The current state and trends in the development of entrepreneurial activity in China

Xuan, Qiyu

Please use this identifier to cite or link to this item: https://er.chdtu.edu.ua/handle/ChSTU/7332

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DC Field	Value	Language
dc.contributor.advisor	Манн, Руслан Володимирович	-
dc.contributor.author	Xuan, Qiyu	-
dc.date.accessioned	2026-03-09T16:02:21Z	-
dc.date.available	2026-03-09T16:02:21Z	-
dc.date.issued	2025	-
dc.identifier.uri	https://er.chdtu.edu.ua/handle/ChSTU/7332	-
dc.description.abstract	Master’s thesis contains 78 pages, 2 tables, 11 figures, bibliography of 88 titles. The object of research is entrepreneurship. The subject of research is the current state and trends in the development of entrepreneurial activity in China. The purpose of the master's qualification work is to analyze the state of development of entrepreneurial activity in China and form recommendations for its activation The objectives of the Master's qualification work are study of historical aspects of the formation of entrepreneurship in China; research of the modern model of entrepreneurship in China; analysis of the current state of entrepreneurship development and readiness for entrepreneurial activity in China; research of the directions of support and development of start-ups in China; research of directions for the development of youth entrepreneurship in China; research of directions for the development of entrepreneurship in rural areas. The scientific novelty of the obtained results lies in in a comprehensive study of the modern entrepreneurial ecosystem of China, considering the interaction of historical prerequisites, institutional changes and the latest trends in digital transformation. For the first time, the features of entrepreneurship development in China are systematically summarized through the integration of three dimensions: the evolution of state policy to support business, the dynamics of the current state of SMEs and the formation of new areas of entrepreneurial activity, such as startup ecosystems, youth and rural entrepreneurship. The novelty also lies in the systematic comparison of internal and external factors that affect the dynamics of entrepreneurial activity, and in the formation of a generalized model of key drivers and barriers to the development of entrepreneurship in China at the present stage. The practical significance of the results obtained lies in the possibility of using the obtained results to improve the mechanisms of state policy in the field of entrepreneurship development, the formation of programs to support small and medium-sized businesses and the development of strategies to stimulate innovation activity. The results of the study can be applied in the process of comparative analysis of entrepreneurial models of different countries, assessment of the effectiveness of institutional reforms and adaptation of tools support for startups, youth and rural entrepreneurship. The practical value draws conclusions on the impact of digital infrastructure, state-managed funds, and regional innovation clusters on entrepreneurship development, which can be used in the formation of economic development strategies, business planning, regional management, and educational programs.The results obtained also serve as a basis for further applied research in the field of economic policy, innovation management, digitalization, and sustainable entrepreneurship.	uk_UA
dc.language.iso	en	uk_UA
dc.subject	business	uk_UA
dc.subject	public policy	uk_UA
dc.subject	ecosystem	uk_UA
dc.subject	small and medium-sized enterprises	uk_UA
dc.subject	mass entrepreneurship	uk_UA
dc.subject	youth entrepreneurship	uk_UA
dc.subject	startups	uk_UA
dc.subject	rural entrepreneurship	uk_UA
dc.title	The current state and trends in the development of entrepreneurial activity in China	uk_UA
dc.type	Master Thesis	uk_UA
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МІНІСТЕРСТВО ОСВІТИ І НАУКИ УКРАЇНИ
ЧЕРКАСЬКИЙ ДЕРЖАВНИЙ ТЕХНОЛОГІЧНИЙ УНІВЕРСИТЕТ
ФАКУЛЬТЕТ ЕКОНОМІКИ ТА УПРАВЛІННЯ
КАФЕДРА ЕКОНОМІКИ ТА УПРАВЛІННЯ

Пояснювальна записка
до кваліфікаційної роботи магістра

на тему: «Сучасний стан та тенденції розвитку підприємницької
діяльності в Китаї»
«The current state and trends in the development of entrepreneurial
activity in China»

Виконав: здобувач 2 курсу,
групи ЕПМ-24
спеціальності 076 «Підприємництво та торгівля»
_________________ Сюань Цюй/Xuan Qiyu _____
(прізвище та ініціали)
Керівник ______Манн Р.В.______________
(прізвище та ініціали)
Рецензент _______________________________________
(прізвище та ініціали)

Черкаси 2025 року

4

ЗМІСТ

INTRODUCTION………………………………………………………….. 5
CHAPTER 1 STUDY OF THE ENTREPRENEURSHIP MODEL IN
CHINA……………………………………………………………………... 8
1.1 Historical aspects of the development of entrepreneurial activity in
China……………………………………………………………………….. 8
1.2 Formation of a modern model of entrepreneurship in China…..……….. 15
Conclusions to the chapter 1……………………………………………….. 25
CHAPTER 2 ANALYSIS OF THE CURRENT STATE OF
DEVELOPMENT OF ENTREPRENEURIAL ACTIVITY IN CHINA …. 27
2.1 Analysis of the development of small and medium-sized enterprises in
China….......................................................................................................... 27
2.2 Analysis of China's readiness for the development of entrepreneurial
activity……………………………………………………………………… 32
Conclusions to the chapter 2……………………………………………….. 39
CHAPTER 3 STUDY OF TRENDS AND DIRECTIONS OF
ENTREPRENEURIAL ACTIVITY DEVELOPMENT IN CHINA………. 41
3.1 The main approaches to supporting and developing startups in China.. 41
3.2 Directions for the development of youth entrepreneurship in China…... 50
3.3 Main trends in the development of entrepreneurship in rural areas……. 59
Conclusions to the chapter 3……………………………………………….. 64
CONCLUSIONS…………………………………………………………… 67
REFERENCES……………………………………………………………... 70

5

INTRODUCTION

The analysis of the state and trends in the development of entrepreneurial
activity in China is extremely relevant given the transformative nature of the global
economy and the role of the PRC as one of the leading actors in the world market.
Over the past few decades, China's economic development model has demonstrated
a unique combination of government regulation and market initiative, which has led
to rapid industrialization, massive growth of small and medium-sized enterprises,
the emergence of a strong startup ecosystem, and intensive digitalization of the
economy. Assessing the current state of entrepreneurship in China and identifying
its key trends is necessary to understand global changes in value chains,
technological competition, and innovation transfer.
The study acquires increased practical and scientific significance due to new
challenges and opportunities: the consequences of the COVID-19 pandemic for
entrepreneurial activity; restructuring of international investment flows and
geopolitical fragmentation of technology markets; strengthening the role of digital
platforms, artificial intelligence, and green transformation in shaping competitive
advantages.
The problem of the development of entrepreneurial activity in China is dealt
with by a number of scientists, in particular, Y. Huang, B. Naughton, N. Thomas,
J. Qian, Y. Zhang, A. van Stel, A. Holzmann, M. Kärnfelt, L. Wang, Z. Huang, Y.
Wang and others, as well as international organizations, including World Bank,
OECD, International Bank for Reconstruction and Development.
The object of research is entrepreneurship
The subject of the study is the current state and trends in the development of
entrepreneurial activity in China
The purpose of the master's thesis is to analyze the state of development of
entrepreneurial activity in China and form recommendations for its activation
The tasks of the master's qualification work are:
6

− study of historical aspects of the formation of entrepreneurship in China;
− research of the modern model of entrepreneurship in China;
− analysis of the current state of entrepreneurship development and
readiness for entrepreneurial activity in China;
− research of the directions of support and development of start-ups in
China;
− research of directions for the development of youth entrepreneurship in
China;
− research of directions for the development of entrepreneurship in rural
areas.
Research methods. The historical-logical method was used to analyze the
evolution of entrepreneurial activity in China. The systemic and structural-
functional methods made it possible to consider the entrepreneurial ecosystem as a
holistic multi-component system. Statistical and comparative-analytical methods
were used to assess the current state of entrepreneurship, the dynamics of key
indicators and compare different models of its development. The method of
generalization and systematization was used to form conclusions, content analysis
was used to process regulatory documents, analytical reports and scientific sources.
The scientific novelty of the work lies in a comprehensive study of the
modern entrepreneurial ecosystem of China, considering the interaction of historical
prerequisites, institutional changes and the latest trends in digital transformation. For
the first time, the features of entrepreneurship development in China are
systematically summarized through the integration of three dimensions: the
evolution of state policy to support business, the dynamics of the current state of
SMEs and the formation of new areas of entrepreneurial activity, such as startup
ecosystems, youth and rural entrepreneurship. The novelty also lies in the systematic
comparison of internal and external factors that affect the dynamics of
entrepreneurial activity, and in the formation of a generalized model of key drivers
and barriers to the development of entrepreneurship in China at the present stage.
7

The practical significance of the results obtained lies in the possibility of
using the obtained results to improve the mechanisms of state policy in the field of
entrepreneurship development, the formation of programs to support small and
medium-sized businesses and the development of strategies to stimulate innovation
activity. The results of the study can be applied in the process of comparative
analysis of entrepreneurial models of different countries, assessment of the
effectiveness of institutional reforms and adaptation of tools support for startups,
youth and rural entrepreneurship. Of practical value are the conclusions on the
impact of digital infrastructure, state managed funds and regional innovation clusters
on the development of entrepreneurship, which can be used in the formation of
economic development strategies, business planning, regional management and
educational programs. The results obtained are also the basis for further applied
research in the field of economic policy, innovation management, digitalization and
sustainable entrepreneurship.
Structure and scope of work. The qualification master's thesis consists of
an introduction, three sections, conclusions, a list of used sources. The total volume
of the work is 78 pages. The list of used sources consists of 88 titles, 2 tables, 11
figures.

8

CHAPTER 1
STUDY OF THE ENTREPRENEURSHIP MODEL IN CHINA

1.1 Historical aspects of the development of entrepreneurial activity in
China

Study of scientific research, reports of international organizations, official
documents [1; 2; 3; 4; 5; 6; 7; 8] allows us to draw the following conclusions about
the historical aspects of the development of entrepreneurship in China.
First, we want to say that the development of entrepreneurship in the country
can be conditionally divided into four periods:
− until 1978, the existence of informal forms of entrepreneurial activity;
− 1978-1990 – reforms and the birth of the private sector;
− 1990-2000 – consolidation of the private sector and institutional
formalization;
− 2014-2015 and up to now – a new national course "Mass Entrepreneurship
and Innovation".
Before the start of reforms in 1978, the economy of the People's Republic of
China was organized according to the Soviet model: centralized planning, state
ownership of the means of production, collective farm and cooperative organization
of agricultural production, that is, there were practically no opportunities for formal
private entrepreneurship except for a few elements, such as informal trade in cities
and agriculture, as well as agricultural subsidiary farms.
The period of 1978-1990s became a fundamental stage in the formation of
modern entrepreneurship in China. At this time, the country began to move away
from the model of central planning and move towards a mixed economy with a
multi-structure form of ownership. In December 1978, the Third Plenum of the
Central Committee of the Communist Party of China of the 11th convocation was
9

held, during which Deng Xiaoping proposed a development model focused on the
modernization of industry, agriculture, science and technology, and defense, and
introduced the principle: "It doesn't matter what color the cat is, it is important that
it catches mice", which meant putting efficiency in a higher priority over ideology.
The first reforms affected agriculture, because the agricultural sector
experienced the greatest deficit in efficiency and productivity. The so-called
Household Responsibility System was introduced in the provinces of Anhui and
Sichuan, which allowed farmers to independently decide how to work and sell
products. This approach showed high results and demonstrated that allowing private
initiative could ensure economic growth, which led to the extension of the reform to
the national level during 1981-1983.
One of the characteristic features of this period was the rapid growth and
development of Township and Village Enterprises (TVEs), which were inherently
collective, but close to private business. Enterprises enabled local communities,
towns and towns to create their own industries, hire employees and generate profits.
The main characteristics of TVEs were the following: formally collective ownership,
but with flexible management; high level of autonomy; stimulation of local
entrepreneurship without direct declaration of "private property"; Taxes remained at
the local level, which motivated the authorities to support entrepreneurs.
In the 1980s, TVEs became the driving force of Chinese industrialization, so
in 185-1995 they provided up to 30-40% of industrial production in China, and
employment exceeded 135 million people by 1996 [9]. We can say that this was a
unique mechanism for incubating entrepreneurship in conditions when the private
sector was not yet fully legalized.
Although private property was limited at that time, in 1980 the state allowed
the so-called individual entrepreneurs (getihu) [10], who were allowed to hire up to
7 workers mainly in such areas as services, small trade, handicrafts, and small-scale
production. By the mid-1980s, millions of such entrepreneurs were already working
in China, and in 1987 their number exceeded 18 million. Gradually, restrictions on
10

