The 11th Annual Meeting of Yabuli Chinese Entrepreneur Forum was held at Yabuli Town of Heilongjiang Province February 15-17, 2011. The theme of this year’s meeting was “New Decade, New Ideas, and New Power.” It was during this meeting that the Survey on Survival Environment for Chinese Entrepreneurs in 2010, jointly compiled by China Entrepreneur Forum Development and Research Foundation, Taikang Life Insurance Company Limited and Horizon Research Consultancy Group, was published. Hundreds of domestic entrepreneurs, economists, journalists, and financial experts attended, as well as over 20 US entrepreneurs. Attendees reviewed the ups and downs of Chinese economic development for the past decades and also discussed key areas for improvement in the entrepreneurial environment in the next decade. Moreover, they probed new opportunities and challenges faced by Chinese entrepreneurs.

1. Survey Report on Survival Environment of Chinese
Entrepreneurs
2010
Yabuli China Entrepreneurs Forum Development Research Foundation
Taikang Life Insurance Co., Ltd
Horizon Research Consultancy Group

2. - 2-

3. Main Research Findings
 This research on entrepreneur survival environment is mainly aimed to research entrepreneur's subjective
understanding, judgment and evaluation of three dimensions: social environment, commercial environment
and individual environment. This study is supported by research on entrepreneurs’ values and behaviors.
 Entrepreneurs generally hold positive view of economic
development policies and economic trends, but the “three rushes”
have highlighted deterioration of the entrepreneurial environment.
 Entrepreneurs generally show much concern about fairness and
stability of policies.
Social
environment
 Most entrepreneurs are satisfied with local government
Commercial administration but dissatisfied with specific land, water, and
electricity policies.
environment  Private enterprises are universally confronted with issues of
Individual
tax burdens, talent shortages, internal management; medium-
environment sized and small enterprises face especially severe issues,
 Entrepreneurs are highly satisfied with their personal lives, but
they have no group identity or sense of security, leading to
potential migration tendencies.
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4. Finding #1: Entrepreneurs generally hold
positive views of China’s economic
development.
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5. A majority of entrepreneurs are optimistic about China’s economic
development policies.
68%
Of entrepreneurs hold positive views of
China’s economic development policies, and
think that economic trends are favorable for
development of their own enterprises.
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6. Over 40% of entrepreneurs think highly of policies on seven emerging
industries
1 Positive influence 42.8%
Influence of planning on
seven strategic emerging
industries as proposed in
2 Adverse influence 2.4%
41.9%
attached “Suggestions on
12th Five-year Plan” on
3 It’s hard to judge presently.
private enterprises
4 No influence 10.5%
Entrepreneurs optimistic about targets for energy saving and
emissions reduction
There will be new market opportunities 45.7
Influence of industrial
Upgrading will be achieved by taking
24.8
structure adjustment and advantage of those opportunities
Increased costs due to increasing
achieving targets for energy 25.2
investment in energy saving and emission
saving and emissions Will be confronted with heavier pressure for
14.3
improvement.
reduction as proposed in
No influence 18.1
“Suggestions on 12th Five-year
Plan” on private enterprises. Not clear 1.9
0% 10% 20% 30% 40% 50%
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7. Finding #2: “Three rushes” highlight
deterioration of market environment
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8. The civil servant rush; participation has exploded and civil servant has
become the most popular occupation.
1,420,000
365,000
Number of
Number of
applicants in 2010
applicants in 2006 The application-to-acceptance ratio is 87.5:1. A certain position in
the National Energy Administration had a ratio of 4961:1.
Horizon’s survey on lifestyle and
consumption of Chinese youth in Why？
2010 shows: Impossible to be dismissed.
First, stability
Starting a White-collar /civil
business servant Second, high remuneration Subsidies and benefits are key
Taxation and customs are
Third, seeking power
18% VS 76% the hottest.
Fourth, highly coveted I want to have a try even I will
not be successful.
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9. The immigration rush – potential immigrants are growing rapidly.
4.8% of respondents
have immigrated.
2.9% of respondents
are going through
18.6% of respondents immigration procedures
haven’t yet applied for
immigration, but intend Living environment Investment
Generally, their wife and children are
to immigrate Clear water and blue abroad, and they are shuttling between
sky, safe foods. overseas and home.
