told me jokingly: “I have to thank Trump. If not for his sanctions on Huawei and ZTE, Chinese tech companies would never have made up their minds to become more self-reliant in chips. Now they have no choice…The state had been promoting semiconductor independence for years, but the market didn’t really take it seriously; they thought the government was just crying wolf. Now the wolf has finally come.”

Whether their entrepreneurial endeavours could survive these crises depend on many factors, but one thing is for sure: they must keep reinventing themselves to brave the constantly shifting currents of economic and geopolitical uncertainties.

You suggest that though part of China’s new technological and liberal market economy, digital entrepreneurship is also reinforcing traditional Chinese ideas about state power, labour, gender and identity, as well as perhaps reinforcing traditional family and generating new inequalities. How does this happen?

Let me give an example using the case of gendered social media reselling, or daigou. Many entrepreneurs in the daigou business are transnational mobile middle-class women seeking flexibility and mobility in an alternative career. They do so to, for example, balance between motherhood and work, accompany their loved ones to study/work abroad while still generating decent income or earn some extra cash while studying or working full or part-time. I situate this popularity of female digital entrepreneurship like daigou in a broader trend towards refeminisation and retraditionalisation in Chinese society and among ethnic Chinese immigrant communities abroad. In doing so, I show how a younger generation of women, under the renewed pressure from the patriarchal society to prioritise (if not return to) the family, has turned to digital entrepreneurship to reconcile the tension between “living for others” and “living for oneself”. Ironically, the formalisation of these entrepreneurial endeavours in the past decade or so has made digital labour increasingly competitive and demanding, which ends up reinforcing these gendered dilemmas and structural gender inequalities.

We’ve seen the Chinese government become somewhat uneasy at the power and spread of domestic tech companies. What is the government’s response to the rise of grass-roots entrepreneurialism within the digital economy and how far can they regulate its growth and development?

The Chinese state has struggled with the competing demands to promote economic development, maintain equity and strive for independence and indigenous innovation since its founding in 1949. In this light, the state has been generally supportive of grassroots entrepreneurship within the digital economy as entrepreneurship helps to curb unemployment and digitalise traditional manufacturing and service industries. One of the reasons why big digital platforms (like Alibaba) have received so much support from various levels of government is because of their essential roles in driving economic restructuring and absorbing surplus labour and over-production through grassroots entrepreneurship. This state-led enthusiasm about entrepreneurship reached a new height during the peak of the “Mass Entrepreneurship and Innovation” campaign in 2015-2016 when we witnessed a surge in digital entrepreneurship of all types around the nation.

However, grassroots entrepreneurialism and the state’s attitudes towards various grassroots entrepreneurial activities also ebb and flow with shifting state priorities and macroeconomic cycles. After the 2015 stock market debacle and worsening geopolitical environment, the priority of the Chinese state had shifted more towards maintaining financial security, social stability and technological sovereignty, which was further reinforced by toughened regulation of the Big Techs, determination to reduce carbon emissions, and the protracted zero Covid policy. In this new context, some entrepreneurs, such as those in crypto currency speculation and mining, p2p finance, digital games and after-school education, faced intensified state regulation. But others, like rural e-commerce, chips, EV and biotech continue to be encouraged, if not prioritised. We also see the pendulum swing back to a less regulated environment entering 2023 as the state’s priority shifted back to boost economic development and robust GDP growth.

The problem here, as I raised in my book, is how these financialised cycles of boom and bust, intensified by the campaign-style promotion and regulation of industries, have generated excessive risks and uncertainties for entrepreneurs. The lack of protection for grassroots entrepreneurs (or entrepreneurial workers) runs contrary to the state’s mission to redress inequalities and maintain social stability. So, if we take a longer view of the evolution of state-business relations in China, we see how the party-state has continued to grapple with the development-equity-nationalism tensions and how the campaign-style regulation of business has persisted. In a way, the government is still finding a balanced approach to dealing with domestic tech firms. Small entrepreneurship, especially those mediated by big digital platforms (e.g., e-commerce, live-streaming, restaurants, ride-hailing, etc.), is inevitably impacted by macro-economic cycles and regulatory environment, but their relations with the government are also quite different from that of the Big Techs.

