China's Entrepreneurs at a Turning Point

Editor's Note: This article was originally published by Sino-US Times (美中时报) on July 8, 2023, under the title "傅小永：2023年的中国企业家," by staff reporter Xu Lie. This English translation has been abridged.

2023 was the first year after the pandemic ended. The pandemic had been a painful fact, but it had also been a solid excuse: things would be fine once it passed. In 2023, that excuse was gone.

The truer meaning of the pandemic lay in its aftermath, as the aftereffects gradually surfaced.

In the first half of 2023, several of China's macroeconomic indicators fell off a cliff. Profits at large industrial enterprises dropped 18.8 percent, a decline holding near one-fifth. Youth unemployment kept climbing toward 21 percent, a problem that could persist for a decade. Growth in China's high-tech industries slipped into a slump for the first time in twenty years. Calls for stronger government stimulus grew louder, and at the same time Standard Chartered, UBS, and JPMorgan each cut their forecasts for China's full-year GDP.

The economy is a web, and firms are its nodes. Whether that web expands or contracts depends on what entrepreneurs expect. The prospects of an economy are, in effect, the sum of the expectations of its individual entrepreneurs. In a downturn, entrepreneurial confidence matters all the more.

Entrepreneurs have returned to center stage. The Summer Davos that had just concluded in Tianjin took as its theme "Entrepreneurship: The Driving Force of the World Economy." At the opening ceremony, Premier Li Qiang said that through their deep understanding and command of the market, entrepreneurs "inject certainty into an uncertain age."

What exactly does "2023" mean for China's entrepreneurs? And why must they grasp that meaning?

Fu Xiaoyong, co-founder of the Humanistic Economics Society and former deputy secretary-general of the Yabuli China Entrepreneurs Forum, has long directed research reports such as A Century of Chinese Entrepreneurship, 1840–2020, the China Entrepreneur Development Confidence Index, and Entrepreneurship and China's Future. Years of close contact and field surveys with China's entrepreneurs, together with his long study of entrepreneurship, have given him an unusually precise portrait of this group.

"Only the micro-level perspective of the entrepreneur can accurately make sense of the rise and fall of macroeconomic data," Fu believes.

More importantly, as a distinguished figure in the study and promotion of entrepreneurship, he draws on his own experience and career to present the deeper history of what entrepreneurship has meant for China. That may prove more valuable than understanding the crisis of 2023 on its own terms.

Raising the Banner of Entrepreneurship

In 2011, Wang Shi, the founder of the real estate developer Vanke, went to study at Harvard at the age of sixty. Fu caught an unusual note in the news and invited Wang to write a column for Yabuli Viewpoint, the magazine Fu edited. He had the column's name ready at once: "Go to Harvard at Sixty."

Wang was devoted to mountaineering, rowing, and rock climbing, and possessed a "modern sensibility" rare among Chinese entrepreneurs of his generation. What "Go to Harvard at Sixty" set out to convey was precisely that modern sensibility, seen through Wang's eyes.

But what should the first column be about? Writing a column for the first time, Wang thought it over at length without settling on anything. Fu suggested he answer a simple question: why, at sixty, when his peers were devoted to golf, was he so set on studying abroad? What Fu really hoped was that Wang would open the column by defining what he understood entrepreneurship to be.

The resulting column, titled "What Is Entrepreneurship," was widely read. At its close, Wang wrote: "Every society has its traditions, norms, and patterns. To recognize the problems within them, to reorganize the elements, and to create value for society in doing so: that is entrepreneurship."

This was only a small prelude.

The Yabuli Forum, long known as "China's Davos," was the first and, by any fair measure, the most famous of the country's entrepreneur organizations, and its annual meeting was an intellectual feast for Chinese business leaders. After years overseeing its research and content, Fu came to feel that the institution needed an anchor for its ideas. In 2015, he proposed that the annual meeting adopt a single theme: entrepreneurship and China's future.

"Entrepreneurship," now so much in the air, was less than a decade ago merely a technical term, one that usually appeared in the writings of specialist scholars. At the discussion over the 2015 theme, several well-known entrepreneurs and investors asked: what is entrepreneurship?

Promoting the idea called for a better occasion.

Each year the forum held nearly a hundred sessions large and small, and all of them discussed matters: the macroeconomy, globalization, corporate governance, and much else. What they lacked was people. Missing was the feeling and warmth of the entrepreneur, the true protagonist of economic life.

In 2016, Fu added a segment devoted to people, called Chinese Business Minds. Years earlier he and his colleagues had planned an interview series titled Chinese Minds, which never came to fruition; now the idea found its use. He still remembered his excitement on first reading the Chinese edition of American Minds, an anthology of CBS interviews.