the number of employees were lifted and part of getihu grew into full-fledged private
enterprises.
In 1979-1980, China created the first Special Economic Zones (SEZs):
Shenzhen, Zhuhai, Shantou and Xiamen [11]. It was Shenzhen that later became a
symbol of reform, as it turned from a small fishing village into one of the most
powerful economic centres. SEZs made it possible to attract foreign investments,
create enterprises with mixed or wholly foreign ownership, apply market
management tools, test new market management tools and forms of entrepreneurship
and management.
At the beginning of 1984, to open up even more to the outside world, the
Chinese government decided to create Economic and Technological Development
Zones (ETDZs), along the seas. Thus, from 1984 to 1988, 14 ETDZs were
established, including Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao,
Lianyungang, Nantong, Minghan, Hongqiao, Caohejing, Ningbo, Fuzhou,
Guangzhou, Zhanjiang.
ETDZs of coastal cities have achieved significant success. Summarizing the
experience of rapid and thorough development of national development zones as the
main component of the development strategy of the western zone, the State Council
decided in 1999 that the provinces of the Midwest, autonomous regions and
municipalities directly subordinate to the central government can select one
qualified and established provincial ETDZ from their capital to participate in the
tender for the establishment of a national ETDZ. At present, there are 54 national
ETDZs [12].
The development of entrepreneurial activity required the development of the
legislative and regulatory framework. Thus, in 1982, the Constitution of the People's
Republic of China for the first time recognized the existence of individual farming,
in 1988 an amendment was made to the document, which allowed the private sector
to "exist and develop under the supervision of the state". In 1988, the status of private
companies was legally enshrined in the Law on Private Enterprises [13], which
allowed the private sector to officially become part of the economic system.
11

The main results of economic reforms by the beginning of the 1990s were the
following: the share of the private sector in the country's GDP reached about 5-7%,
the number of private enterprises – more than 90 thousand, getihu – more than 23
million [9].
Thus, the first wave of reforms created the basic elements without which
China's economic breakthrough would not have occurred: private initiative was
legalized, albeit in limited quantities; a model of "socialism with Chinese specifics"
was built; nascent mass entrepreneurship at the local level; legislative and
institutional conditions for the development of entrepreneurship have been created;
The foundations of changing thinking about the role and importance of
entrepreneurship are laid.
The period of the 1990s and early 2000s became fundamental for the
consolidation of the private sector in the economic system of China. This stage was
defined by several key processes: political recognition of private business, large-
scale reform of state-owned enterprises, changes in the legislative framework,
structural economic transformations and integration of China into the world
economy.
At the 14th Congress of the Communist Party of China in 1992, China
officially proclaimed a course towards a "socialist market economy". In the new
concept, the market was recognized as a key mechanism for coordinating economic
processes, and the private sector was an integral participant in the market system,
and the terms "non-state enterprises" and "private economy" began to be
systematized. In 1999, the Constitution of the People's Republic of China was
supplemented with a provision that the private sector is an important component of
the national economy, and the state "encourages, supports and regulates it". During
this period, a large-scale restructuring of state-owned enterprises began, many of
which turned out to be inefficient in the new market conditions, needed
modernization, had large debts or lost competitiveness. The government embarked
on a policy of "seize the big, let go of the small", which meant maintaining control
over strategic industries and at the same time closing unprofitable state-owned
12

enterprises, privatizing or partially privatizing small and medium-sized state-owned
enterprises, transferring small enterprises into private hands to local businessmen,
and creating a more flexible and competitive economic environment.
This wave of reforms facilitated a massive shift of labour to the private sector,
which not only strengthened the private economy, but also created an economic basis
for its long-term dominance in several sectors. At the same time, the reform of the
corporate governance system took place, in particular, supervisory boards, auction
mechanisms, and partial access to the domestic stock market were introduced for
state-owned enterprises.
During this period, a modern legislative framework for private business began
to form a number of laws that legally determined the status of enterprises of various
forms of ownership and established the rules for doing business.
Among such legislative acts, it is necessary to mention the Companies Law of
the People's Republic of China, which for the first time established the structure of
modern corporate forms: LLCs, joint stock companies, requirements for capital,
management, rights and responsibilities of owners [14]. This allowed private
entrepreneurs to form full-fledged companies, rather than working as individual
farms or semi-formal enterprises.
The market infrastructure is also beginning to develop, including the
introduction of accounting rules, tax system, standards for registering enterprises,
economic courts, and exchange regulators.
In 2007, Property Law was adopted [15], which completed the stage of
institutionalization, consolidating the inviolability of private assets. Which was an
important signal for investors.
In the 1990s-2000s, there was a rapid growth of sectors that became the core
of Chinese private enterprise, including manufacturing, light industry and export-
oriented business, construction and development, trade and logistics, household,
repair, transport, and services. During this period, companies began to emerge that
later became national and global leaders: Alibaba (1999), Tencent (1998), Baidu
(2000).
13

In 2001, China joined the World Trade Organization in 2001, which
consolidated the international recognition of the Chinese market system, opened
access for private companies to global markets, facilitated the wave of foreign
investment, and required China to modernize the regulatory system in accordance
with international standards.
At the provincial and city level in the 1990s and 2000s, various development
models began to form. For example, Zhengqiang has formed a model of
"entrepreneurial families and small firms" and decentralized growth, which is based
on family enterprises, private small and medium-sized companies, local business
networks and clan connections, specialized city-production clusters. This province
was poor in the 1970s and 80s, but had a very active tradition of trade and private
crafts. Among the key characteristics of the Zhengqiang model, we can cite the
following: decentralization, the structure of the economy with a minimal presence
of state-owned enterprises; high flexibility and adaptability of private companies,
informal financial systems such as private loans, local credit associations; strong
network and family ties, assistance from the local government by providing
businesses with land, tax breaks, loans, incubators.
In the cities of Wenzhou, Yiwu, Shaoxing and others, the so-called specialized
commodity cities were formed, which concentrated the production of one type of
product. The most famous is Yiwu, which has become a global centre for small-scale
wholesale trade and has become a symbol of the flexibility of small producers. Such
a cluster model allowed small enterprises to quickly adapt to changes in global
demand, innovation, and price competition [2].
Guangdong has formed an export-oriented model of production clusters due
to its proximity to Hong Kong and the early opening of special economic zones,
which were discussed above. So, in the 1980s – 2000s, a model based on export-
oriented production, clustering of factories, attraction of foreign investments,
outsourcing of Western companies, mass production of electronics, toys, household
appliances, clothing was formed here; The province has become a key center of the
global supply chain [16].
14

In the 1990s, Guangdong turned into a "world factory" thanks to the large-
scale attraction of investments from Hong Kong and Taiwan, which transferred the
production of electronics, clothing, toys, furniture and household appliances here. A
special place was occupied by the city of Dongguan, which became a global centre
of contract manufacturing, where Chinese factories manufactured products under the
brands of Western companies.
The model was characterized by a high concentration of enterprises in
industrial parks and clusters, which made it possible to effectively organize supply
chains. The Guangdong model has become a classic example of Chinese integration
into global production networks, and its competitiveness has determined China's
position as the world's leading manufacturer [16].
In Shanghai, a model of modernized services, finance and logistics has been
formed, which has the following main elements and characteristics: a financial hub
(Shanghai Stock Exchange, banks, investment funds); a powerful logistics complex
(the port of Yangshan, one of the largest container ports in the world); Pudong
District, which is one of the largest international trade, economic, financial and
technological centres; strong accucente in the service economy (logistics, fintech,
insurance, consulting); development of high-tech parks (Zhangjiang Hi-Tech Park)
[3].
In Jiangsu, a model of groups and industrial parks was formed. It can be said
that it is a region with a balanced development model that combines state support,
investment in industrial parks and the creation of new corporate groups. This
development was strategically organized, with a strong focus on industrial zones and
planned growth.
The most famous example is the Suzhou Industrial Park (SIP), a project that
was launched in partnership with Singapore and attracted high-tech companies with
a focus on electronics, IT, biopharma and materials science. Thanks to this, Suzhou
became the leader in industrial production among Chinese cities.
The Jiangsu model envisaged the formation of mixed-ownership corporate
groups, in which local governments owned a stake, but at the same time attracted
15

private partners. This contributed to financial stability and modernization of
production processes. A feature of the Jiangsu model is its focus on technological
innovation and corporate governance [3].
Thus, the period of the 1990s – 2000s can be considered the period of
formation of a mature private sector, since it was then that the private sector received
official political recognition, a full-fledged legal framework was created, the market
became a key regulator of economic relations, state-owned enterprises were
restructured, which freed up space for private firms. The country has formed a
modern institutional market infrastructure, including courts, standards, financial
system, registration mechanisms, etc. Private companies entered global markets and
began to form international brands. By the 2000s, the private sector was already
producing a larger share of GDP growth and was the main source of employment
and innovation. It was on this basis that the economic miracle of the 2000s and the
launch of the policy of mass entrepreneurship and innovation in the 2010s became
possible, which will be described in more detail in the following sections of the
study.

1.2 Formation of a modern model of entrepreneurship in China

The Chinese government is aware that the development of entrepreneurial
activity is important for the socio-economic development of the country, in
particular, it plays an important role in stimulating employment and job creation.
Thus, Li Chang’an noted that according to surveys, a self-employed person can
create three to five jobs, and a small private startup can create about 10 jobs [17].
One of the most important documents in which the strategy for the
development of industry in China was formulated was the document "Made in China
2025" (MIS 2025), developed and approved in 2015 [18], and the purpose of which
was to move China up the global value chain and establish dominance in production
by focusing state support on ten sectors that Beijing considered strategically
important, but not sufficiently developed. Among such industries are the following:
16

next-generation information technology industry; high-end computer numerically
controlled machines and robotics; aviation and space equipment, including drone
technologies; offshore engineering equipment and high-tech ships; advanced rail
transportation equipment; energy-saving and new energy vehicles, including electric
vehicles; electrical equipment, including solar and wind power; agricultural
machinery and equipment; new materials; and biopharma and high-performance
medical devices [19].
The document considers entrepreneurship and innovation as key elements of
industrial modernization, since the purpose of this is not just to increase production
capacity, but to raise the technological level, develop new forms of industrial
production, and stimulate the creation of innovative companies. MIC 2025 explicitly
supports the concept of "mass entrepreneurship and innovation", which can make
the country more dynamic, mobile and technologically independent [18].
In this strategy, special attention is paid to specialized, refined, distinctive,
innovative small and medium-sized enterprises that operate in innovative sectors and
can develop as "technological" locomotives; it is noted that there is a need to
improve the quality of management of such SMEs through education, training, skills
improvement, etc [18].
Also, the document notes the need to create financial and institutional
mechanisms to ensure SMEs' access to finance, through subsidies, grants, soft loans,
for the development and implementation of innovations, as well as to reduce the
risks associated with the high technological level of projects [18].
An important emphasis is placed on the creation of appropriate infrastructure
for the development of entrepreneurship and innovation, in particular through the
creation of "manufacturing innovation centres", which are designed to combine
research work, technology testing, commercialization of developments and
cooperation of industry with universities and scientific institutions, i.e. the creation
of the so-called "industry-university-research" model [18].
To enable small and medium-sized enterprises, as well as startups, to test new
technologies, production processes and business models, the document provides for
17

the need to create "national demonstration zones" that aim to accelerate the
innovative transformation of production [18].
To reduce the risk for innovative enterprises, it was planned to strengthen the
protection of intellectual property through the strengthening of the patent protection
system. The document also pays special attention to improving the quality of
production, which aims not only to increase volumes, but to build "smart production"
[18].
In 2015, China officially proclaimed a policy of “mass entrepreneurship and
innovation”. Chinese Premier Li Keqiang's speech at the World Economic Forum
noted that “To foster a new engine of growth, we will encourage mass
entrepreneurship and innovation” [20]. He noted that “mass entrepreneurship and
innovation, in our eyes, is a “gold mine” that provides constant source of creativity
and wealth” [20].
Among the main measures to support mass entrepreneurship and innovation,
the following were identified:
− improvement of institutional mechanisms, implementation of reforms
in the areas of doing business, protection of intellectual property, creation of
mechanisms for training and hiring talented specialists;
− optimization of financial policy to support mass entrepreneurship and
innovation;
− optimizing the capital market to facilitate financing and investment,
supporting the development of online financial companies and crowdfunding
projects;
− expanding investments to promote the development of start-up
companies;
− developing services to promote mass entrepreneurship and innovation;
− stimulating the creation of public platforms for mass entrepreneurship
and innovation;
− encouraging the population to start their own business in China;
18