We’re now in a post-covid China and many restrictions are relaxed, so areas like home delivery may see a slight downturn after a peak during the lockdowns. What does the future look like for small-scale entrepreneurs in the digital economy going forward?

The overall prospects for small entrepreneurship post-covid are promising as the Party-state has prioritised boosting economic growth and employment. But we also have to be sector specific. As daily activities return to normal, businesses like restaurants, cafes and shops will likely recover to pre-pandemic levels. But sectors like live streaming e-commerce and home delivery groceries, for example, will see less online traffic and might have to readjust their business strategies. Of course, macro-economic conditions, such as weak overseas/domestic demands, high local governments debts and a bearish stock market, will also impact sales and the support/ investment that small entrepreneurs could receive.

The post How the digital economy transformed entrepreneurship in China appeared first on Focus - China Britain Business Council.

China’s Ministry of Industry and Information Technology published the 14th Five-Year Plan for Information Communication Development in November 2021, following on from the national 14th Five-Year Plan. The macro trend for technology in China is to focus on digital transformation: the mainstream integration of intelligent technology throughout industry to increase efficiency and align development with the 14th Five-Year Plan.

Digital transformation affects operations, business models, and the B2B and B2C customer experience, and whether directly or indirectly, is a key part of the value proposition that the UK can offer China through our vibrant tech and digital sectors.

China is one of the world’s fastest-growing digital technology markets with over 900 million internet users and a growing cohort of leading ‘frontier technology’ companies operating in key growth areas such as big data and AI. In 2021, the value of China’s digital economy reached RMB 47.94 trillion, and by 2025, it is expected that the digital economy will account for 10% of China’s total GDP, increasing from 7.8% in 2020. The integration of intelligent technology has expanded into many areas of business and has presented an array of new opportunities for British companies to support transformation and growth across China’s digital economy. Opportunity areas include software, fintech (including cross-border transaction solutions, reg-tech, wealth management, underwriting and risk assessment, and insure-tech), software as a service (SaaS), and ed-tech.

China also presents a unique set of challenges to navigate for UK businesses investing in this sector , and in the past year, the Chinese government has introduced several new regulations such as data security and personal information protection laws that have required companies to take appropriate actions to manage data in China. There is however, still a growing consensus amongst UK companies, many of which sit at the forefront of the data industry, that these new laws provide a sound and stable framework for businesses to operate within.

Moreover, the UK is still a key partner for China and is ranked third globally for investment in emerging technologies such as AI, robotics, IoT and cybersecurity – accounting for 15% of all investment into the technology sector. Together with the support from the British Government on the development of the industry and its regulatory environment the UK, will continue to be an attractive partner to work with. Frontier technologies such as robotics will continue to play an growing role in both the UK and Chinese economies, and it is likely that businesses will continue to utilise these technologies to improve the delivery of services to their respective customers.

What opportunities are there for collaboration in the digital economy?

It is predicted that digital transformation will be the biggest single contributor to China’s GDP growth over the next five years. Significant opportunities exist for UK tech firms to assist clients in the manufacturing, banking, healthcare and agriculture sectors with their digital upgrading.

Green tech, sustainability and smart Cities
China is increasingly deploying tech to face the considerable environmental challenges it faces. A growing focus on green tech is driving investment in electric vehicles and smart cities, with the aim of reducing emissions and creating a cleaner, greener environment.

Consumer tech
With a middle-class numbering 400 million and over 900 million internet users, China is a vibrant and fast-growing market for consumer tech. From lifestyle apps, VR and wearables, to digital health, educational software and media streaming services, there are many opportunities to serve the consumer market.

Software
China’s software sector has seen significant growth in recent years, quadrupling its value from RMB 2,479 billion in 2012, to RMB 9,550 billion less than a decade later in 2021.

Chinese buyers are increasingly focused on software performance over price, but many sectors and applications are not yet fully served by local vendors, thus creating opportunities for international software providers. These opportunities span a range of sectors and application areas, including business analytics, system-on-chip applications, finance, healthcare, and the IoT.

