China is banking on private initiative, innovation and startups to reignite its slowing economy, which will have to cater for a larger social security bill in the future, as early signs of an aging population in the country begin to show.
The signal to develop a state-of-the art, bottom up economy that would absorb the brightest from the millions of young people who enter China’s job market every year has come from the very top. Prime Minister Li Keqiang, said in his work report last week to National People’s Congress -- China’s parliament –that "twin engines" of popular entrepreneurship and mass innovation, alongside increased supplies of public goods and services should drive the economy of the future.
His message has now been percolating rapidly through the country’s decision making channels.
The State Council, chaired by the Prime Minister, has subsequently announced that China will pilot online crowd funding, which would be equity based. Besides, banking and financial institutions would be encouraged to provide loans in order to support small businesses, Xinhua is reporting.
On Wednesday, Wang Gang, the science and technology minister offered a glimpse of China’s ambitious plans. Addressing a media conference, he said that more than 1000 investment agencies are channeling a hefty fund of $56.8 billion for promoting entrepreneurship.
Mr. Wang revealed that 115 university science parks and over 1,600 technology business incubators are engaged in supporting startup technology companies in China. Over 80,000 enterprises are being incubated in these institutions, generating 1.7 million jobs.
Yet, many support formation of a more flexible banking architecture that is nimble enough to respond to the specific needs of startups. Mei Xingbao, former president of China Orient Asset Management, stressed during a meeting of political advisers to the government, the urgent need to establish small and medium-sized private banks, which are tailor made to address the needs of small and micro-businesses.
Li Yanhong, chairman of the Chinese language search engine Baidu.com, advocated the start of "China Brain" fund, to meet the research requirements in the field of artificial intelligence, which could then be applied to fields such as automatic driving and drones.
Many among the young- and- ambitious, especially in the hi-tech industry, are swiftly aligning themselves with China’s rapidly transitioning business ecology. Writing in The Washington Post, Linda Bernardi, the chief innovation officer at IBM says that a new culture of innovation has begun to grip China. “I’ve visited China over a dozen times in the last decade. And I’ve seen dramatic changes during that time. But nothing compares to what’s happened in the last 18 months,” she observes.
The success of Alibaba-the Hangzhou based start-up-which ended up with an evaluation of $167.6 billion at the New York Stock Exchange last September has been a game-changer. Alibaba’s success has triggered the emergence of some of China’s most successful startups in Hangzhou-half an hour away from Shanghai.
Analysts say that the urgency for the new economy to take root is visible, in the light of China’s growing aging population at the workplace, which will put a lot of pressure on pension funds. Pension payments had been at the heart of a strike last year at a shoe factory in Dongguan, in the southern province of Guangdong.
China’s human resources minister, Yin Weimin points out that China’s population above the age of 60 would triple by 2050, comprising 39 per cent of the total.