− stimulating entrepreneurship in rural areas to increase employment;
− ensuring effective leadership and coordination of public authorities to
oversee and implement relevant policies and measures [21].
For 10 years, the government has been implementing step by step specific
measures to fulfil the set tasks within the framework of the policy.
For example, in 2017, a decision was made to simplify registration procedures
and reduce barriers to entry for sectors such as education; expanding funding
channels for startups, promoting the financing of intellectual property rights,
creating state venture capital funds; introduction of preferential social security and
taxation policy to attract and retain domestic and foreign specialists in
entrepreneurship and innovation; implementing measures to facilitate the living and
working of foreign professionals in China, as well as providing them with relevant
benefits when starting a business; development of guidelines for express delivery
services [22].
The consequences of this policy were an increase in the number of new
business entities in the country. Thus, Premier Li Keqiang noted that for three years,
more than 40000 new market subjects were registered every day, that is, more than
10 million appeared every year. new businesses [23].
In 2017, in order to implement the national development strategy, which is
focused on innovation and entrepreneurship, the Ministry of Science and
Technology developed the 13th five-year plan for the development of business
incubators in the field of science and technology. The very role of incubators was
reconsidered, which, from serving startups and providing comprehensive services,
was supposed to become part of the ecosystem for innovation and entrepreneurship
and a driving force for their development. Incubators must be more diversified in
their forms and more efficient in providing services; exchange resources and apply
flexible mechanisms; regional coordination should be carried out in a strong
entrepreneurial atmosphere [24].
Within the framework of this plan, the following main goals were defined:
19

1. Serving mass entrepreneurship and supporting the diversified
development of incubators.
2. Optimizing financial services and integration investment and incubation.
3. Improving the quality on incubation and optimizing innovation services.
4. Promoting open and coordinated development and building the ecosystem
for business incubation.
5. Enhancing regional cooperation and developing incubators in a
coordinated and balanced manner.
6. Integrating into global networks and heeding the internationalized
development on incubators.
7. Pushing forward reforms and innovations and achieving a sustainable
development.
8. Fostering an entrepreneurial climate and enhancing the entrepreneurial
culture.
9. Enhancing self-discipline and self-regulation and achieving a healthy
development for incubation industry [24].
In 2018, the State Council published a circular setting out tasks to improve
mass entrepreneurship and innovation for local governments and various ministries,
with the aim of stimulating employment and integrating domestic and international
innovation resources. Among the tasks identified were the improvement of tax
policy, in particular, the reduction of social security contributions, tax exemption for
shares of the National Stock Exchange and quotations purchased on the secondary
market; exemption from property taxes and value-added tax for provincial
technology enterprise incubators and university technology parks. In addition, it is
planned to improve the system of risk assessment and control of intellectual property
rights and strengthen its protection through online identification, real-time
monitoring and traceability of origin; development of a system of encouragement
and support for scientists to start a business outside of work; implementation of a
training system that will include innovative education and training at universities;
development of policies to support entrepreneurship and innovation among labor
20

migrants, veterans, talented people who returned from war and moved from abroad,
etc. [25].
The government of the country has introduced the National Weeks of Mass
Entrepreneurship and Innovation, during which competitions, exhibitions and
forums are held for entrepreneurs, investors, researchers and university students, as
well as events dedicated to promoting international cooperation in the field of
entrepreneurship and innovation [26].
In 2018, the construction of 120 demonstration bases for entrepreneurship and
innovation began, which this year created 710000 jobs and registered an average of
6700 new high-tech companies [26].
If we talk about the period of the COVID-19 epidemic, which broke out in
Wuhan in early 2020, the economy and business activities during this period were
quite badly affected, which required the government to introduce rapid anti-crisis
measures.
Thus, according to the National Bureau of Statistics, China's GDP fell by 6.8%
year-on-year in the first quarter of 2020 (Fig. 1.1)

Figure 1.1 – Main economic indicators in China in Q1. 2020
Source: [27]

21

Beijing has made aid to small and medium-sized enterprises one of the main
areas of struggle against the economic damage caused by the Covid-19 outbreak.
During the first ten days after the Spring Festival, 600 policies to support small firms
were launched in China [28], including the following:
1. Financial support. First, the central bank provided re-lending in the amount
of 300 billion. yuan so that banks can provide loans to key enterprises (medical
industry and essential goods). To support the recovery of micro and small businesses,
UAH 500 billion was allocated. yuan, and the interest rate for re-lending to
agriculture and small businesses was reduced by 0.25 percentage points to 2.5%.
Also, extended debt service loans for SMEs were allowed. There was a purposeful
reduction in the required cash reserve ratio in the bank. The special loan quota was
increased by UAH 350 billion. yuan and reduced the lending rate to private
companies and medium-sized businesses, and provided 800 billion yuan to promote
the development of micro-business, etc.
2. Tax cuts and fee reductions. For example, prices for energy resources for
enterprises were reduced, social taxes were reduced, and the rate on income and VAT
for small taxpayers for a certain period was reduced.
3. Support for employees of enterprises. For example, the possibility of
receiving unemployment insurance payments for the past year by those small and
medium-sized enterprises that do not reduce or slightly reduce the number of
employees; providing a one-time employment allowance to those SMEs that hire
new graduates and sign a contract for a period of more than one year.
4. Increasing productivity by providing a number of digital special services
for small and medium-sized enterprises, including assistance to SMEs in
videoconferencing, using cloud services, creating digital platforms, etc. [28].
These measures have had a positive impact on the Chinese economy, for
example, according to the National Bureau of Statistics, in the second quarter of
2020, China's GDP grew by 3.2% year-on-year and by 11.5% quarter-on-quarter.
China was reportedly the only major economy in the world to achieve positive
growth in 2020 with a growth rate of 2.3% [30].
22

In 2021, the government's policy in the field of entrepreneurship and
innovation focused on supporting businesses to stabilize employment and increase
economic viability, in connection with which a number of new policy measures were
developed, including:
− promoting mass entrepreneurship and innovation to increase employment,
in particular by helping key groups to start their own businesses or get a job;
− launch special campaigns aimed at stimulating employment through
entrepreneurship and innovation in social service sectors such as online education,
telemedicine, smart agriculture, etc.;
− support colleges and universities in cooperation with enterprises;
− encourage integrated innovation among large, medium and small
enterprises in demonstration areas;
− develop startups in the growth stage, as well as small and medium-sized
enterprises that produce complex, unique and innovative products;
− create a better environment for entrepreneurship and innovation;
− deepen reforms to streamline administration, delegate authority, and
improve services, including by introducing nationwide list management for all items
related to business licenses across China; launch of a single online platform for all
registration procedures related to starting a business; reduction of the total period for
consideration of trademark registration;
− strengthen fair regulation, in particular, strictly implement a system of
examination of applications based on the principles of fair competition, abandon
policies, laws and regulations that may create discrimination and hinder the work of
market actors; strengthen law enforcement activities against monopolies and unfair
competition;
− to ensure the proper implementation of preferential tax policy, in
particular, to increase the ratio of additional tax deductions for manufacturers'
research and development costs to 100%; loan support and interest discounts for
start-ups, self-employed individuals, and small and micro enterprises;
23

− expanding financing channels and increasing the volume of inclusive
loans for small and micro enterprises issued by the banking sector [31].
During 2022, the government continued its policies in the field of supporting
the development of entrepreneurial activity, in particular, introduced a new
regulation that defines detailed policies to improve the business environment, as well
as to protect the legitimate rights and interests of the self-employed, in particular,
the facilitation of procedures for the self-employed to change ownership and
increase the status of the enterprise, as well as individual aid packages for
innovation, financing and vocational training. It was believed that the measures
developed were supposed to help 111 million self-employed people overcome the
challenges caused by the COVID-19 epidemic, as well as stabilize the labor market
[32].
In 2025, the government continued its activities in the direction of the
development of entrepreneurship and innovation. First of all, in April 2025, the law
"On Promoting the Development of Private Property" [33] was adopted, which
contains provisions to support technological innovations of the private sector, as well
as ensures "fair competition" for private enterprises (protection of rights, transparent
procedures, access to public procurement and other guarantees).
Also, in 2025, the People's Bank of China and other regulators announced that
they would increase lending to private companies and expand funding channels for
them. The People's Bank of China will work with the National Financial Regulatory
Administration and the Securities Regulatory Commission to issue a policy
document on supply chain finance aimed at helping financial institutions better serve
small and medium-sized enterprises. [34]. Also, tax incentives that support "mass
entrepreneurship and innovation" will continue until at least 2027, including
incentives for venture capital investments, startup financing, and innovative ventures
[35].
Seven central government departments, including the Ministry of Human
Resources and Social Security, the Ministry of Education, and the Ministry of
24

Finance, have developed guidelines aimed at optimizing the business environment
and supporting more individual entrepreneurs and startups [36].
China also plans to increase the effectiveness of financial and political support
for young entrepreneurs, increase their entrepreneurial competencies by integrating
them into the curricula of colleges and universities. The greatest support is planned
to be provided to college graduates, labor migrants, demobilized military personnel
and others who have difficulties with finding a job [36].
The use of digital tools is encouraged to create entrepreneurial simulation
platforms, create mentorship programs from successful businessmen, investors, and
experts, and highlight success stories and reward individuals who have created a
large number of jobs or contribute to industrial development [36].
Thus, we can conclude that the Chinese government has been pursuing a
systematic and consistent policy to support the development of entrepreneurship and
innovation for a long time, covering various areas of support: financial, tax,
institutional, educational, research, information, etc.
Such a policy made it possible to obtain positive results in the socio-economic
development of the country. Thus, the Chinese economy maintained a stable growth
rate at the beginning of 2025, while real GDP grew by 5.4% year-on-year in the first
quarter; Consumption growth has improved, although it remains below the pre-
COVID level (Table 1.1).

Table 1.1 – Main macroeconomic indicators of China 2021-2024, 2025-2026
(forecast)

Source: [37]

25

Experts estimate that more than 600000 high-tech and innovative small and
medium-sized enterprises have been established in China in the past three years. By
the end of 2024, the total number of small and medium-sized enterprises in China
has exceeded 60 million, and the revenue from industrial SMEs has reached 81
trillion yuan (11.2 trillion US dollars) [38].
A survey of midsize and small businesses found that 60% of them have
maintained or increased their income by 60% in 2024. Scientists note that "the
environment for the development of small and medium-sized enterprises in China
continues to improve" [39].
Cities continue to improve public service systems for SMEs, with more than
80 percent of cities surveyed using digital platforms that integrate online and on-site
services. More than 1800 four-tier public service institutions for SMEs have been
established in China. China's SME service network has reached connectivity with
32 provincial and 171 municipal service platforms, serving more than 1 million
enterprises [39].

