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Workers at Tech Temple, a co-working space for start-ups in Beijing. Young people are making the most of the mainland's rising internet technology sector. Photo: Bloomberg

China's young entrepreneurs answer Beijing's calls to innovate

Focus on internet technology helps start-ups avoid economic gloom and take advantage of a sea change in mainland business environment

Encouraged by Beijing's support for an innovation-led economy, young entrepreneurs are taking advantage of the mainland's burgeoning internet technology sector to launch their businesses.

The economic slowdown and stock market slump have taken a toll on large state-run companies and many traditional manufacturers have been hit by rising labour costs and dwindling orders.

Less affected by the gloom are the many young businessmen and women who have created internet-technology-based start-ups, often with minimal funding.

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They have been inspired in part by Premier Li Keqiang's call for companies to use the internet to revamp business models and enhance services.

Ken Cui, 30, is among those to have heeded Li's call.

Cui quit his job as a clerk at a Shanghai-based foreign bank to start a 3D printing business after hearing Li say 3D printing should be part of the push to modernise China's economy.

"To quit my steady job at a bank was not an easy decision," Cui said. "But the vast market potential offered by 3D technology and the government's supportive attitude cemented my belief that it was the right time to make a change."

With his banking background Cui is in charge of the financing and marketing of the 10-million-yuan (HK$12 million) venture while his business partners supply the premises and technology.

In the past, private entrepreneurs on the mainland needed connections in local governments to secure orders and preferential policies. But the ability to attract customers via the internet has led to a sea change.

"China is at the start of a brand new business era," said Li Ruoshan, a professor at Fudan University's School of Management, in Shanghai.

"Companies must respect the market rather than focus only on building relationships with government officials."

Terence Ho, of professional services company EY, said it was "much more complicated to assess the value of a company today than several years ago".

"Even without substantial revenue, a company can be viewed as a promising star of the future with potential for profit if it achieves heavy online traffic."

EY recently named Skio Matrix - a start-up in Hangzhou that provides battery-charging services for electric vehicles - as one of China's most promising businesses. The firm uses internet technology for its sales and to manage client services. It offers a low-cost e-car rental service and has received funding from carmakers.

China is at the start of a brand new business era
Professor Li Ruoshan

EY said the firm's focused business model should ensure long-term success.

"It's no longer necessary to gauge a start-up's financial strength," Ho said. "As the mainland highlights innovation as it looks for new drivers of growth, the mass market will be the ultimate judge of a company's prospects.

"That's why online traffic can be a key yardstick for assessing a start-up company's valuation."

However, there are hurdles for even the most technologically savvy young entrepreneur.

Beijing recently suspended initial public offerings on the stock market - closing the door on cash-hungry businesses looking to raise funds.

And the leadership has yet to introduce any strong tax incentives to ease financial burdens on small companies.

Rigid bureaucracy is also a stumbling block, with many young entrepreneurs saying they will be unable to expand without further market deregulation.

This article appeared in the South China Morning Post print edition as: Young entrepreneurs heed Beijing's calls to innovate
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