Why? Children’s education Sense of security
Better primary education and Tax evasion, policy change, public
famous colleges. voice
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10. The investment rush – Housing and stock markets are most favored by
entrepreneurs for investment.
Investing in real estate Investing in stocks
70%
62.9
60%
50%
40%
50
31.4
50% 31%
30%
20% 14.3 14.3 11.9 9.5 9 8.6 5.7
10% 1.9
0%
ise tat
e ks d rk ts elr
y al e bt lea
r
rpr es oc fun wo uc pit ranc de tc
t
uity rt d ew ca a l
nte al S A p ro old
j re Ins
u on No
t oe Re eq c ial G ntu ati
y in ate an Ve N
ctl Pr iv fin
Dir
e nk
Ba
Top 10 investment environments, Guangdong 1st, Shanghai 2nd
50%
40 36.7
40%
30%
20.5
20% 14.8
9.6 7.6
10% 5.2 4.8 4.3 3.3
0%
Guangdong Shanghai Beijing Zhejiang Jiangsu jiangxi Tianjin Hainan Chongqing Shandong
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11. Finding #3:The predicament of private
enterprise reflects flux between public
authority and the market.
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12. Most entrepreneurs feel pressured by competition.
Entrepreneurs feeling stressed Why ？Figure: Sources of pressure on entrepreneurs
in competition with state-owned
and foreign enterprises
Tilt of government policies 34.2
Non-market
67%
Support of preferential policies 15.7 factors
Cost increases 35.7
Talent contest 22.9
Market prices 20
18.9% of of entrepreneurs feel Brand popularity 20
highly stressed. Technical innovation 15.7
Unconventional competition
approaches
12.1
Enterprise management 7.1 Market factors
50%
Product quality 5
Of entrepreneurs detect
Others 2.1
unfairness in government’s
Not clear 2.1
different policies toward
state-owned and private 0% 10% 20% 30% 40%
enterprises. Note: it is a multiple-choice question, with the total adding up over 100%.
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13. Policy change is biggest challenge for private enterprises
Influence of state policy change
on enterprises
78% Of entrepreneurs think the
influence is high, and among them
24.3% think the influence is very high.
So, entrepreneurs need to
The survey shows that influence of policies on
Study policies: immerse themselves even more deeply in
studying policy orientation. industries quite differs from each other. Among
Obtain voice, taking all reasonable measures to get their 21 real estate enterprise leaders in the survey,
voices heard by relevant government authorities. 19 of them (90.4%) express that policy
Make contact with government, taking more energy change has high influence on their
in socializing with government officials in actual policy
enterprises.
implementation.
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14. Finding #4: Entrepreneurs both
optimistic and pessimistic about the
legal environment, and show concern
about enforcement of laws.
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15. Over half of entrepreneurs hold positive view toward existing legal
protections
51% Of entrepreneurs think the
current Enterprise Laws can
protect enterprises’ interests
Entrepreneurs in service industry are seeking protection of intellectual
property rights.
Protection degree of laws on patents and intellectual property rights
The ratio of entrepreneurs in such industries as
real estate, computer service and software,
44% VS 51% information transmission, commercial and
technological service who think that protection
Not Established
established of intellectual property rights are not
established is higher than those in other
industries.
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16. Dual effect of new labor laws
Operations are more standardized. 41 Positive effect
Labor cost have increased 68.6
Staff turnover increased 17.1
Adverse effects
Staff made mistakes, slowdowns 16.2
Discouraging effect on foreign capital 3.8
No influence 5.2
Not clear 1
0% 20% 40% 60% 80%
Large enterprises better adapted to new labor laws
50% Operation is more standardized.
62% Labor cost is increased.
Other adverse effects account for less than 10%.
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17. Finding #5: Public opinion puts some
entrepreneurs in awkward position.
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18. Entrepreneurs think that media are not objective, and consider
themselves a disadvantaged group
Table What do you think of the relationship between entrepreneurs and
the media?
Entrepreneurs think media reports 1. Entrepreneurs are somewhat vulnerable and hardly have
are not objective. a voice in face of media. 28.6%
43%
2. They have the upper hand and can influence the media 2.4%
3. Their rights to speech and influence differ for different events. 68.1%
Over 30% entrepreneurs are subject to adverse
influence of public opinion.