Conclusions to Chapter 1

The analysis of historical prerequisites, stages of transformation and the
modern model of entrepreneurship development in China makes it possible to assert
that the entrepreneurial sector has become one of the key factors of the country's
economic growth. The evolution of the Chinese model took place gradually,
fragmentarily, but systematically: from informal economic activity to the formation
of a complex institutional architecture focused on innovation, mass entrepreneurship
and integration into global markets. The first reforms after 1978 laid the foundation
for market transformation, laying the basic elements of the future private economy,
in particular, the decollectivization of agriculture, the development of Township and
Village Enterprises, the creation of special economic zones and the formation of a
primary legislative framework that ensured the legalization of private initiative.
26

In the 1990s and 2000s, the institutional consolidation of the private sector
and its integration into the economic system became key. The recognition of private
property, the adoption of laws on companies and ownership, the restructuring of
state-owned enterprises and accession to the WTO ensured the formation of a mature
market environment and facilitated the entry of Chinese companies into global
production chains. Regional models demonstrated that the development of
entrepreneurship in China did not take place according to a single scheme, but
through local forms of experiments, which subsequently scaled up to the whole
country.
The current stage of entrepreneurship development, initiated after the
proclamation of the policy of "mass entrepreneurship and innovation" in 2014-2015,
is characterized by the transition to technological modernization and structural
renewal of the economy. The MIC 2025 policy, the creation of innovation centers,
incubators, demonstration zones, strengthening the institutional protection of
intellectual property, and the development of venture financing form an ecosystem
in which entrepreneurship becomes a strategic resource for national development.
Support for SMEs during the COVID-19 pandemic has demonstrated the ability of
the state to promptly compensate for external shocks and ensure the stability of the
business sector.
Summarizing the results of the study, it can be argued that the Chinese model
of entrepreneurship is based on a unique combination of market mechanisms,
strategic public administration and multi-level institutional tools for business
promotion. It combines the flexibility of local initiatives with centralized national
programs, which ensures a high level of economic adaptability and the ability to
generate innovation. It is the synergy of market dynamics and state support that
allowed China to become one of the global leaders in terms of entrepreneurial
activity, innovative development and participation in global value chains.

27

CHAPTER 2
ANALYSIS OF THE CURRENT STATE OF DEVELOPMENT OF
ENTREPRENEURIAL ACTIVITY IN CHINA

2.1 Analysis of the development of small and medium-sized enterprises in
China

Most businesses in China are small and medium-sized businesses (SMEs),
which are a key factor in its economic development, since about 50% of the country's
tax revenues and 60% of the gross domestic product come from SMEs. In 2022, the
total number of micro, small and medium-sized enterprises in China exceeded 52
million [40]. In 2024, 27.37 million were registered in China. new business entities,
which is on average about 24 thousand. new enterprises per day [27].
Figure 2.1 shows the dynamics of the number of enterprises in China,
including the percentage of small and medium-sized businesses.

Figure 2.1 – Number of enterprises in China and percentage of SMEs
Source: [41]

SMEs play a crucial role in job creation, so this group of enterprises in China
accounts for more than 80% of total employment. The link between SMEs and
28

employment in the country is closely interrelated: a stable SME sector is essential
for maintaining a stable labour market [42].
Small and medium-sized businesses are also the driving force behind
innovation. Statistics show that there are about 500000 SMEs working in the field
of technology, 465000 high-tech enterprises and 215000 innovative SMEs in the
country [42].
It should be noted that in 2024, the Chinese economy began to gradually
recover from the crisis caused by COVID-19, so GDP growth was 5%, but domestic
demand remains low. At the end of 2024, the number of employed people in China
was 734.39 million, of which 473.45 million were in urban areas, which is 64.5
percent of the total number of employed. The unemployment rate in urban areas in
2024 averaged 5.1 percent. The total number of labour migrants was 299.73 million,
which is 0.7 percent more than in 2023 [43].
China's slowdown in economic growth has been reflected in key indicators of
SME performance, including the SME Development Index, which is published by
the China SME Association. This index is compiled by surveying 3000 SMEs in
eight main sectors of the national economy and using data on the judgments and
expectations of SMEs regarding the functioning of their respective sectors, own
production and business [44] .
The range of SMEDI values is from 0 to 200: 100 is a critical index value that
indicates that the economic situation has not changed significantly; 100-200 –
economic range, which indicates that the economic situation tends to increase or
improve; A value between 0 and 100 indicates that the economic situation tends to
decrease or worsen.
When selecting industries based on their contribution to GDP, eight main
sectors were selected in 2024: industry, construction, transport, postal and
warehousing services, real estate, wholesale and retail trade, social services,
information transmission, computer services and software, as well as
accommodation and catering [44].
29

The index can be divided into three groups of indicators. The first is the
general business climate, which measures the state of the environment in which
SMEs operate: macroeconomic situation, employment level, availability of
resources, economic dynamics of sectors, SME support policies. The second block
is an assessment of the operating activities of SMEs, which characterizes the actual
activities of enterprises, such as production, income, orders, investments,
profitability, capacity utilization. And the third component is the confidence index,
which shows the expectations and sentiment of the business: assessment of the
current state of the company, profit expectations, investment expectations, industry
development forecast, market risk assessment. Thus, the index is divided into 8 sub-
indices: Business Climate Index, Market Demand Index, Production Index,
Investment Index, Labor Employment Index, Benefits Index (Profitability), Cost
Index, Financing Index (Financing Environment).
Figure 2.2 shows the dynamics of the SME Development Index during 2019-
2025 (Q2).
As we can see from the figure, the SME Development Index fell sharply in
2020 due to COVID shocks, then went through a phase of gradual recovery in 2021-
2022, and in 2023-2025 it fixed at the level of about 89, under the influence of
structural risks and simultaneous state support.
In 2020, the index suffered a significant drop. Thus, the average value of the
index fell to about 85.6 on average for the year, with the lowest readings in February-
April (about 80.5), when lockdowns, supply chain disruptions and an almost
complete halt in demand for many sectors of the economy caused massive
disruptions in the work of small and medium-sized businesses.

30

Figure 2.2 – Dynamics of SME Development Index during 2019-2025 (Q2)
Source: [40]

After the initial shock, SMEs began to recover, partly due to the implemented
government support measures, which will be discussed below, and partly due to the
adaptation of businesses. The overall dynamics indicate a gradual increase in the
index, but still lower than the pre-pandemic period (over 90).
Starting from 2023 and throughout 2024, the index ranged from 89 to 89.5,
which indicates a noticeable improvement in the operational condition of SMEs
compared to 2020, but also that the economy has not fully returned to the pre-crisis
level of activity.
Data for late 2024-early 2025 shows slight upswings. This is in line with a
situation where support policies continue, but external and internal macrocyclic
factors are hampering a faster recovery.
If we analyze the change in the level of sub-indices, then the Business Climate
Index in 2020 had a sharp drop due to lockdowns (in some months to 78-82), in
2021-2022 it partially recovered to the levels of 85-88, and during 2023-2025 it
stabilized to the level of 89-90.
The Market Demand Index proved to be the most volatile component of the
index, as it had the strongest decline among sub-indices in 2020 (75-80 in some
31

months), but in 2021 there was a rapid recovery to 85. In 2022, the decline again to
82, and during 2023-2025 there is a weak increase (86-88). This indicator is one of
the main ones that negatively affects the overall growth of this index.
The Production Index tended to decline in 2020 (80) and gradually recover
during 2021-2025 to 87-90. This suggests that production has recovered faster than
demand thanks to exports and digital logistics.
The Investment Index has shown itself to be the weakest component of the
index. So in 2020 it fell below 80, in 2021-2022 it grew slowly to 83-85, and during
2023-2025 it stays at the level of 84-86 without stable positive signals.
The Labor Employment Index declined in 2020 due to massive layoffs to 82,
but by 2025 there was a slight recovery to 86-88. We can conclude that the demand
for labor is growing, but slowly.
One of the slowest components of the index in recovery is the Benefits Index.
Thus, in 2020, its value, like that of all previous components, sharply decreased to
78-80, in 2021-2022 there was a slight increase to 84-85, and during 2023-2025 it
remains at the level of 86-87, not reaching values greater than 90, which were
characteristic of 2018-2019. The main reasons for the weak recovery of profitability
include high costs for logistics, raw materials, energy, increased competition in the
domestic market, as well as a slow recovery in demand.
The high level of costs is a systemic pressure factor that restrains the growth
of all other components of the index. If at the beginning of 2020 there was an
increase in costs due to supply disruptions, then in 2022-2023 there was a peak in
inflation. Today, there is a gradual decline, but costs are still high compared to the
pre-COVID period.
And the last component of the Financing Index turned out to be one of the best
regenerative components, which increased from 82 in 2020 to 90-92 in 2023-2025
thanks to tax incentives, loan guarantee programs, subsidized loans, etc. This is one
of the sub-indices that has returned to pre-pandemic levels.
So, as we can see, the Financing Index and the Production Index have
recovered the fastest; the slowest to recover are Market Demand Index, Investment
32

Index, Benefits Index, which requires the development and implementation of
appropriate policies to improve the situation.

2.2 Analysis of China's readiness for the development of entrepreneurial
activity

Let's analyze China's readiness for the development of entrepreneurial
activity, in particular the state of entrepreneurial activity, attitudes towards
entrepreneurship and the ecosystem of entrepreneurship, based on the results of the
Global Entrepreneurship Monitor (GEM) 2024/2025. According to the study,
entrepreneurial activity in China shows mixed characteristics, so, on the one hand,
we observe a relatively high level of identified opportunities and a noticeable
presence of skills in part of the population, on the other hand, there are noticeable
barriers that hinder the transformation of opportunities into business initiatives, as
well as a low level of long-term retention of businesses. Overall, GEM records an
increase in the share of adults engaged in early-stage business (TEA) – about 7% in
2024, but this value remains relatively low compared to many Level C economies
and far from pre-crisis indicators. The country has a high level of perception of
opportunities, an average/sufficient level of self-assessment of startups' own
competencies, but at the same time a large number of people who do not risk starting
a business because of the fear of failure [45]. The general characteristics of
entrepreneurial behaviour and attitude of the country are presented in Fig. 2.3, which
visualizes a comparison of the survey results for 2024 and 2023, as well as with the
global average.
33

Figure 2.3 - Entrepreneurial Behaviour and Attitudes
Source: [46]

GEM shows that the share of the adult population in China who creates a
business or is an owner-manager of a new business is still growing by 1% compared
34

to the previous year. This growth indicates a renewed interest in starting a business,
but as noted, the absolute level of TEA remains moderate. The low level of
Established Business Ownership (EBO), which is about 4% (about 1 in 25 adults),
indicates that many startups do not move into a sustainable state of "established
business", i.e. there is also a problem in retaining and scaling enterprises [45].
About 7 out of 10 adults in China see good opportunities for setting up a
business in their area, which indicates a sufficient level of market opportunities. At
the same time, about two-thirds of those who see opportunities note that they will
not dare to start a business for fear of failure. Part of the population assesses their
entrepreneurial skills (three out of five respondents), but these skills are not always
combined with a willingness to take risks [45].
In research, there is traditionally a distinction between "necessity-driven" and
"opportunity-driven" entrepreneurship. In China, a significant part of entrepreneurs
are those who were pushed by economic need and expectations to receive a source
of income. At the same time, there is also a segment of entrepreneurs focused on
growth and innovation, especially in the areas of digital services, e-commerce and
technological niches. The report indicates that part of the TEA has medium or high
growth expectations, but in general, many start-ups consider entrepreneurship as a
means of employment in case of a shortage of other jobs.
A large proportion of the population believes that there are good business
opportunities in their environment, which creates a favorable "demand" for startups,
in particular, many adults rate their own entrepreneurial abilities positively.
The fear of failure is one of the most powerful inhibiting factors, which is not
only inherent in China, but also intensifies at the global level. The problem of
business survival and scaling (low EBO) means that many startups either stop at the
early stages or do not develop into sustainable businesses. This could be the result
of funding shortages, insufficient access to markets, regulatory barriers, or weak
support for mentoring incubation there.
There are also certain problems in entrepreneurial education and training, so
the report notes its low quality. For the country, this means that although individuals
35

experience competencies, the system of formal support for education and training
may not be sufficiently focused on practical skills, risk-thinking and long-term
training of entrepreneurs.
The study shows a slight gender gap in early entrepreneurial activity, but there
are still some barriers to access to resources for women entrepreneurs.
GEM 2024/2025 highlights the growing trend of the role of digital channels,
digital marketing, and the use of AI in the activities of new businesses in the global
context, which creates favourable conditions for China, with its developed e-
commerce market and ecosystem platform, for startups in the consumer services,
logistics, and digital products sector.
The conditions for the development of entrepreneurship in China are
presented in Fig. 2.4
As you can see, in 2024 there is an improvement in the following positions:
Entrepreneurial Finance, Government Policies: Taxes and Bureaucracy, Commercial
and Legal Infrastructure, Internal Market Burdens or Entry Regulation, Physical
Infrastructure. Deterioration occurs in areas such as: Governmental Policies:
Support and Relevance, Government Entrepreneurship Programs, Entrepreneurial
Education at School Stage, Entrepreneurial Education at Post School Stage, R&D
Transfer, internal Market Dynamics and Cultural and Social Norms.
Thus, GEM experts report a noticeable deterioration in business finance
ratings in China between 2022 and 2024. This affects both the availability of venture
capital and the effectiveness of other financial channels for early-stage companies.
Declining financial capacity is a very important factor because it limits scaling and
innovation. This assessment should send a signal to the government to develop
appropriate policies and measures to strengthen public financing at an early stage,
risk mitigation mechanisms, and strengthen the angel and venture capital investment
ecosystem.