In 2018, the fortieth anniversary of Reform and Opening, Fu produced a special program for Chinese Business Minds titled "A Letter to Forty Years." He invited representative entrepreneurs, among them Yu Minhong and Feng Lun, to read aloud the heartfelt words they had written to those four decades, revealing what the entrepreneurial class had privately known of its own joys and hardships.

First among them was Zhang Wenzhong, founder of the Wumart supermarket chain, who had endured twelve years of imprisonment and had only just been exonerated. Not long before, the Supreme People's Court had, for the first time, publicly retried the wrongful conviction of a private entrepreneur. That entrepreneur was Zhang.

Holding a letter he had revised dozens of times, Zhang read: "There is no pain greater than the loss of freedom. In the detention center alone I was held for three years. Many people ask me how I got through those years. Today I will tell you: in my most miserable, most helpless, most despairing moments, it was reading that carried me through. I read several hundred books, many of them in the original English, and my English improved enormously."

"This is no longer about me, Zhang Wenzhong. It is about China's entrepreneurs and about Chinese entrepreneurship. To retry my case was not merely to clear my name; it was to clear the name of Chinese entrepreneurship itself."

The letter moved many to tears and rewarded repeated reading; online it was shared hundreds of millions of times. By common rumor, certain leaders read it too.

Soon after the meeting, Fu received a phone call. Certain authorities had asked him to arrange a visit to the economist Zhang Weiying, to seek his counsel on how to advance entrepreneurship. A professor at Peking University, Zhang was widely regarded as the country's foremost authority on the theory of the firm and on entrepreneurship. Fu sensed that something big might be coming.

At the end of that year, a symposium on private enterprise was convened, and not long after came a symposium on entrepreneurs. Forums, policy documents, and studies devoted to promoting entrepreneurship followed one after another.

The term "entrepreneurship" was at last on everyone's lips, the fashion of the moment.

What Is Entrepreneurship?

Zhang Weiying deserves no small share of the credit for entrepreneurship's rise in China. Known as "China's Mr. Market," he was also the first person after 1978 to use the word "entrepreneur."

In 1984, in a book review for the Beijing Daily, he used "entrepreneur" for the first time; the editors would publish it only after he changed the word to "industrialist."

Zhang's scholarly career has, to this day, explained just two things: why prices matter and why entrepreneurs matter. He captures the market economy in a simple formula: "market economy = prices + entrepreneurs."

While everyone else was asking what entrepreneurship is, offering answers like innovation, risk-taking, courage, or drive, Zhang did the opposite and asked what entrepreneurship is not.

An entrepreneur, he said, is not a good employee: the good employee is directed by others, while the entrepreneur directs them. An entrepreneur does not seek the optimal solution within given conditions but changes those conditions themselves. Entrepreneurial decisions are not "scientific" ones: scientific decisions rest on data and calculation, whereas entrepreneurial decisions rest on intuition, imagination, and the "non-consensus." And so on.

After studying under Zhang for years and mixing extensively with entrepreneurs, Fu arrived at his own distinctive understanding of what entrepreneurship is, one he summed up in a single word: alertness.

The Latin root of "entrepreneur," empresa, originally meant to discover, to see, to perceive, to know, and to seize.

His interest lay less in what alertness means than in how entrepreneurs can be kept alert. Surprisingly, yet on reflection quite logically, he turned to the subject of media reform. "The role of media reform is greatly underestimated," he said, and "its importance cannot be overstated."

"Only with comprehensive, multidimensional information can an entrepreneur perceive accurately. Only under the constant wash of information from many directions, agreement and dissent, inside and outside, optimism and pessimism, can an entrepreneur stay alert. Any single-dimensional information cocoon is bound to distort perception and so to damage an entrepreneur's judgment and alertness."

"Undermine the alertness of entrepreneurs and you undermine the efficiency of an entire economy."

Asked about the main problem facing China's economy in 2023, he said the outside world had already begun testing a new pricing strategy that Chinese entrepreneurs had not yet fully recognized. What they needed most urgently in 2023 was an external perspective.

At the end of 2021, Fu was living in Los Angeles and often drove across the United States. On the streets of San Francisco or Los Angeles, he found, strangers still wore friendly, well-mannered smiles; in the old Rust Belt, things could be different.

Traveling through the Rust Belt, he liked to find a bar in the evening, order a couple of pints, and study those "looks of loneliness and resignation." Globalization had inevitably left some regions behind. "If it cannot bring empathy, who will be left to support it?"

