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Guangdong province to subsidise new start-ups as failure rate skyrockets

PUBLISHED : Wednesday, 17 June, 2015, 5:04pm
UPDATED : Tuesday, 23 January, 2018, 5:01pm

Start-ups in southern Guangdong province have a relatively low rate of success in China, according to the country’s State-run media.

Over 134,000 companies were newly registered in the province in the first four month of 2015, up 38 per cent from the year before, the Yangcheng Evening News reported, citing the Guangdong Provincial Employment Service Bureau.

But their success rate is proving sub-par due to difficulties encountered raising funds and finding qualified staff, Tang Shengzhang, the bureau’s deputy head, was quoted as saying.

READ MORE: China's start-up mania overlooks the risk of failure

Tang did not specify the overall failure rate but said that only one per cent of companies started by college students in Guangdong is successful.

The same rate among college kids in Shanghai is 4 per cent, the bureau said.

In global terms, only one in 10 start-ups are believed to still be operating within three years, reports say. The rest either fold or are sold to larger companies at a discount.

Tang said the provincial government will invest at least 500 million yuan (US$80.5 million) each year to subsidise new start-ups, but did not give a deadline. 

As China embarks on an economic slowdown after three decades of rampant growth, Chinese premier Li Keqiang has urged the nation to focus more on innovation from this year while also promoting the entrepreneurial spirit.

Some local governments in China have even advised young people to defer their studies for up two years to pursue promising start-up ideas, a move now supported by China’s education ministry.

According to a post doing the rounds on China’s social media, Chinese university students are only passionate about two things: investing in the domestic stock market, one of the world's best-performing this year, and launching a start-up in a bid to become the next Jack Ma (founder of e-commerce giant Alibaba) or Mark Zuckerberg (Facebook).