36

Figure 2.4 – Entrepreneurial Framework Conditions
Source: [46]
37

China has a high record of government policy and bureaucratic procedures
compared to other countries. But experts note that government support in this
direction is usually stronger in some regions or sectors than in others, which requires
greater alignment of national policies with local conditions and opportunities. There
are state support programs in the country, and their development is better than the
world average, but given the problems with scaling and survival of business in the
country, among the possible areas of state programs to support entrepreneurial
activity, we see exactly those that will be aimed at helping in the further development
of businesses.
Although the effectiveness of both school and out-of-school entrepreneurship
education is improving in the country, in particular, more formal training, university
incubators and experiential programs are emerging, this area needs further
improvement.
Although the country has a significant strong potential in the field of research
and development, the effective transfer to startups is unstable in different regions, so
it is necessary to improve this area and strengthen ties between universities and
industry.
Large cities provide good access to mentors, legal and accounting services, as
well as corporate partners. This situation is getting a little worse outside of large
business hubs, which requires the extension of this practice to other cities and rural
areas. There is also a well-developed physical infrastructure, in particular transport,
digital networks, logistics, which has a very favourable effect on the development
of entrepreneurial activity. Further improvement of physical infrastructure will
further promote the development of entrepreneurial activity in those regions that
need infrastructural strengthening, in particular rural regions.
The least favourable factor for the development of business activity in China
today is regulatory and bureaucratic burdens, which create significant barriers to
entry into markets. It is still necessary to optimize the procedures for registration,
licensing and others related to the opening, development and scaling of
entrepreneurial activities.
38

Therefore, based on GEM indicators, the following general priority policies
and measures can be proposed to stimulate entrepreneurial activity in China.
First, the introduction of a few information and support programs that would
reduce the fear of failure among potential entrepreneurs, that is, to change the
cultural paradigm regarding risks and failures. For example, conducting information
campaigns by publishing case stories of successful "imperfect" startups; introduction
of a business risk insurance system through state financial programs, introduction of
an easier bankruptcy procedure for micro and small businesses and startups.
Secondly, it is to strengthen practice-oriented entrepreneurial education, to
introduce more practical programs, mentoring support and internships at universities
and vocational schools, support local incubators, accelerators, and mentorship
programs.
It is important to focus on the survival and scaling of the business through
targeted financing programs, facilitating access to network markets, introducing tax
incentives for small businesses in the first years of operation; assistance with logging
into large e-commerce platforms, digital marketing and analytics training,
simplification of logistics chains for SMEs, etc. It is necessary to support certain
vulnerable categories of the population, such as women, youth, rural entrepreneurs
through grants, training, networks.
Thus, we can say that China has a significant potential for entrepreneurship
growth, due to the high perception of opportunities, available basic skills, well-
developed digital and supporting infrastructure, and state support, but this potential
is limited by psychological barriers, problems of business survival and gaps in the
system of entrepreneurial education and long-term support. To turn existing
opportunities into a sustainable entrepreneurial ecosystem, it is necessary to
introduce policies that combine cultural change, practical education, and support for
business at the stage of development and scale-up.

39

Conclusions to Chapter 2

An analysis of the current state of business development in China shows that
small and medium-sized enterprises (SMEs) are a key structural element of the
national economy, which provides a high share of gross domestic product, tax
revenues and employment. Based on statistical data, it has been established that the
number of SMEs in the country continues to grow steadily and exceeds 50 million
enterprises, which forms a powerful foundation for innovative and structural
development of the economy. At the same time, the pace of recovery from pandemic
shocks demonstrates unevenness, which is manifested, in particular, in the indicators
of the SME Development Index (SMEDI). Despite the gradual improvement of the
main sub-indices such as production, financing and the business climate, structural
issues such as weak domestic demand, high operating costs and low profitability
continue to constrain the sector's dynamics.
An important result is that the best dynamics are demonstrated by the areas
that receive the most state support, in particular financing and digitalization, while
weak positions are inherent in indicators such as investment activity, profitability
and demand. This indicates the limited ability of SMEs to scale independently
without government intervention and the presence of internal challenges related to
the recovery of the consumer market and increasing the efficiency of enterprises.
The results of the GEM 2024/2025 study deepen the understanding of China's
entrepreneurial potential, demonstrating a combination of a high level of perception
of business opportunities with a low risk appetite of the population. Despite the fact
that the share of adults involved in the early stages of entrepreneurship shows
growth, the indicators of business retention and development remain relatively low,
which is due to a significant share of entrepreneurship "out of necessity" and
insufficient efficiency of the scaling support system. The analysis of institutional
conditions shows that the strengths of the Chinese entrepreneurial ecosystem are
access to finance, developed digital infrastructure, logistics and local innovation
40

ecosystems. On the other hand, entrepreneurial education, the quality of government
support programs, bureaucratic burdens, and regulatory barriers remain weak.
Thus, the current state of entrepreneurship in China is characterized by high
growth potential and significant achievements in the field of digitalization and
financial support, but at the same time, the presence of systemic restrictions that
hinder the transformation of many startups into sustainable enterprises. Deepening
entrepreneurial education, reducing administrative barriers, strengthening
mechanisms to support business scaling, and overcoming psychological barriers
among potential entrepreneurs are key prerequisites for the formation of a mature,
dynamic and innovative entrepreneurial ecosystem in the country.

41

CHAPTER 3
RESEARCH OF TRENDS AND DIRECTIONS OF DEVELOPMENT OF
ENTREPRENEURIAL ACTIVITY IN CHINA

3.1 The main approaches to supporting and developing startups in China

As the study showed, one of the main directions of entrepreneurship
development is the development and implementation of startups.
According to StartupBlink's Global Startup Ecosystem Index, which evaluates
countries' startup economies, China ranked 13th in the world and third in East Asia
in 2024 [47] (Fig.3.1)

Figure 3.1 – Top 20 countries in the Global Startup Ecosystem Index 2025
Source: [47]

At the same time, we see that China's position has decreased in 2024 compared
to 2021, when the country ranked 7th. During 2021-2024, there is a gradual decline
in the country's position in the world ranking. At the same time, China's ecosystem
42

growth rate is 45.9%, which is the highest among the top 35, which is higher than
the average of 26% [48].
The best cities for startups in China were Beijing (6th), Shanghai (7th), and
Shenzhen (17th), as well as other major cities including Hangzhou, Guangzhou,
Nanjing, Chengdu, Wuhan, and Changsha [48] (Fig.3.2).

Figure 3.2 – Top 20 cities in the Global Startup Ecosystem Index 2025
Source: [48]

The main industries in which China has achieved significant success in terms
of the startup ecosystem are Software & Data, Hardware & IoT, Transportation,
Fintech, Automotive, Agtech, Manufacturing (Fig. 3.3).
According to data, there are 9153 startups in China. China recorded 149
startup exits worth more than $1 billion, accounting for 80% of such exits in East
Asia. To support Chinese startups, there are 237 coworking spaces, 56 accelerators,
and 5 startup organizations [49].

43

Figure 3.3 – Top Industries in the Global Startup Ecosystem Index 2025
Source: [47]

According to the National Bureau of Statistics in 2024, an average of 24000
new companies were created daily, and the number of micro, small and medium-
sized enterprises exceeded 53 million. [50]. Among them were 14600 enterprises of
"Little Giants" - small and medium-sized enterprises of the national level,
recognized within the framework of the initiative as "specialized, refined,
distinctive, innovative". These firms have succeeded in niche sectors due to strong
R&D as well as advanced manufacturing capabilities, 90% of which are in
manufacturing, more than 80% in strategic industries, and 5000 companies in
industries such as artificial intelligence and low-altitude aviation [51].
According to the Global Unicorn Index 2024, which includes non-public
companies from around the world founded after 2000, with a value of more than 1
billion US dollars, 340 such companies have been established in China, which is
2.33% of the global total. In 2024, 56 "unicorns" appeared in the country [52]. In
44

terms of the number of "unicorns", China ranks second in the world after the United
States, which has 703 such companies.
Chinese "unicorns" tend to operate in the fields of artificial intelligence,
semiconductors, and new energy, including "unicorns" created by state-owned
enterprises, including GAC Aion, Dongfeng Motor, and Voyah, which produce new
energy vehicles, and others [52].
The top ten "unicorns" in 2024 included four Chinese companies (the
threshold for getting into the top ten is 235 billion yuan and the top ten accounts for
18% of the total value of global "unicorns"). Among them, ByteDance (specializing
in products that use AI algorithms to personalize content), which is valued at 1.56
trillion yuan, and occupies the 1st position in the ranking. In fourth place is Ant
Group, headquartered in Hangzhou (a fintech company founded as a division of
Alibaba, valued at 570 billion yuan). In 5th place is the Guangzhou fast fashion e-
commerce platform Shein (460 billion yuan) [52].
Among the companies listed in the Top Unicorn Startups in China for 2025,
in addition to the above, the following companies are mentioned [53]:
− Xiaohongshu (Little Red Book) is a popular social media and e-
commerce platform in China that combines lifestyle content with user reviews and
shopping;
− Klook is the leading travel and leisure e-commerce platform for
experiences and services anytime, anywhere;
− Lalamove provides fast and reliable on-demand delivery services for
businesses and individuals in need of urgent shipping solutions;
− Chehaoduo is a platform connecting individual car sellers and buyers
for online trading;
− Leap Motor creates cutting-edge electric vehicles and many others.
The startup ecosystem in China is predominantly focused on domestic
markets, with many startups focused on the local market and having limited
influence due to the Great Firewall policy. But now the country is considering
45

opportunities to move to more global cooperation in order to achieve world
leadership [48].
Investments in Chinese startups continue to grow. Strong growth was
observed from 2010 to 2021, when the number of venture investments amounted to
5208 deals worth 371 billion yuan. In 2024, there began to be a gradual decline in
venture capital investments. Thus, the total volume of venture capital investments in
the first three quarters of 2024 reached UAH 296.2 billion. yuan, representing a
decrease of 37.69% year-on-year, and the number of transactions decreased by
30.15% to 2403 [51].
Table 3.1 shows several venture companies and the results and directions of
their activities.
As we can see from the table, the investments of venture capital companies
are mainly focused on high-tech sectors, primarily semiconductor manufacturing,
new energy and advanced manufacturing.
The country implements policies to support the creation and operation of
startups. First of all, this is a preferential tax policy, which is common for micro,
small and medium-sized enterprises and small low-profit enterprises, and can also
be applied to startups. To apply for benefits, a number of requirements must be met,
including the appropriate amount of profit and the amount of labor. For example, a
reduced income tax rate of 20% can be used by enterprises with an annual taxable
income of less than UAH 3 million. yuan, the number of employees is less than 300
people and total assets are less than 50 million. Yuan. Also, their tax base is reduced
by 25%. For those enterprises whose annual sales are less than 5 million. yuan, a
reduced rate of value added tax of 1% (reduction from 3%) is available, and those
enterprises that have a monthly sales volume of less than 100000 yuan are
completely exempt from VAT. Individual entrepreneurs and individual enterprises
receive a 50% reduction in the personal income tax rate for that part of the annual
taxable income that does not exceed UAH 1 million. yuan [51].