Fintech
China is a world leader in digital payments, with 853 million users of mobile payment methods, 74% of whom make payments every day. The financial services sector is in the process of continual liberalisation as it evolves to meet the increasingly sophisticated needs of its consumers, and with the UK as a global leader in fintech, British firms are increasingly finding opportunities for collaboration in areas including:

• Cross-border transaction solutions: Chinese firms can find it difficult to receive and make cross-border payments. This means there is strong demand for payments, foreign exchange, trade finance and other transaction solutions.
• Regtech (aka regulatory technology): There is growing demand from Chinese companies for platforms that can provide compliance and risk assessment technologies.
• Wealth management: Chinese banks and brokers are looking to international firms to help develop wealth management and trading platforms.
• Underwriting and risk assessment: As China continues to develop its credit rating system, and as the insurance market grows, there will be opportunities for foreign companies to participate in these areas.
• Insuretech: With increasingly diverse insurance products on offer, risk control and data management services are required in China.

SaaS
China’s software as a service (SaaS) sector has experienced rapid growth in recent years and, by 2023, is expected to be ten times the size it was in 2015 – from RMB 5.53 billion to RMB 55.51 billion. Despite this, the SaaS market in China remains relatively small in international terms, currently accounting for less than 10% of the global market.

Growth in the take-up of SaaS in China is driven in part by the country’s increasing embrace of cloud computing, with it now having a market for cloud computing that is second in size only to that of the US globally.

EdTech
Edtech is developing rapidly in China and opportunities for the UK are most apparent in apps, audiovisual software, intelligent toys, robots, assessment software, professional development software, campus security systems, staff and information management software and AR/VR technology.

Case study: CBBC Member successes in localisation

For British companies operating in China, there is growing recognition of the need to localize their approach either through investing into dedicated R&D centres or by entering into partnerships or joint ventures with local digital technology or big data companies to combine their respective strengths.

For example, the UK’s largest IT technology company, MicroFocus, entered a joint venture in Shandong with local partners in 2020. This new venture, established through the support of CBBC, combines the resources of three partners to provide cloud-based testing service for SaaS software leveraging MicroFocus IP with local big data and technology.

Wireless Logic has teamed up to form a joint venture with China Mobile to develop connected autonomous vehicle technology – again, combining their respective strengths in technology with local partners worldwide which have access to big data.

Joint ventures proved to be an effective form to leverage foreign technology and knowledge with local content and market. In the past 40 years, RELX, a UK analytics firm, has formed over 10 joint ventures in China. Its exhibition division RX has six JVs in China. KeAi, its JV in the STM publishing industry, has developed into a top Open Access journal publishing business in China, with more than 130 high-quality STM journals in the past 15 years.

How CBBC is supporting the bilateral development of the digital economy

In response to the growing demand for engagement between UK business and our partners across Government and local business here in China, CBBC has launched a digital and data working group. The group will consist of leading British data and technology companies, focus on addressing the various regulatory obstacles, and support the development of new initiatives such as pilot projects and commercial partnerships.

The working group was announced as a key outcome of the June 2022 meeting between the ministers of the UK’s Department for Business, Environment and Industrial Strategy (BEIS), and China’s Ministry of Industry and Information Technology (MIIT).

CBBC’s Data & Digital Working Group will strive to promote greater collaboration between the UK and China on digital economy based on the following three core pillars:

• Advocacy: Form a single voice for UK business to advocate to the ministries, regulators and relevant departments of the Chinese Government responsible for developing China’s digital and data economy. Through this engagement, the working group will seek to become the leading group for Chinese government bodies to consult when seeking input on related policy, regulation and guidelines.
• Cooperation: Promote cooperation between UK-China business and Government in the digital and data economy including commercial partnerships, joint research, draft regulation, and other forms of collaboration. Although membership will be limited to CBBC members, the working group will aim to engage a broad range of stakeholders including international and local businesses as well as third country governments.
• Information sharing: Become the leading platform for information sharing in the UK-China data and digital governance and commercialisation.

If you would like to find out more or get involved, please contact Mark Xu (mark.xu@cbbc.org)

As the role of frontier technologies expands in the UK, China and globally, new opportunities will continue to emerge for growth. IP will, of course, underpin much of this activity as companies look to leverage new and existing technologies together with the growing pools of data. It is, however, critical that Governments remain focused on encouraging innovation and provide a supportive regulatory environment for business to succeed.

CBBC will continue to facilitate engagement between UK business and our partners here in China to help overcome obstacles and support the development of new partnerships.

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s market research and analysis services can provide you with the information you need to succeed in China.

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