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Urban Chinese entrepreneurship is booming – and so are opportunities for investment

Take a step inside the Garage Cafe in Beijing, where the city’s brightest idea generators congregate in an unyielding cycle of development, innovation, and pitching. Or turn to Shenzhen, a prefecture which has funneled 100 billion yuan ($16.25 billion) directly into the development of an entrepreneurial start-up zone for small-to-medium sized enterprises. Better yet, cast gaze on individual innovators, like V-Roof founder Huang Ke, who saw an opportunity to install gardens on Shanghai rooftops and has since expanded and molded that concept to fit a variety of needs across sectors. All of these are products of the Chinese SME mindset: dynamic, adaptive, and forward-thinking.

In China’s metropolises, new business is big business.

The number of small-to-medium sized enterprises in Chinese urban areas is staggering, even after one wraps their mind around the country’s massive urbanization. Chinese cities now boast a combined population of almost 700 million. In turn, the workforces of bigger municipalities like Shanghai and Beijing are burgeoning, manifesting in thousands of fresh businesses in the service, retail, and technology fields. Hong Kong by itself hosts more than one million companies, a majority of which are small or medium in size.

But while a majority of urban Chinese enterprises are focused in scope and fresh in concept, the challenges they face are overwhelmingly conventional. China’s Ministry of Industry and Information Technology has conceded that securing financing remains a struggle for small businesses, while managing cash flow and navigating a highly competitive environment are major concerns for startup founders. More and more, Chinese enterprises are looking outside the country to infuse this startup economy with outsider expertise and capital.

This translates to opportunities for foreign investors, who can often receive generous tax breaks, including as much as a 50 percent cut in corporate income tax or, in some cases, complete exemptions and refunds, dependent on the level of investment. The key is accessibility, and the Chinese government aims to provide it. For example, the Thousand Foreign Experts program offers foreign-born professionals incredibly favorable conditions with which to enter the country and lure both human and monetary capital to growing Chinese businesses.

The feeling is mutual: a March 2013 PricewaterhouseCoopers survey found that a majority of worldwide executives continue to prefer foreign direct investment in China over other emerging economies, and despite a lagging worldwide economic climate, recent figures show an increase in inbound investment of 5.7 percent year over year.

Entrepreneurs, investors, and government are driving this boom, together seeking to position the second-largest economy in the world at the forefront of thought leadership and innovation.

This article was produced on behalf of Cathay Pacific by the Quartz marketing team and not by the Quartz editorial staff.

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