In Dream Town, a collection of creater office space model in the gritty side of this historic city, one tiny company is building a portable 3-D printer. Another takes orders for traditional Chinese massages by smartphone. These are just two of the 710 start-ups being nurtured here.
Anywhere else, an incubator like Dream Town would have been a vision of venture capitalists, angel investors or technology stalwarts. But this really is China. The Chinese Communist Party doesn’t trust the invisible hand of capitalism alone to encourage entrepreneurship, especially since it is a huge part from the leadership’s tactic to reshape the sagging economy.
Which explains why the government of Hangzhou – a former royal capital that has been an important commercial hub for more than a millennium – built Dream Town and lavishes resources on start-ups. The businesses here obtain a slate of benefits like subsidized rent, cash handouts and special training, all courtesy of the area.
Chemayi, which provides car repair services through a smartphone app, is staying rent-free at Dream Town for three years and it is applying for up to $450,000 in subsidies from city authorities to aid pay salaries and buy equipment.
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“From the central government down to local governments, we have seen plenty of warm support,” said Li Liheng, co-founder and chief executive of Chemayi.
For most of China’s long economic boom, young adults flocked to manufacturing zones for jobs making bluejeans or iPhones. These days China is trying to advance beyond just being the world’s factory floor. Policy makers want another generation to locate better-paying work in modern offices, creating the ideas, technologies and jobs to give the country’s future growth.
Premier Li Keqiang frequently calls for “mass entrepreneurship.” In March on the National People’s Congress, he bragged that 12,000 new companies were founded on a daily basis in 2015.
The entrepreneurial embrace comes with lots of financial support. Country wide, officials are coming up with investment funds, providing cash subsidies and building incubators.
“Without most of these subsidies, you merely depend upon private money, so you wouldn’t see numerous technology start-ups happening today,” said Ning Tao, someone at Innovation Works, a venture capital fund in Beijing. “Without quantity, you can not have quality.”
But the heavy spending is adding to worries about an inflating bubble in the world of China’s tiniest companies. Combined with the government funds, venture capital money is flooding the land. About $49 billion in deals were made just last year, making China second merely to america, based on the accounting firm Ernst & Young.
Workers remodeling old houses in Dream Town, that is nurturing 710 start-ups. Credit Jes Aznar for your New York Times
Some economists and entrepreneurs have concerns that the government is helping fuel a frenzy that might ultimately result in failed businesses, wasted resources and financial losses. Only one city, Suzhou, near Shanghai, has announced it is going to open 300 incubators by 2020 to accommodate 30,000 start-ups.
Beijing’s policy makers use a long past of giving Shanghai office park for rent easy accessibility to loans and subsidies to propel certain industries, with both negative and positive consequences. Though that tactic lubricated the nation’s industrialization, in addition, it contributed to the excess containing buried the continent in empty apartment blocks, mothballed cement plants and sputtering steel mills – which all threaten the economy’s stability.
“I think the subsidies shouldn’t be a long term policy,” Jin Xiangrong, an economist at Zhejiang University in Hangzhou, said of the start-up support programs. “They can cause overcapacity like the kind we have seen now in China’s manufacturing sector, which can be largely a consequence of government support.”
At Dream Town, Mr. Li, 39, frets more about his business. He got the initial idea for Chemayi during 2009 right after a car accident. To locate a trustworthy mechanic, he searched online, asked friends for advice and visited repair shops.
But Mr. Li found it difficult to judge who has been reliable. A vehicle culture – and the help that are included with it – is fairly new in China.
Aiming to fill the data void, he and three friends set up Chemayi in 2013 with 5 million renminbi (currently $750,000) that belongs to them money. For the annual fee, Chemayi sends out staff members to assist fix flat tires, paint scratches or repair broken-down engines.
“Henry Ford has vanished for so many years, but we have been still driving his cars,” Mr. Li said. “I felt i also must pursue a reason which will persist after I’m gone.”
Chemayi beat out a lot more than two dozen other start-ups for any coveted space in Dream Town inside a 2014 competition. Another co-founder, Ouyang Feng, delivered a 40-minute presentation to your panel of judges who peppered him with questions regarding Chemayi’s business design and future prospects. The provincial governor watched over the grilling.
In the end, the committee awarded Chemayi a 3-foot golden key that symbolically opened the doors to Dream Town.
Chemayi has 284 employees in four cities, with intends to reach one thousand at the end of the year. Mr. Li said his company had raised $22 million in private money and turned revenue of about 10 million renminbi a year ago.
Cai Liangen, left, and Mao Jinmei cook for Mishi, a food delivery start-up. Credit Jes Aznar for The New York Times
“A lots of Chinese people desire to be successful. They wish to initiate change through innovation,” Mr. Li said in their spacious corner office, while fussing with a traditional Chinese wooden tea-making set. “That is really a formidable power.”
Hangzhou can be a natural center for China’s start-up fever. After China embraced capitalist reform within the 1980s, Zhejiang province, of which Hangzhou will be the capital, emerged like a leading base for that export industries that fueled the country’s rapid growth. Factories pumped out products like socks and plastic Christmas trees.
Since zeal for commerce is being channeled into technology start-ups. Hangzhou hosts China’s most popular internet company, the e-commerce giant Alibaba, which has become a training ground for would-be entrepreneurs.
The neighborhoods near Alibaba’s sprawling campus, after a poorly developed area around the city’s outskirts, now comprise a budding tech center with newly built office parks like Dream Town, covered with ambitious college graduates, angel investors and venture capitalists. The regional restaurants have grown to be hangouts to switch ideas and gossip over fried squid and stewed pork and eggs.
Feng Xiao is typical of this new breed. Mr. Feng, 39 along with a Hangzhou native, spent 11 years at Alibaba, mainly in sales and marketing.
“There is really a Chinese proverb, ‘The soil is way too rich,’” Mr. Feng said. Alibaba “offered you plenty of opportunities. It had been easy to possess a sense of success. But I wanted in order to 32dexkpky completely from scratch.”
His start-up came to be in Alibaba’s cafeteria, where he ate meal after meal. “I really missed Mom’s cooking,” he explained. He figured that a great many other individuals, trapped working for extended hours far from home, felt the same.
Mr. Feng as well as two other Alibaba employees left their jobs in 2014 and opened a food delivery service, Mishi. Their plan was to connect people ready to prepare homemade meals with on-the-go pros who were too busy to prepare. They set up shop inside a friend’s empty house, decorated with secondhand furniture and photos from home.
Along with raising $19 million from private investors, Mishi caught the attention in the Hangzhou city government. In 2014, district officials awarded Mishi 5 million renminbi to help spend the money for bills. Its rent in creater space address is likewise subsidized.
“The most significant thing by the federal government is if they may be open” to new varieties of businesses, Mr. Feng said. “We are glad to discover these are aggressively supporting us.”