China's start-up boom: a new company every seven minutes
Every seven minutes someone in China founds a new company. A report from a Beijing start-up hub – and what remains of the boom today.
Every month thousands of entrepreneurs found new companies in China. Beijing is fuelling the boom. Handelsblatt correspondent Stephan Scheuer visited a start-up hub in Beijing and had the model explained to him.
Background
This report captures the mood of the Chinese start-up boom of 2016 and 2017 – a phase in which mobile payment, e-commerce, bike-sharing and fintech attracted venture capital in double-digit billions. In 2018 alone around 105 billion dollars flowed into Chinese start-ups – at that point as much as in the United States.
The dynamic was no accident. Prime Minister Li Keqiang had in 2014 elevated the campaign “Mass Innovation and Entrepreneurship” to state doctrine. Local governments competed for incubators and subsidised new ventures. The combination of cheap capital, an enormous home market and an internet largely shielded from global competition created its own champions: Didi Chuxing (ride-hailing), Meituan (delivery platform), ByteDance (TikTok’s parent company), Ant Financial (spun out of Alibaba).
The turning point came in autumn 2020. Beijing’s regulators stopped the planned IPO of Ant Group – at the time set to be one of the largest in history – at short notice. Days earlier Jack Ma had publicly criticised the Chinese financial system. What followed was a wave of investigations: against Didi for data-protection violations, against Meituan for competition breaches, and against the entire private tutoring industry with a blanket business ban.
Venture capital investment in Chinese consumer start-ups subsequently collapsed by 70 to 80 per cent. Many international investors such as Sequoia Capital completely spun off their China operations in 2023. What today qualifies as deserving support in Beijing’s eyes is “hard technology” – semiconductors, artificial intelligence, biotechnology, electric vehicles, aerospace. In these areas billion-dollar funding continues to flow, but now under clear political direction.
For the start-up scene depicted in this report, that means a cultural shift. The era of fast, market-driven consumer tech innovation is over. What remains is a system in which entrepreneurial success is more tightly coupled than ever to political conformity.