Table: The public has raised hot
1 It creates some moral pressure. 19.0%
discussion of “original sin” and
2 It damages my personal image and the
15.7%
“heartless wealth” of collective image of entrepreneurs.
entrepreneurs.
3 It has influenced my work and life. 2.9%
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19. Only 10% of entrepreneurs think “All-out donation” merits imitation.
Table: what do you think of “All-out donation” behavior？
1 Fortunes are entrepreneurs’ individual accumulation, I do not agree with this behavior. 5.2%
2 Profits made by entrepreneurs should be used for reinvestment, raising returns to the community. 22.4%
3 I think it is a personal action, and should not considered necessary for all entrepreneurs. 59.5%
4 I think it is worthy of imitation; more entrepreneurs should do this. 11%
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20. Finding #6: Entrepreneurs hold positive
views of local government
administration.
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21. Most entrepreneurs view administration behavior of local government
positively
Of entrepreneurs think that local
61% government’s administration
concepts, efficiency and behavior
have positive effect on enterprises.
However,
Of entrepreneurs think that local
61% land, water, and electricity
policies are unfavorable for
enterprise development.
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22. Finding #7: Four difficulties of private
enterprises: tax burdens, financing,
talent, and management.
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23. Problem #1: tax burdens are generally heavy.
Entrepreneurs feel that
tax burdens are heavy 54.8% “somewhat heavy”
80% +
24.8% “very heavy”
Entrepreneurs’ view
High tax rate and diversified Eastern regions Western regions
tax categories
26.3% 17.9%
Incomplete taxation system
VS
Haven’t enjoyed rights Service sector Industrial sector
and status they deserve
28.7% VS 19.3%
Lacking government trust
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24. Problem #2: private enterprises cannot easily get loans, especially
medium-sized and small enterprises.
Main financing channels
60%
for private enterprises Entrepreneurs who
find it difficult to
Bank loans (50.5%) get bank loans
Private sector borrowing （26.7%）
13.8% say “very difficult”.
Equity financing （25.7%）
Listing on stock market （15.2%）
Attracting venture capital （10%）
Large Medium and small
Trade financing（7%） enterprises enterprises
Financial lease（2.9%） 2.9% VS 15.9%
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25. Four reasons why private enterprises have difficulty getting loans
“Banks are only willing to make a loan to state-owed big companies,
even they would suffer great losses”.
“Banks do not believe in the strength
of private enterprises”. “Identity of private enterprises”
“Policy trends”
Identity
“Complicated review and approval procedures” discrimination
“Little understanding and confidence in the
“Long review and approval time” industry”
Complicated review Industry constraints
and approval
“Banks mainly support the real estate
“Complicated procedures” Collateral is industry and give a little support to
hard to find other industries”
“Risk evaluation unscientific” “No collateral for IT industry”
“No loans are offered to enterprises with small capital funds”
“You need fixed assets and properties”
“Physical collateral is required. And sometimes we may owe RMB 1
“Only collateral loans, no loans on credit” million for materials and worker’s salaries in a project, So how can
we provide so valuable physical collateral?”
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26. Problem #3: Over half of private enterprises are troubled with talent
problems, three types of talents are most lacking.
What is lacking?
54%
Of entrepreneurs think current
Lack of marketing talent
Lack of professional technicians.
Lack of middle management personnel 32.4
39
48.6
Staff turnover rate is high. 18.1
labor market cannot meet
Staff are universally not very active. 9.1
enterprises’ demand for talent.  Lack of marketing talent
Business concept of top management is
6.2
inconsistent with enterprise's strategic  Lack of professional
Entrepreneurs’ view Unharmonious relationships among
4.3 technicians
management team
 Lack of middle management
Divorce of higher education from society Others 1
personnel
Enterprises’ human resource None 1.4
Job seekers are
blundering principle are biased
Not clear 2.4
Enterprises Enterprises’ training systems
expanding greatly are incomplete. 0% 10% 20% 30% 40% 50% 60%
Note: multiple-choice question, with the total summing to over 100%
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27. Problem #4: Internal management structures are bottleneck
constraining development of private enterprises.
