Cai Haoyu, CEO of MiHoyo, in his studio in Shanghai. The computer science major registered an Internet technology company with classmates after graduating last year. Shen Yu / for China Daily

New graduates look for work at a job fair in Shanghai at the weekend. The fair offered about 10,000 employment opportunities at 500 businesses. Xinhua

Graduates are being helped to start their own companies. Zhou Wenting reports from Shanghai.

Wu Chaoqi, a 24-year-old Shanghai entrepreneur, is not sure how long his business will survive. He joked that his company's method of delivering wine by moped means that the logistics costs are far lower than those of his competitors. However, his humor underplays a serious problem. "Sure, it saves on expenditure, but also emphasizes an undeniable shortage of orders," he said.

After graduating from college in September, Wu registered his company, but crucially didn't have to pay the usual registration fee. The policy, which was introduced in Shanghai four years ago, was rolled out nationwide last year to encourage and support young businesspeople.

The preferential policy means that young entrepreneurs who set up their own business within two years of graduation are exempt from the minimum fee of 30,000 yuan ($4,900) to register a limited liability company with capital of less than 500,000 yuan. However, the sum must be paid after two years in operation.

The policy has encouraged new entrepreneurs. In the first five months of this year nearly 2,400 college graduates had opened enterprises in Shanghai. In 2010, the number for the full year was 1,882, according to the Shanghai Administration for Industry and Commerce.

The municipality also offers several other incentives as it seeks to boost the number of young entrepreneurs and counter the threat of high levels of graduate unemployment. Meanwhile, China's universities will churn out nearly 7 million graduates this month.

However, some experts have warned that the policies will also encourage a rash of "blind" entrepreneurs.

"In certain districts, people with little more than just a business idea can rely on the local governments to provide office space, financing channels and tutors for the first six months of their business, but who will look after them for the rest of their careers?" asked Zhu Jiang, general manager of the entrepreneurship center at Fudan University's technological park.

Sales and wine are the key words for Wu, a native of Lishui in Zhejiang province. While working as an intern, selling insurance and tourism projects, he attended 100 wine-tasting events for his own pleasure and eventually decided to take advantage of the preferential policies and distribute imported wines.

'Green channel'

He and four classmates formed the company and scraped together a combined start-up sum of 40,000 yuan.

"The zero threshold gave us the confidence to make our business dream a reality. Without it, we would have had to pay at least 10,000 yuan for an agency to find the registration fee for us, and we couldn't afford that," he said.

Wu and his colleagues also welcomed the "green channel" offered by university entrepreneurship centers: Graduates hand over their ID cards, graduation certificates and business plans to a center, which will apply to the industry watchdog for a business license on their behalf.

Wu was prepared to weather some hard times during the initial operating period. He ate simple dishes such as fried rice and eggs for the first few months, and each employee earned just 2,000 yuan a month, the maximum he could afford to pay them.

However, in retrospect, he believes he and his co-founders did not prepare the ground thoroughly enough.

He set a goal of reaching 200 clients, including bars, restaurants and hotels, within one year of starting. "However, I didn't realize that many customers at those places only order Chinese brands such as Changyu, or Dynasty, a Sino-French brand. There's no room for me, despite the quality of my imported wines," he said.

"I tasted hundreds of wines in the two months before I started the company and thought my selections were right for the Chinese market. I believed that passion and diligence would guarantee success," he added.

He preferred not to disclose the company's turnover, but admitted that he still owes his co-founders the iPhones and iPads he had promised as year-end bonuses.

Now, experts are discouraging the unprepared and are keen to emphasize that zero registration fee does not mean zero risk.

"Never expect preferential policies to guarantee entrepreneurial success. Running a business is fairly comprehensive and involves leadership, a good mental attitude, environment and social connections," said Jia Xinguo, principal of Shanghai Value-Plus Vocational and Technical Training School, which specializes in training entrepreneurs.

"The registration fee is just a small part of the total investment in an enterprise, and the policies are small benefits in terms of an entire career. Survival of the fittest is always the principal rule of the market," said Zhang Yusong, a spokesman for the Shanghai Administration for Industry and Commerce.

However, many graduates have been inspired by the heightened competition for jobs. Statistics from the Ministry of Education show that while the number of college graduates has hit a record high, job vacancies are down 15 percent compared with last year, partly because the Chinese economy has entered a period of slower growth.

The employment rate in Beijing was 33 percent as of May 1, while in Shanghai the number was 44 percent as of May 10, according to the cities' education commissions.

At the same time, 82 State-level entrepreneurial cities have spent huge sums to foster potential businesspeople through policies such as subsidized office rentals, free accounting services and also contributing half of the company's social insurance payments for the first two years of operation.

