Generation 40s – 四十世代

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From start-ups to big guns: can more Hong Kong entrepreneurs make it big in mainland China?

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NewsHong KongEconomy
2018-01-24
One stumbling block is the issue of identity. Many young Hongkongers cringe at any sort of ties to mainlanders, but for savvy entrepreneurs who have crossed the border, gunning for their pot of gold has included playing down their connection to the city

As the wealthy mainland investor was about to speak, aspiring Hong Kong entrepreneur Vincent Wong had the sinking feeling that his hopes of securing a cash injection for his start-up had been dashed.

This scene took place in Beijing two years ago when Wong, then aged 30, was anxiously trying to raise funds for his no-frills quick haircut business, Xingkeduo.

“We sat down and the first question he asked was, did I think Hong Kong entrepreneurs could succeed on the mainland? I just knew that the meeting was over,” Wong recalled with a laugh.

Meanwhile, things have looked up for Wong, who now boasts 90 salons across the country delivering more than 100,000 haircuts a month.

But Wong’s story highlights the obstacles facing Hongkongers who want to leave their comfort zone and step outside the nine-to-five work culture to be their own boss.

In 2009, only 7.3 per cent of about 2,000 adults surveyed in Hong Kong had ever considered starting their own business in the city, according to a large-scale study jointly conducted by three universities in Hong Kong, the Shenzhen Academy of Social Science and the Savantas Policy Research Institute, a think tank. By 2016 the figure had expanded to nearly one in five.

But only 3.6 per cent turned their intention into reality in 2009, with the figure rising correspondingly to 9.4 per cent in 2016.

The study also compared the trends for 2016 in other places: the percentage of respondents who had started their business was 16 per cent in Shenzhen, 10.3 per cent in the mainland as a whole, 12.6 per cent in the United States, 8.8 per cent in Britain, 8.2 per cent in Taiwan and 6.7 per cent in South Korea.

What the survey did not measure was the number of Hongkongers who crossed the border to follow their dreams. The size of this group is unknown but officials have previously estimated that about 300,000 – or 8 per cent of the city’s working population – work on the mainland.

The challenges of crossing the border

Recent news that Hongkongers on the mainland will get to access more perks – such as studying in public schools, receiving an employment report certificate to facilitate their job hunt after graduating from a mainland university, and the opportunity to contribute to a fund to help them own property – might encourage more people to move across the border.

But two issues then come into play.

First, the angst-fraught question of identity. Hong Kong has been back in China’s fold for almost 21 years but many young Hongkongers remain uncomfortable with any sort of connection to mainlanders.

A recent survey by the University of Hong Kong asked 1,034 respondents to choose their identity from the following options: “Hongkonger”, “Hongkonger in China”, “Chinese” and “Chinese in Hong Kong”. Only 0.3 per cent in the 18-29 age group picked “Chinese”, compared with 69.7 per cent for “Hongkonger”.

Under the “one country, two systems” principle in place since 1997, Beijing allows Hong Kong a high degree of autonomy and free speech, although recent incidents – such as the mysterious disappearance of booksellers who later turned up on the mainland – have raised questions about Beijing’s commitment to those rights.

Efforts to better integrate Hong Kong with the rest of China – such as the Greater Bay Area initiative that aims to unite Hong Kong, Macau and nine Pearl River Delta cities into an integrated economic powerhouse – are only just starting to gain traction, and what effect that will have on cultural identity remains to be seen.

Second, the difference in business culture. A lack of transparency in the mainland government’s policymaking process means that business activities considered legal one day can suddenly find themselves on the wrong side of the law the next day.

Given the importance of  guanxi – or personal connections – to the smooth conduct of business, Hongkongers with paltry ties may struggle.

Many Hong Kong entrepreneurs also have had to deal with a common perception among mainlanders that Hongkongers do not understand guoqing, or how things work in China.

To blend in, be humble

Despite Wong’s painful rejection two years ago, he went on to raise about 200 million yuan (US$31 million) for Xingkeduo and is considering taking it public.

Wong has learned to navigate the mainland business environment with a touch of calculated humility.

“When I introduce myself now, I say that I’m from a small Chinese suburb called Hong Kong,” he said.