Completeness of internal management
structure in the eyes of entrepreneurs
Medium and small
Large enterprises
enterprises
82.3% VS 50.6%
56% 44% Eastern regions Central and
“Complete” “Incomplete” western regions
57.9% VS 46.2%
Effect of entrepreneurs’ personal social
resources on enterprise development
Large Medium-sized and
20% enterprises small enterprises
79% “Very great effect” 91.2% VS 76.8%
“Great effect”
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28. Finding #8: Medium-sized and small
enterprises in tougher struggle for
survival.
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29. Small and medium-sized enterprises (SMEs) are more pessimistic
about the macro-economy.
SMEs are more extremely influenced by policy environment.
SMEs feel less protection of laws.
SMEs express lower recognition of local government's policies.
Small & Medium-sized Large enterprises
enterprises（%） （%）
Economic development trend are unfavorable for development of
35 17.6
their own enterprises.
The government is quite unfair in terms of policies respectively for state-
15.2 2.9
owned enterprises and private enterprises.
Change of state policies has great influence on enterprises. 11.8 27.6
Policies do not have favorable effect on protection of patents and
54.5 35.3
intellectual property rights.
The enterprise law cannot protect their enterprise’s interests. 46 36.3
New labor laws have led to increased labor costs. 69.9 61.8
Local government’ s administration concept, efficiency, and behavior
36.7 20.6
have caused adverse influence on enterprises.
Local land, water, and electricity prices are unfavorable for
63.3 35.3
enterprise development.
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30. Finding #9: Entrepreneurs are highly
satisfied with their lives but dissatisfied
with their property security and
personal safety.
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31. Entrepreneurs are generally highly satisfied with their
lives.
Entrepreneurs Common citizens
Overall satisfaction
VS 55%
76%
Source: Horizon’s research on “Life
Quality Index of Chinese Residents” in
2010
Large Medium-sized and
enterprises small enterprises
VS
91% 73%
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32. Entrepreneurs have low satisfaction with their property security and
personal safety.
Entrepreneurs Common citizens
29% of them worry about property security！
VS 11% think the public is unsafe.
38% of them worry about personal safety.
Source: Horizon’s research on “Life Qualify Index of
Chinese Residents” in 2010
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33. Conclusion – Contradictions and confusions among China’s
entrepreneurs
1. Entrepreneurs are aware of huge development opportunities from the development of China’s market-
oriented economy. But the intervention of public authority into the market has led to failure to achieve
expectations and increased entrepreneurs’ feeling of uncertainty. As a result, entrepreneurs in China hope to
avoid intervention of public authority into the market, and on the other hand they also actively make efforts
to link forces with the public authority to make more profit. The latter route always makes them more
dependent on public authority and deeper intervention into the market, trapping them in a cycle of
dependence.
2. Entrepreneurs have emerged to accompany the development of China’s market-oriented economy. They
share fortunes with the market-oriented economy, feel a sense of accomplishment brought by market
innovation, and are also respected by society. However, their function in the market are not fully
recognized, and even have yet to enjoy the power they deserve as taxpayers. Hence, in combination with a
lack of public voice, entrepreneurs have no feeling of corresponding social identity. In addition, policy
changes, criticism from public opinion, and other factors sap their sense of security with respect to their
property and lives. Thus Chinese entrepreneurs often feel that they are treading upon thin ice.
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34. Survey Instructions
Qualifications of respondents
• Chairman, director, president, vice president or CEO of a private enterprise;
• Still engaging in operating management;
• The enterprise has reached a certain scale and influence
Execution and Sample Size Distribution
By January 7, 2011, 229 interviews had been conducted in total for the project of “Survey on
Survival Environment of Chinese Entrepreneurs”; 19 were excluded due to enterprise nature,
scale, and respondent’s identity, for 210 effective samples total.
Table: enterprise scale distribution
Enterprise Scale Quantity Percentage (%)
Large enterprise 34 16.2
Medium-sized enterprise 169 80.5
Small enterprise 7 3.3
Total 210 100.0
Note: The survey is mainly conducted on large and medium private enterprises. For division of enterprise scale,
please refer to the division standard of The National Bureau of Statistics.
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