46

Table 3.1 – Major Venture Capital Firms in China (January 1 – December
31, 2024)
VC firm Number of New Key focus areas
investments fundraising size
CICC Capital 120+ RMB 50 Advanced manufacturing,
billion+ semiconductors, healthcare, digital
technology, AI, new energy, and new
materials
HongShan 100+ RMB 18 billion Technology, healthcare, and consumer
(Sequoia sectors
China)
Yida Capital 80+ RMB 4.5 billion Semiconductors, new materials,
advanced manufacturing, biomedicine,
IT
CAS Star 70+ RMB 3 billion+ Optoelectronic chips, new energy, new
materials, aerospace, and other tech
fields
Hillhouse 68 Approx. RMB Smart hardware (including wearable
Ventures 12 billion devices), energy transition (tech &
materials), life sciences
Shenzhen 58 RMB 3.43 Automation and core components in
HTI Group billion nuclear technology
Cowin 53 RMB 2.6 High-end manufacturing,
Capital billion+ semiconductors, new energy, healthcare,
digital economy
Junlian 50+ Approx. RMB Smart manufacturing, technology,
Capital 20 billion consumer, enterprise services, and
healthcare
Shunwei 40 RMB 3 billion Technology, smart manufacturing, smart
Capital hardware, consumer, enterprise services,
electric vehicles, etc.
Fortune 36 RMB 13 billion Advanced manufacturing, AI
Capital
Source:[51]

Startups are also entitled to receive tax benefits aimed at encouraging
technological innovations, in particular, a 15% corporate income tax rate for high-
tech and new technological enterprises, as well as a 15% VAT rate for enterprises
providing advanced technology services [51].
Support and stimulation of business entities to conduct research and
experimental work continues. Thus, if research and development costs do not form
tangible assets and are included in current profits and losses, then an additional 100%
of such expenses can be deducted from the amount of taxable income; if research
47

and development expenses formed intangible assets, they can be depreciated before
VAT in the amount of 200% of the actual value of the actual value of intangible
assets [54].
Venture capitalists and individual business angels who invest in early-stage
technology startups are also eligible for a tax benefit under the following conditions:
startups must have no more than 300 employees, total assets and annual sales
revenue of less than $50 million. yuan, investments are made within 2 years. In this
case, venture capital companies have the right to deduct 70% of the investment
amount from their taxable income. Also, venture enterprises with limited liability, as
well as angel investors, are entitled to such benefits.
Funding for startups and innovations is also carried out through Government
Guidance Funds (GGF), which were created by central and local governments in
partnership with the private sector to invest in priority sectors identified by the state.
By the end of 2021, there were more than 1800 GGFs across China with a target
capital of 10.18 trillion yuan [55].
So, we can say that over the past decade, China has formed one of the most
dynamic startup ecosystems in the world, based on mass entrepreneurship, rapid
scaling of technological solutions and active state support.
At the same time, there are a number of problems in this area that require the
transformation of state policy on the development of the startup ecosystem in the
country.
First of all, as noted above, in recent years, the pace and volume of venture
capital investments have slowed down due to the pandemic, increased regulatory
oversight and global macroeconomic instability. On the negative side, this was true
for high-productivity sectors such as technology and consumer goods [56].
The Committee on Foreign Investment in the United States (CFIUS) has
expanded its oversight authority over foreign investment, primarily in critical
technology, critical infrastructure, and data-sensitive industrial sectors, which has
caused U.S. institutional investors to participate in Chinese private equity funds [56].
Thus, in January 2025, the United States imposed a complete ban on investments by
48

Chinese firms in sectors such as artificial intelligence, semiconductors, and quantum
computing.
In this regard, China needs to focus its attention on strengthening the domestic
venture capital market to support domestic startups.
In order to reduce these negative impacts and strengthen resilience in the
investment market, it was decided to create a "National Venture Capital Fund",
which will mobilize 1 trillion yuan ($138.01 billion) to support technology startups.
The fund will focus on cutting-edge industries such as artificial intelligence,
quantum technologies, and hydrogen energy storage, and will invest in early-stage
companies and startups using market-oriented methods [57].
In our opinion, it is also advisable to increase funds that will be focused on
startups with a long R&D cycle of 7 to 10 years, create more flexible grant funding
models for teams from universities and government laboratories.
To reduce dependence on foreign capital and stabilize the venture capital
market, it is necessary to allow pension funds and insurance companies to increase
the share of venture capital investments, as well as to spread the "Fund of Funds"
model, which has proven its effectiveness in Shenzhen, Hangzhou and Beijing;
support private venture capital firms through access to co-financing tools.
For technology startups, access to laboratories, equipment, and test sites is
extremely important. In this regard, it is necessary to continue to develop a network
of state-owned "shared labs" covering the cost of scientific equipment, industrial
demonstration zones for testing EV technologies, robotics, industrial automation,
etc., as well as "pilot production" centers.
It should be noted that the country is actively implementing the model of joint
scientific laboratories, i.e. open research platforms, where large scientific tools and
infrastructure can be used not only by universities and academic institutions, but also
by enterprises, startups and young researchers. This model is part of the national
scientific and innovation strategy, so state institutions stimulate the sharing of
scientific resources in order to accelerate the commercialization of technologies and
to increase the efficiency of scientific investments. For example, as of 2025, 342
49

central-level universities and research institutes in 31 provinces have established
online service platforms and are interconnected with the national network
management platform. 141000 sets of large-scale R&D equipment with an initial
cost of 500000 yuan or more are included in the open sharing platform [58].
A good example is the Huizhou Comprehensive National Science Centre in
Beijing, which has a platform for open technological installations. There are 37 large
scientific infrastructure facilities available for joint use, including synchrotron
sources, high-precision instruments for materials science, biomedical centres, which
allows researchers to access complex equipment without the need to supervise it on
their own [59].
Among the main reasons and motivation for the development of "shared labs"
we can name the following. First, it is an increase in the efficiency of equipment use.
Sharing allows you to increase the workload of specific laboratory devices and
reduce the cost of purchasing new ones. Such joint laboratories are extremely
important to support startups and small research teams, as it is too expensive to
purchase their own equipment for research in high-tech areas. During the joint use
of scientific laboratories, close relationships are established between enterprises and
scientific laboratories and universities, which accelerates the transfer of
technologies. In such an environment, the development of human resources and
talents takes place, as scientists and researchers who gain access to advanced
equipment can engage in scientific work, prepare publications and gain experience.
The creation of joint laboratories is fully consistent with the national strategic policy
on the concentration and development of priority areas of the economy.
Therefore, the government should focus on continuing the establishment and
development of these collaborative laboratories through equipment upgrades, further
funding, the introduction of effective management practices and approaches to their
transparent use.

50

3.2 Directions for the development of youth entrepreneurship in China

One of the most important tasks for the development of entrepreneurial
activity in China is to involve young people in this process. In this regard, the
government is quite active in supporting youth entrepreneurship in the country. This
becomes even more important because, as recent surveys show, Chinese youth are
less and less willing to engage in entrepreneurial activities, which is not in line with
the purpose of the nationwide strategy for the development of mass entrepreneurship
and innovation. Thus, for Generation Z, the most popular and desirable profession
today is "freelancer", and young people value flexibility and financial freedom more
[60].
At the same time, the unemployment rate among young people (except for
students) in China today is quite high and averaged 16.64% from 2021 to 2025 (the
highest level of 21.3% was observed in June 2024) (Fig. 3.4). And this further
confirms the thesis about the need to find ways to increase employment among
young people, including their involvement in entrepreneurial activities.

Figure 3.4 – Youth unemployment rate in China
Source: [27]

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It should be noted that in mid-2025, the Chinese government developed and
published a plan that contains a number of measures that will reduce youth
unemployment. For example, it offers subsidies and other benefits to employers in
order to encourage them to hire young people [61].
Scientists annually conduct research on the development of youth
entrepreneurship in order to identify the profile of an entrepreneur, problems and
prospects for the development of youth entrepreneurship. For example, in 2022, the
China Foundation for Youth Entrepreneurship and Employment, in cooperation with
the Jieping Macroeconomic Research Group, conducted a questionnaire and
depicted the profile of young entrepreneurs: more than 90% of young entrepreneurs
have higher education; almost 70% have less than 100000 yuan of start-up capital,
most of which are personal or family savings or a loan from relatives or friends;
more than 70% are aspiring entrepreneurs, 50% of young people over the age of 31
have two or more entrepreneurial experiences; more than 90% of young
entrepreneurs choose individual entrepreneurship or partnership; start-up capital,
social resources, knowledge reserves are the main difficulties; tax benefits and
simplified administrative procedures are the main requirements of young
entrepreneurs; More than half of the student entrepreneurs participated in
entrepreneurship competitions and have some theoretical knowledge [62].
Also, scientists proposed a special index to assess the development of youth
entrepreneurship, which consists of three dimensions: entrepreneurial environment,
entrepreneurial spirit and entrepreneurial results, and includes a total of 17
indicators. Thus, the calculations showed, the Index showed that from 2015, which
was taken as a base, until 2021, it cut from 100.0 to 171.0 units. Thus, the index of
entrepreneurial results increased the most – from 100.0 to 368.9. The index of
entrepreneurial spirit increased to 160.6, and the index of the entrepreneurial
environment – to 159.3 [62].
In addition, in 2021, the level of viability of youth entrepreneurship in cities
was assessed using a special index for the main 100 cities that rank first in the
national GDP ranking.
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As research has shown, Beijing, Shanghai, Guangzhou and Shenzhen occupy
leading positions in the first three elements, but in terms of resource provision and
technological innovation, the leaders are Suzhou, Chengdu, Hangzhou and others.
Young people, as a rule, seek to start a business in Beijing, which is considered a
leading city for entrepreneurship; Chengdu is a city with developed cultural and
creative industries; Hangzhou is "the first city of the digital economy". there are
cities such as Shanghai, Chongqing, Guangzhou, Changsha, Shenzhen, Nanjing and
Xiamen [63].
The ICT sector, in particular artificial intelligence and big data, as well as the
cultural and creative industries sector are the most attractive for entrepreneurship
and innovation [63].
It should be noted that the development of youth entrepreneurship in these
cities makes them much more competitive than others, and especially in rural
communities, where the development of entrepreneurial activity, including on the
part of young people, is quite low.
In 2022, a survey was conducted among young people in China to find out
their attitude to entrepreneurship. It turned out that more than half of young people
believe that in order to start a business, it is necessary to gain experience working in
state-owned, private enterprises or enterprises with foreign investment. 20% of
young people would like to have flexible employment in order to be able to bring
their entrepreneurial ideas to life. that they have ideas and are already starting to
implement them, and 80% either do not have entrepreneurial ideas (38.5%), or have
ideas, but do nothing to implement them (46.9%) [64].
Among the main reasons cited by young people who have ideas, but do not
implement them, the following were named: insufficient financial support (75.8%),
lack of entrepreneurial knowledge and skills (62.5%), lack of connections (57.7%),
inappropriate time (50.6%). More than half of the respondents mentioned these
obstacles. In addition, they also mentioned "inability to find a business partner"
(46.9%) and "unclear market prospects" (42.7%) [64].
53