"But I hope college graduates don't feel as though they are entering a no-risk zone when they start a business," said Zhu. "When consulting about starting an undertaking, the first question on most of their lips is 'What policies does the government have?' Overreliance on preferential policies will become a weakness and will lead to poor competitiveness and business adaptability."

In March, Wang Xuanyi, 26, registered a company in Shanghai that provides psychological counseling. She said the policies can create an illusion of starting up without responsibility.

"How can those who have no idea what to do after graduation or who can't find a job start an enterprise and provide jobs for others?" asked Wang, a native of Shenyang, Liaoning province.

"However, for youngsters like me, those with clear ideas and a firm conviction to start a business, have to benefit from the policies as much as possible," she said.

A burgeoning trend

Liu Wei and two classmates, who describe themselves as "homebodies", chose to create games for mobile phone apps, a burgeoning trend. One of them, Cai Haoyu, acts as CEO.

The computer science majors, who left Shanghai Jiao Tong University last year with master's degrees, registered an Internet technology company called MiHoyo.

So far, the only game they have developed is The End of School, an anime-style game similar to Super Mario. Since its launch in February, the game has been downloaded 300,000 times on the Chinese mainland, earning the three friends almost 600,000 yuan.

Liu said the game will be launched in the United States and Japan in the latter half of this year and they are happy hustling for business. However, two headaches remain; staff recruitment and raising capital.

"Veterans and top talents won't work for my small company, but those who do apply are unsatisfactory," said Liu.

"The three programmers I recruited were all recommended by friends, but that can't sustain the long-term need for employees," said the 26-year-old.

One way to attract talent is to offer better wages than larger companies, said Liu. However, his company can't afford to pay the average annual salary for a games programmer, roughly 200,000 yuan, so he is considering raising capital.

"I must be careful, because raising funds is like a marriage, but I won't have the opportunity to express regret and ask for a divorce," said Liu, commenting on the large number of legal disputes between investors and the enterprises they've backed.

Wang admitted that running a business is much harder than she had imagined.

"When we were looking for clients, people often looked down on us because of our age and lack of experience. My monthly plan is lagging behind," she said.

Niu Liben, chairman of the board of Fclub e-commerce (Shanghai) Co, said: "An old Chinese saying is: 'A man without downy lips makes thoughtless slips', so there is a traditional prejudice toward young people. It's harder for young people to attain a position and be competitive."

Niu, 38, started a business at the age of 22. However, he quickly realized that he wasn't ready for such an undertaking and decided to return to paid employment until he had sufficient experience to strike out on his own once again.

"Young people's passion is always appreciated, but they're also easily discouraged and swayed," he said.

Niu advised those thinking of starting a business, even those with clear entrepreneurial ideas and aptitude, to gain a couple of years' work experience. He emphasized that recent graduates, whose ideas may be immature, should definitely think twice.

Wu said,"The media mythologizes too many 'heroes', which makes youngsters take it for granted this is a fast and wide freeway. Actually they (the successes) are just one in a million and you never know what favorable factors may have contributed to their success."

However, Liu believes he has chosen the right path for his business. "The mobile Internet is the craze of the age and it makes me feel I am participating in that age in a special way," he said. "I'd rather do something I love than simply be a cog in a wheel, doing the same thing as everyone else in the office."

Defining success

Industry insiders consider an entrepreneur to be successful if his or her company survives for three years, but for new graduates the stakes are high: Only one out of every 100 is likely to succeed.

But some experts say the most important indicator of freshman success is not how long the business survives, but what the young entrepreneur learns from the experience.

The motivation of Chinese entrepreneurs has changed from making a living to seeking better opportunities and growth, according to a 2012 report by Global Entrepreneurship Monitor.

"I never expected to make a stellar enterprise at the first attempt. Success is something I have in myself, because I'm engaged in a wide range of social circles and do everything from finance and administration to public relations," said Liu.

Jia said that while success should be celebrated, people should also be lenient to those who fail.

"No entrepreneur will say they've succeeded, because success is the product of numerous successes and failures. That's why we often hear about people who have experienced many ups and downs in the entrepreneurial process," said Jia.

In Shanghai's Yangpu Business Incubation Center graduates are provided with free tutors and offices for their companies for six months.

Fresh graduates are immersed in a pure working environment, alongside people from the same age group and with the same goals, said Zhang Juejin, office director of the center.

"All these efforts are being made to help young entrepreneurs get through the preliminary phase. Those six months will allow them to understand their career path and help them decide whether to continue with their own companies or to look for a job," she said.

Contact the writer at zhouwenting@chinadaily.com.cn

(China Daily USA 06/18/2013 page8)