Graduates need more help to start business

Having graduated from a university last June, Wang Zhicha opened a small gift shop. But after one year of struggle, he has decided to close shop.

"Of the 100,000 yuan ($16,305) I got from my parents, I've already lost 80,000 yuan," he says with a forced smile. "I should spend the rest on something serious." By "serious" he means taking the national or provincial level exam for civil servants.

Wang is not the only university graduate to fold up his business. According to a MyCOS Institute survey, 70 percent of the university graduates who start a business fold up within three years.

Another MyCOS Institute survey, released recently, found that only 2 percent of the university graduates aim to start a business, compared with about 20 percent in developed countries. In contrast, an increasing number of graduates are taking the civil service exams. In 2012, more than 1.2 million graduates took the national civil service exam for the 12,901 vacancies. The numbers and the ratio both were historic highs.

Almost all university campus surveys show that students prefer to work for "government, State-owned enterprises or government-sponsored organizations", with the last being their top choice. Asked why, their common answer was: Why not? The income is stable and I don't have to struggle for the rest of my life.

Business startups are the last choice of university graduates in China. Unlike in developed countries, where talented students exploit the market to become their own boss, good students in China usually choose State-sponsored jobs because they guarantee a stable income and don't require much hard work. So most of the graduates in China who start a business do so because they have no choice. In March 2011, a China Youth Internet Society survey found that 37.5 percent of the graduates who started their own business belonged to this group.

Another difficulty that graduates face in starting a business is the lack of technological knowledge that can help them become competitive in the market.

In 2012, the World Intellectual Property Organization said it had received more than 526,000 patent applications from China, or one-fourth of the world's total, but very few of them were submitted by fresh graduates. Though there are no national data, students from China Jiliang University in Hangzhou, Zhejiang province, have got approval for only 10 invention patents in the past 10 years. This is surprising because CJU claims to be one of the top institutions from where students get patents.

Shortage of startup funds also is a common problem for graduates. Unlike in the US, where young graduates can benefit from a ripe capital market to start a business, Chinese graduates still find it difficult to get support from commercial investors. A 2008 survey found that 82 percent of the Chinese graduates who start a business get their capital from parents, while only 1 percent benefit from commercial investments.

The problems faced by graduates in starting a business have now drawn wider attention. At his first press conference after taking office, Premier Li Keqiang talked about the problems graduates faced in starting a business and promised to help solve them.

The government exempts people who start a business within two years of graduating from paying income tax for the first one to two years. It also offers a low-interest loan of up to 20,000 yuan. Besides, many provinces have asked State-run banks to issue low-interest loans to help fresh graduates start a business. In Beijing, for example, some fresh graduates can get up to 500,000 yuan as loan - for which the local finance department will pay the interest - to start a business. And Shanghai started a State-supported "angel fund" in 2011 to support fresh graduates with loans of up to 300,000 yuan for three years.

The problem is that the government support level is low in poor regions, where graduates need a lot more help. In landlocked provinces like Anhui, a fresh graduate can get only 50,000 yuan as loan, while in neighboring Henan the amount is even lower. This is ironical because a 2008 survey showed that graduates in less developed provinces where the jobless rate is low are more likely to start their own business.

Moreover, a local government alone cannot help all the graduates. For instance, in Shanghai less than 200 graduates can avail of the "angel fund" every year, which is quite a small number compared with the number of graduates passing out each year.

Therefore, more needs to be done to encourage fresh graduates to start their own business. To begin with, the government could introduce more favorable policies to help graduates starting a business to enter the market. In fact, graduates need the encouragement and active help of the entire society to succeed in their business ventures.