Among those who do not have entrepreneurial ideas, the majority believe that
it is quite difficult to start a business (71.2%), and 45.6% - that they do not want to
take risks. In addition, young people realize that in order to start and run a business,
you need to be able to work hard, which also deters them from entrepreneurial
activity [64].
Therefore, this survey allows us to clearly outline the main areas that need to
be developed in order to stimulate youth entrepreneurship in China. First of all, it is
necessary to raise awareness and culture of entrepreneurial activity. Secondly, to
strengthen the educational component and practical training during the educational
process. Thirdly, to provide financial support and apply other incentive measures
that would reduce the risks associated with entrepreneurial activity.
The government, understanding the problem, in its recommendations aimed
at optimizing the business environment and promoting the development of more
individual entrepreneurs and start-ups, the government emphasizes the importance
of developing entrepreneurial awareness, especially among young people.
Universities and vocational colleges are encouraged to organize events and
competitions related to innovation, as well as to integrate entrepreneurship into their
curricula [65].
Thus, in the conclusions of the Ministry of Human Resources and Social
Security and seven other agencies on improving the system of entrepreneurship
support and improving the quality of entrepreneurship, special attention is focused
on optimizing entrepreneurship training and improving entrepreneurial abilities. To
this end, according to government officials, it is necessary to strengthen
entrepreneurial awareness among young people by improving the system of
entrepreneurship education in universities and vocational colleges. In this regard, it
is recommended to integrate entrepreneurship courses into educational programs at
all levels, to strengthen cooperation between universities and enterprises, as well as
local authorities, to conduct various competitions, information campaigns, trainings,
public lectures on entrepreneurship and other events with the involvement of the
54

whole community, which would allow the formation of entrepreneurial and
innovative thinking in young people, as well as in society as a whole [66].
It should be noted that in this regard, a number of competitions related to the
development of entrepreneurial thinking and culture are organized in the country,
both at the national and local levels.
For example, in 2025, the China International College Student Innovation
Competition was announced with the theme: "I dare to take risks, I will create", the
main tasks of which are to promote talent development, integrate education in five
aspects (moral, intellectual, physical, aesthetic and labor education) into innovation
and entrepreneurship education, enhance innovative practice, expand international
cooperation, foster a competitive spirit, increase creativity, etc [67].
Since 1989, the country has been holding the National Competition of
Extracurricular Academic and Scientific Works of College Students "Challenge
Cup". If at the very beginning of this educational event only 430 young people from
52 educational institutions took part, then more than 2000 universities took part in
the 18th competition in 2023 across the country, submitting more than 400000
works, as well as more than 2.5 million. Students. About 400 projects were submitted
to the competition of entrepreneurial plans of Chinese college students in 1999, and
390000 innovative and entrepreneurial projects in 2024. And the competition for
innovation and entrepreneurship of Chinese international college students in 2024
attracted 5.14 million projects from 5406 educational institutions, in which 20.836
million people took part [68].
Thus, we see a significant increase in interest in such events that contribute to
the development of creativity, innovation and entrepreneurial spirit.
This type of competitions can be held at the provincial level or certain cities.
For example, in Beijing in 2025, the 8-1 competition of innovations and
entrepreneurship "Entrepreneurship in Beijing" was held, which is held according to
the "1+5+1+N" model, namely one direction for youth creativity, five sectoral areas
(intelligent technologies, advanced manufacturing, modern services, healthcare,
green economy and cultural industries).
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Prizes of up to RMB 200000 are offered to the winners of the competition, as
well as four types of services: policy support, incubation and implementation,
resource coordination, and advertising and promotion [69].
For example, the Department of Industry and Information Technology of
Hunan Province in 2025 announced the holding of the "Golden Seed Cup" College
Student Entrepreneur Competition with the theme "Young Hunan Gathers to Create
the Future", with the aim of attracting young people to entrepreneurial activities in
their region, as well as building a strong brand for entrepreneur competitions,
promote in-depth integration between student entrepreneurs and the modern "4×4"
industrial system, promote the implementation of high-quality projects in Hunan,
make Hunan a center of student entrepreneurship and a youth-friendly province, etc.
[70].
Within the framework of the considered and other competitions, a number of
activities are offered, such as systematic trainings and mentoring workshops, after
the competitions, the so-called resource meetings are used in order to connect young
entrepreneurs with potential investors and partners; Governments and local
administrations use these competitions as part of campaigns to attract young
entrepreneurs to their region.
Such campaigns are very important for supporting youth entrepreneurship, as
they create a platform for young people, providing an opportunity for students and
young entrepreneurs to test their ideas, help attract financial resources and partners.
The media coverage of such competitions is aimed at increasing interest among
young people in entrepreneurial and innovative activities. Cities that hold
competitions are even interested in involving young people in the development of
the region, so they can offer them some support in the form of grants, premises,
subsidies, etc. And, most importantly, participation in such competitions helps to
form a culture of entrepreneurship among young people.
The next important direction in the development of entrepreneurship is seen
by the government of the country in strengthening entrepreneurship education by
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improving curricula, increasing the relevance and effectiveness of training, as well
as subsidizing vocational training [66].
First of all, it is planned to accelerate the development of specialized training
programs for the development of industries such as the digital economy, artificial
intelligence, green economy and silver economy, as well as to introduce innovative
training models such as "skills + entrepreneurship" and "workforce brand +
entrepreneurship". Also, it is planned to create entrepreneurship training camps and
other activities to provide basic and advanced training in business and management
[66].
Also, it is proposed to focus on practical training to acquire entrepreneurial
experience and skills to implement entrepreneurship development programs, create
business incubators, involve students and graduates in management practices, create
learning platforms with simulation of entrepreneurial scenarios, etc. [66].
It should be noted that China has created powerful institutional support for the
development of youth entrepreneurship, including both state and non-governmental
organizations. They offer a variety of programs and projects for young people with
the aim of increasing their entrepreneurial potential and competencies.
For example, the China Foundation for Youth Entrepreneurship and
Employment (CFYEE), which is a non-profit organization, works in the direction of
financial, educational, informational, advocacy support for young people through
various programs.
CFYEE, in cooperation with Yunnan Southeast Asia South Asia Industrial
Finance Investment Development Co., Ltd, in 2016 created a Special Fund for Youth
Entrepreneurship, which has the amount of 2 million yuan [71].
The Communist Youth League of China, which promotes youth policy, and
together with other financial institutions, supports startups among young people by
providing soft loans, supporting training programs and business competitions [72].
Youth Business China (YBC) is a non-profit program that aims to promote
youth entrepreneurship. Its establishment was initiated by the All-China Youth
Federation, the Ministry of Human Resources and Social Security and other
57

institutions in 2003. The organization helps young people between the ages of 18
and 35 who are unemployed, part-time, have a viable business idea, and want to
engage in entrepreneurial activities, but do not have business experience and access
to seed funding [73].
Many city administrations and high-tech zones, such as Beijing, Shanghai,
Shenzhen, and others, have their own programs to support youth entrepreneurship
and innovation.
For example, the Beijing University Entrepreneurship Training Camp
Hengqin Incubator, which is a non-profit platform that supports young entrepreneurs
from the Greater Bay Area, including Guangdong, Macau, Hong Kong, and Taiwan.
This camp, which has 2376 square meters, offers a complete chain of education for
venture startups, consultant services, the Angels Fund, innovative incubators,
competitive industry resources to support youth from four regions. Interestingly, this
camp was founded jointly with the Peking University Alumni Association and the
Hengqin Provincial Government [74].
The Qianhai Shenzhen-Hong Kong Youth Innovation and Entrepreneurship
Center was jointly initiated by the Qianhai Administration, the Hong Kong
Federation of Youth Groups and the Shenzhen Youth Federation, and is operated by
Shenzhen Qianhai Ehub Operation Co., Ltd.
Covering an area of 58000 square meters with a total area of 470,000 square
meters, the total investment is 430 million yuan. Construction and opening took
place in December 2014, it can accommodate 200 teams at the pre-incubation stage
and provide employment for 500 young entrepreneurs from Hong Kong [75].
Wuhan has established four provincial-level youth entrepreneurship parks,
including Hubei Youth Innovation Park (Hanyang), Hubei Youth Innovation Park
(Chegu), and Daijiashan Incubator, as well as 46 municipal-level youth
entrepreneurship parks, with more than 500 student entrepreneurship teams. 1123
youth entrepreneurship projects received direct support, the total funding of which
amounted to UAH 20.1 million. Yuan.
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The Youth Innovation Park performs such incubation functions as
consultations, financial services and further support, provides free premises to start-
ups, project financing, operating subsidies, tax discounts, etc. [76].
We would like to say a few words about preferential state support for the
development of youth entrepreneurship. In addition to the nationwide tools to
support small and medium-sized businesses, which were mentioned earlier, there are
certain tools that apply exclusively to young entrepreneurs.
For example, in 2022, a list of policies was published to support
entrepreneurship and employment for college graduates and graduate students who
want to start their own business, including the following:
− access to incubators and rental subsidies (about 30% of the space in
publicly funded incubators is provided to college graduates free of charge);
− tax benefits for graduates engaged in individual entrepreneurial
activities (can receive a tax discount of up to 12000 yuan for each household per
year for 3 years from the date of registration);
− guarantee loans for entrepreneurs (graduates starting their own business
can apply for a loan of up to 200000 yuan, and small and micro enterprises can apply
for a loan of up to 3 million yuan);
− one-time subsidy for startups (the exact amount of the subsidy is
determined by regional or municipal authorities) [51].
So, as we can see, the development of youth entrepreneurship in recent years
has become one of the key priorities of China's state policy. The government actively
stimulates the involvement of young people in the creation of startups, supports
innovative initiatives and creates new opportunities for commercialization.
In 2023-2024, research shows that youth entrepreneurship is most actively
formed in the areas of digital business, green economy, high-tech production,
cultural and creative industries.
The country has already created powerful institutional, financial, resource,
informational and educational support for the development of youth
59

entrepreneurship, but since recently there has been a decrease in activity on the part
of young people to start their own business due to a number of reasons, the Chinese
government has focused on the development of such areas as educational
competencies and entrepreneurship culture.

3.3 Main trends in the development of entrepreneurship in rural areas

According to statistics, the share of the population in rural areas in China in
2024 was 34.46% [77], and this indicator has a stable downward trend, which
indicates powerful urbanization processes in the country (Fig. 3.5).

Figure 3.5 – Dynamics of the share of the rural population in China
Source: [77]

It should be noted that economic growth in China is uneven and there are
significant differences in incomes between rural and urban residents (Fig. 3.6). As
you can see, the ratio between the income level between the urban and rural
population in 2023 was 2.4.
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This situation negatively affects the overall socio-economic development of
rural areas and requires the search for various mechanisms to revive the situation. In
particular, such mechanisms are the development of entrepreneurial activity.
Back in 2017, in order to stimulate rural development and reduce the income
gap between urban and rural areas, it was proposed to implement the "Rural Revival
Strategy", the main elements of the revival are the following five "pillars" rural
production/industry, human capital, culture, ecology, management/organizational
reforms [79].