In America, he found, perhaps only two things drew no disagreement: investment in infrastructure, and China. The phrase "China and the United States," he argued, one of the most frequent in the diplomatic vocabulary, had grown too narrow. An outside world acting in concert had, in fact, already taken shape.

Fu directed the China Entrepreneur Development Confidence Index survey for nearly a decade. Conducted twice a year over more than ten years, the confidence index is regarded as a barometer of the Chinese economy and an important reference for entrepreneurial decisions. Those looks of loneliness and resignation in Rust Belt bars always brought him back to two central findings from that barometer: Fewer than one in five Chinese entrepreneurs remained optimistic about the outside world, a share that had fallen by more than half over the past decade. More than eight in ten believed that deglobalization was now irreversible.

When the confidence index reached its tenth full year, Fu offered three major policy recommendations. One was to communicate with external markets and ease relations with them. Relations with external markets, and with European and American markets in particular, had been among the most decisive factors shaping the confidence of Chinese entrepreneurs over the past decade.

A Century of Entrepreneurship

The high point in the celebration of entrepreneurship had arrived.

In 2017, Jack Ma, the founder of Alibaba, and Chen Dongsheng, the founder of Taikang Insurance, together with others, decided to build the China Entrepreneurship Museum, to celebrate Chinese entrepreneurship from 1860 to the present and to give it a permanent home.

The building itself was commissioned from the noted architect Ma Yansong. Resembling a pupa breaking from its cocoon, it went on to win numerous awards, among them the 2021 Dezeen Award for best cultural building and a 2021 Architizer A+Awards jury prize. Another of that year's winners was the Gardenhouse at Beverly Hills.

The harder task was the intangible one: how to distill the generational characteristics of Chinese entrepreneurship. Fu assembled a team of historians, economists, and management scholars and worked at it for more than a year. Its first task was to find the entrepreneur amid the dusty records of history.

China was a commercially precocious country. It had formed a unified, vast-scale market over more than two thousand years, and private trade was intensely active. Joint-stock companies and a class of professional managers had appeared as early as the Song dynasty, paper money in the Yuan, and grain futures by the early Qing. Yet nowhere in the dusty records of Chinese history was there an entrepreneur.

Fu quoted John King Fairbank, the foremost China hand: "One of the most pressing questions a Westerner can ask of the whole of Chinese history is why commercially precocious China never formed an independent industrial and commercial class. Why did it always remain an appendage of the bureaucracy?"

In the preface to the report, titled A Century of Entrepreneurship, 1860–2020, Fu wrote: "Economic history is the history of the metabolism of products, services, technologies, and industries. The entrepreneur's most important role is to drive the emergence of new products, new services, new technologies, and new industries. To understand the entrepreneur is the key to understanding economic history."

The entrepreneur is a scarce social resource.

After the Opium War, national salvation became the theme of Chinese history, and its first order of business was to learn to make things, a program of technological imitation known as the Self-Strengthening Movement. Who would build, and how? With these questions the entrepreneur stepped onto the stage of modern Chinese history.

From 1860 to the present, China has passed through three golden ages of entrepreneurship: the Self-Strengthening Movement, the early Republican era, and Reform and Opening. Across these more than 160 years, the four most important forces shaping Chinese entrepreneurship have been institutions, ideology, technology, and social attitudes.

Building on this report, Fu and his team ultimately selected one hundred entrepreneurs from 1860 to the present and drew out their defining traits. The list of one hundred is on permanent display in the China Entrepreneurship Museum.

In the final paragraph of the preface, Fu wrote: "This list is no final register of merit and rank. It is an opening invitation, a reader's guide meant to prompt others to view economic growth, social progress, and modern civilization through the lens of the entrepreneur."

He was especially fond of one joke. In 2016, a delegation of Chinese entrepreneurs visited Israel to learn how so tiny a country had come to lead the world in entrepreneurship.

The best answer may have been an Israeli joke told on the bus the day before the trip ended by its "star guide," Ronnie Chan, chairman of Hong Kong's Hang Lung Properties. A reporter interviews four people: an American, a Russian, a Chinese, and an Israeli. "Excuse me," the reporter asks, "what is your view on the meat shortage?" The American says, "What is a shortage?" The Russian says, "What is meat?" The Chinese says, "What is a view?" And the Israeli says, "What is 'excuse me'?"

Israelis have always been tolerant of failure and open to offense, willing to challenge hierarchy and authority, and they possess a truly free marketplace of ideas. The more an economy comes to depend on technology, knowledge, and innovation, the more urgent that free marketplace of ideas becomes.

In this sense, "China's entrepreneurs in 2023," or the entrepreneurs of any year in Chinese history, carry a meaning that is nothing new.