“It’s challenging to build a big business in China if you can’t blend in with the people and understand them. You may build a business, but it won’t be a big one.

“It’s not unlike, say, trying to do business in the United States with a limited grasp of English. Investors won’t discriminate against you but you might run into some challenges making friends with these people, getting business connections,” he added.

Wong grew up in Hong Kong but attended university in the US. After graduating in 2007, he joined HSBC Banking Group in its Shanghai and Mexico offices.

“When I went to Shanghai in 2008, almost nobody wanted to go there. People were asking, why should they go to the mainland? But after I started working there, I realised that every city has its own type of energy.”

In 2012, he left his job and started a software company, renting a small flat and looking for customers via Taobao, the online shopping platform owned by Alibaba Group Holding, which also owns the South China Morning Post.

In 2015, he merged his software company with Xingkeduo and became its chief operating officer. He revamped the brand, raised the price of a haircut from 15 to 58 yuan and improved its appointment service, allowing customers to make bookings through WeChat, a mainland messaging app.

Hong Kong entrepreneur Terence Lin Chiu-fai has also become savvy in dealing with mainlanders.

Lin, who co-founded MICHE to sell used cars online and through its 105 outlets, tells investors he is from his family’s home province of Fujian instead of mentioning Hong Kong.

“Mainland investors sometimes feel that Hong Kong people don’t understand the mainland market.

“[But] a lot of Hongkongers also turn up on the mainland with an attitude that they are superior to local people,” Lin said.

He started MICHE in Xiamen three years ago as he saw the potential for the used car business, after Beijing began restricting new car ownership due to traffic congestion and air pollution.

Lin now has a staff of 1,000 and also heads a think tank set up by Hongkongers and Macanese who graduated from mainland universities.

To secure benefits, embrace the risks

Met Li Hing-lung is a young Hongkonger with dreams of building robots to replace delivery workers in China.

The mainland is an ideal place to pursue his idea, given that nearly 21 billion deliveries – for food and other goods – are made each year, according to his own research.

In 2016, Li co-founded ZhenRobotics, which produces metre-high six-wheel robotic AI delivery vehicles.

“Sometimes you see packages lying around delivery vehicles on the streets. That’s not the future. The future of delivery lies in artificial intelligence,” he told the Post from his office in Zhongguancun, Beijing’s Silicon Valley. Each robot is equipped with sensors and CCTV cameras and costs about 100,000 yuan to build.

Since last October, his robots have been making about 2,000 deliveries a day across 20 universities to solve the “last-mile” conundrum.

It works this way: delivery workers send online orders made by students to storage facilities on campus as they are not allowed to enter the dormitories due to safety concerns. Instead of students walking to the store room and back to pick up their parcels, they can now use ZhenRobotics’ WeChat account and request that their items be delivered for a fee of 2 yuan.

But recently, Li was caught off guard when some universities told him he could no longer charge his robots’ batteries on campus. This happened after a few incidents of electric scooters catching fire due to problems with their batteries, Li said.

“In the past, we could charge our robots as many times as we wanted. Now we have to charge the batteries once a day off campus,” he added.

Similarly, Sampson Ho, co-founder of China’s leading co-working space company WEPLUS, had to go back to the drawing board when mainland authorities recently banned the practice of multiple companies registering themselves under one business address.

This affects small start-ups who do not want to invest in an office but prefer using a co-working space to minimise costs.

“We’re still figuring out how to deal with that,” the Hong Kong entrepreneur said. “Some people are saying that because of the new policy, they won’t be using our spaces.”

The Federation of Hong Kong Industries recently said that the city’s business sector wanted mainland authorities to seek their views first before implementing policies that could affect them.

Despite this, for Hongkongers with dreams of building business empires, the mainland is still the place to be.

Aware that competitors are entering the market, Li is gunning for his robots to hit the streets in five years and to be the biggest supplier of delivery robots.

His company has received 300,000 yuan in subsidies from the mainland government, which is encouraging innovation and technology.

“The scale of fundraising in the mainland is so much different from that in Hong Kong.” Li said

“In Beijing, it is not us reaching out to the investors, but the investors who come to us.

“How many investors could you possibly find in Hong Kong? You can count them all on the fingers of both hands.”

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