Figure 3.6 – Per capita disposable income, by urban-rural, 1990–2023
Source: [78]

According to the Strategy, its central element is entrepreneurship, with which
it is possible to transform rural areas from an agrarian, low-income zone into a
modern and competitive basis. Thus, the component "Revival of Rural Industry"
provides not only for the modernization of traditional agriculture, but also for the
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development of various local crafts, processing, micro and small businesses, agro-
processing, logistics, commodity production, that is, the creation of those enterprises
that provide added value better than just growing agricultural plants.
Part of the Strategy's policies concerns the development and attraction of
human capital, the return of talent, the training of personnel, and the stimulation of
young and educated people to create and develop businesses, rather than moving to
cities.
The Strategy describes an integrated approach to the revival of rural areas,
including the development of rural infrastructure, reforms in land use management,
culture and traditions, ecology, i.e. everything that creates the basis for the
development of entrepreneurial activity.
It should be noted that since the development of the Rural Renewal Strategy,
a few supporting policies have been introduced aimed at providing financial support
and legal guarantees, which has laid the foundation for the modernization of
agriculture and rural areas [79].
As for the development of entrepreneurship and innovation, China has built
about 2200 innovation and entrepreneurship parks and incubation training bases in
rural areas. On average, each institution provides full-time employment for six to
seven people and also provides employment opportunities for 15-20 people [79].
At the same time, the development of rural entrepreneurship still requires
significant support, including state support, since, as scientists note [80], there are a
number of problems that do not allow to fully use the existing potential of rural areas
for business development. First, these are limited financial resources, i.e. small rural
entrepreneurs often have limited access to bank loans, although local financial
markets are gradually developing, but risks and weak capitalization of local financial
institutions remain.
Rural areas have weaker transportation, warehousing, and digital
infrastructures in remote areas, which increases costs and reduces competitiveness.
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A significant problem is the scarcity and low quality of human capital due to
mass migration, including of young people to cities, who, as a rule, do not return to
their communities after training.
Peasant enterprises, as a rule, need support in marketing, financial
management, quality standards, to scale their business and enter large markets.
It should be noted that such a type of entrepreneurial activity as e-commerce,
the market of which has become the largest in the world, is gaining significant
development in rural areas [81].
This was facilitated by a number of government programs, as well as the
private sector. First, over the past ten years, the Chinese government has developed
20 policy documents related to the development of digital infrastructure, digital
services, and e-commerce in rural areas. Thus, by the end of 2021, the share of
broadband access in administrative villages across the country reached 100%, and
the share of optical fiber and 4G access exceeded 99%. By the end of 2022, the level
of Internet penetration in rural areas reached 61.9% [81], and as of June 2025 –
69.2%, i.e. 322 million. people living in rural areas are Internet users. In addition,
the 5G service now covers more than 90% of the country's administrative villages
[82].
The development of e-commerce in rural areas began with a demonstration
program of e-commerce in rural areas in 2014, which aimed to contribute to rural
poverty reduction and rural modernization by promoting e-commerce [83]. This
year, each selected demonstration province had to choose a maximum of seven
demonstration districts. In 2017, each demonstration province was asked to include
one-third to one-half of its poverty-stricken and underdeveloped constituencies as
demonstration districts, and in 2018 the new demonstration districts were limited to
poverty-stricken districts.
The program was financed in the amount of RMB 1.1 billion in 2014 and
increased to RMB 3.9 billion in 2017 in key areas such as promoting online sales,
improving public service systems, and conducting e-commerce training, as well as
supporting logistics systems in rural areas [83].
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And by the end of 2016, the program had created 120000 jobs for poor
households, the number of online stores was 8.17 million, and in 2017 their number
increased to 9.86 million, which led to the employment of 28 million people [83].
By the end of 2022, online retail sales in rural areas had increased from 180 billion
yuan in 2014 to 2.17 trillion yuan, with the number of online businesses in rural
areas exceeding 17.3 million [84].
Live-streaming e-commerce is becoming an important form of entrepreneurial
activity, so according to 2023 data, more than 110000 streamer farmers spent about
3.3 million. sessions online to sell their products [85].
The development of e-commerce has enabled 12.2 million people in China to
return or move to rural areas to start businesses by the end of 2022, creating more
than 34 million jobs in rural areas [85].
Private businesses, primarily Alibaba, also played an active role in the
development of e-commerce in rural areas, which implemented the Taobao villages
project, which aimed to provide rural residents with greater access to a wider range
of goods and services, as well as help farmers sell their products through online
platforms; establish a service system in 100000 administrative villages in 1000
counties throughout China. At the beginning of the project, it was planned that
Alibaba would invest 10 billion yuan over three to five years with local authorities
[83].
Taobao villages are villages that are officially defined as populated, where at
least 10% of households are engaged in e-commerce and generate a combined annual
income exceeding 10 million. yuan [86].
The success of this project cannot be overestimated, if in 2009 there were only
three projects, then by 2022 7780 communities were already participating in it [86],
data for March 2024 indicate that the platform unites more than 300000 villages,
contributing to the sale of agricultural products worth 58 billion yuan.
By the beginning of 2024, Taobao is starting to use artificial intelligence
during live broadcasts, the platform has deployed virtual hosts with artificial
intelligence on 60000 trading channels that are capable of showcasing products in
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different languages around the clock. Preliminary data shows that sellers who use an
AI assistant have 40% higher conversion rates compared to traditional broadcasts
[87].
Thus, experience has shown that the development of digital infrastructure and
financial, resource and educational support from public and private organizations
have made it possible to develop entrepreneurial activities in rural areas of the
country.
According to government documents, in 2025 it is planned to deepen reforms
in rural areas, which are focused on improving agricultural efficiency, developing
local industry, modernizing the countryside, supporting new business reforms [88],
primarily through the integration of rural agribusiness, processing, logistics and e-
commerce.
Among the main priorities for the development of entrepreneurship and
business in rural areas is the modernization of agricultural production, in particular,
the use of the latest technologies, increasing efficiency, and the transition to highly
productive and technological farms. In addition, an important issue is the creation of
industrial clusters in rural areas, combining agricultural production, processing and
industry in order to increase added value. Also, the development of rural tourism
based on local traditions and culture is considered as a promising business direction
in rural areas. The state should continue to create conditions to encourage the return
of young people, former migrants, graduates, veterans to rural communities in order
to start businesses, startups, and implement new ideas.

Conclusions to Chapter 3

Modern trends in the development of entrepreneurial activity in China are
characterized by high dynamism, multi-level and significant dependence on state
policy aimed at innovation, digitalization and strengthening of internal market
mechanisms. China's startup ecosystem demonstrates significant innovation
potential, as evidenced by the high growth rates of technology sectors, a significant
65

number of "unicorns" and the active development of institutional support in the form
of accelerators, incubators and special investment funds. At the same time, the
decline in venture capital investments in recent years shows the vulnerability of the
ecosystem to external regulatory and geoeconomic factors, which actualizes the need
to strengthen the domestic investment market and expand public financing of
strategically important sectors.
A significant trend is also the development of youth entrepreneurship, which
is considered by the government as a strategic resource for innovative growth.
Despite the high level of education of young entrepreneurs and an extensive network
of state and non-state support institutions, the results of sociological surveys indicate
a decrease in the motivation of young people to start their own business. The main
barriers are insufficient financial resources, limited practical skills, low risk
tolerance and undeveloped social ties. The reaction to this is the intensification of
state policy focused on expanding entrepreneurial education, scaling up
competitions for innovative projects, developing incubation platforms and
expanding financial and credit benefits for young people.
One of the most dynamic areas of sustainable economic development is rural
entrepreneurship, which plays a key role in the implementation of the nationwide
Rural Revival Strategy. China has formed a developed digital and logistics
infrastructure, which has made it possible to scale e-commerce models in rural areas
and significantly increase employment. Programs such as "Taobao villages" and
large government initiatives on digital transformation have contributed to the
creation of millions of jobs, increased farmers' incomes and the return of young
people to the villages. At the same time, structural problems remain, such as a lack
of qualified personnel, limited access to finance, uneven infrastructure development
and a low level of innovation culture in some regions.
In general, the analysis of trends shows that China's entrepreneurial ecosystem
is developing according to the model of comprehensive state modernization, which
combines market mechanisms with the active role of the state in creating institutions,
financing innovations and creating a favourable environment for startups, youth and
66

rural entrepreneurship. Further development will depend on China's ability to ensure
the sustainability of the venture capital market, increase the motivation of young
people to entrepreneurship, and improve the mechanisms for integrating digital
technologies and local innovations in different regions, which will deepen the
structural modernization of the economy and strengthen its global competitiveness.

67

CONCLUSIONS

Generalization of the results of the study makes it possible to comprehensively
assess the formation, current state and key strategic directions of the development
of entrepreneurial activity in China. The analysis of historical, economic,
institutional and social factors forms a holistic view of the specifics of the Chinese
model of entrepreneurship, its evolution and prospects in the context of global
transformations.
The results of the study confirm that the Chinese model of entrepreneurship
is formed because of a unique synthesis of market mechanisms and strategic state
regulation. Starting with the reforms of 1978, it was institutional changes,
liberalization of the economy, the development of local economic experiments and
the gradual introduction of market instruments that determined the trajectory of the
formation of the private sector. Important stages of transformation were: legalization
of private property, corporate reform, China's accession to the WTO, development
of special economic zones and active attraction of foreign capital. All this ensured
the transition from the model of small semi-formal entrepreneurship to a high-tech
innovative economy.
The analysis of the current state of entrepreneurship testifies to the
multicomponent and highly dynamic structure of the Chinese business sector, which
is based on micro, small and medium-sized enterprises, which generate most of the
employment and a significant share of GDP. Statistics show a steady growth in the
number of SMEs, high rates of registration of new companies and an increase in the
volume of innovation activities. At the same time, the results of GEM and SMEDI
studies indicate the uneven development of the sector, a decrease in profitability, a
decrease in domestic demand and the presence of structural barriers. Despite this,
China's competitive advantages remain a high level of digitalization, developed
logistics infrastructure, innovation clusters, the availability of financing for strategic
sectors, and large-scale government programs to stimulate entrepreneurship.
68

The main trends in the development of entrepreneurship have been studied,
among which three key areas dominate: the development of the startup ecosystem,
support for youth entrepreneurship, and the activation of entrepreneurship in rural
regions.
China has formed one of the most dynamic startup ecosystems in the world,
which is confirmed by the number of startups, the scale of venture capital
investments, and a significant share of "unicorns" operating in industries such as
artificial intelligence, semiconductors, new energy, IoT, fintech, and other high-tech
areas. The system of state support for startups includes tax incentives, subsidies,
science and technology funds, state venture funds, and a network of incubation
centers. Particularly significant are Government Guidance Funds, which mobilize
capital in priority industries and create conditions for early investment. At the same
time, in 2023-2025, there is a decline in venture activity under the influence of global
economic risks and geopolitical restrictions, which stimulates China to strengthen
domestic investment mechanisms.
The development of youth entrepreneurship is recognized as one of the key
priorities of the state economic strategy. The government actively invests in the
development of entrepreneurial competencies of young people, scaling up
educational programs, developing incubators, holding competitions for
entrepreneurial projects and creating special funds for young people. However,
sociological studies show a decrease in young people's interest in entrepreneurship
due to insecurity, limited access to finance, lack of skills and low risk tolerance. This
necessitates the strengthening of the educational and cultural component of
entrepreneurship, the development of mentoring, support at the stages of incubation
and the development of interaction between universities, business and regions.
Entrepreneurship in rural regions is a central element of the Rural Revival
Strategy. China has demonstrated high rates of development of agricultural
entrepreneurship, agro-technological startups, production clusters, as well as the
digital transformation of the countryside. E-commerce development programs have
become one of the most effective in the world, as millions of farmers have integrated
69

into digital platforms such as Taobao, which has contributed to job creation and
increased incomes in rural areas. Despite the successes, problems remain: a shortage
of qualified personnel, asymmetry between regions, uneven infrastructure and
limited financial resources, which forms strategic challenges for the future.
Thus, the Chinese model of entrepreneurship is unique in its content and
implementation mechanisms. It is based on a combination of state strategic planning,
market mechanisms, local innovation experiments and active involvement of the
private sector; China's entrepreneurial sector demonstrates high adaptability, which
is manifested in rapid digitalization, scaling up of innovations, development of new
forms of business and active participation in global markets; the main structural
problems of entrepreneurship remain unresolved, in particular, inequality of access
to finance, high regulatory barriers, differences between regions, insufficient
entrepreneurial culture among young people and dependence on foreign investment;
rural entrepreneurship becomes the basis for reducing regional inequality,
developing agrarian innovations and modernizing rural areas, which corresponds to
long-term state priorities; China's startup ecosystem is gaining global importance,
but internal investment mechanisms, support for long R&D cycles, and
technological autonomy are needed to ensure its sustainability.

70

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