Global Entrepreneurship in the G20

“You just take it one step at a time.”

Because of this instability, many Chinese entrepreneurs tend to be more opportunistic, focusing on short-term profits and maintaining safety-nets independent of their business, such as leaving their family abroad while they return to work in China for months at a time.

They also develop guanxi, the Chinese equivalent to networking or relationship building. However, guanxi encompasses more than just genial relations – it tiptoes around the edge of bribery and corruption to ensure speedy government approval, it creates trust to overcome natural and man-made obstacles.

As Lin Wang put it in another interview for the Stanford Journal of East Asian Affairs, “You don’t just need connections, you need the right kind of connections.”

Other obstacles are financial. In 1999, only 0.9 per cent of working capital loans went to the private sector. According to an article written by the specialist foreign direct investment practice, Dezan Shira and Associates, Chinese banks continue to pour billions of dollars into state-owned enterprises (SOEs), which may motivate youth to return to the security and benefits of SOE work.

“Many young people are now actively seeking careers back in China’s SOEs as they seek more protection and state assurances,” the article reads.

“This bodes ill for the ability for future generations being able to provide China with innovations that could turn it into a global leader. China as an innovator? Not unless the Chinese banks start to encourage and fund the nation’s entrepreneurs, and China gets its politics out of business.”

Argentina – 124 for Ease of Doing Business

Argentina is quite a contrast to China. Instead of employing 75 per cent of the urban workforce as is the case in China, entrepreneurs represent only 9.2 per cent of Argentina’s. Although this difference could be because of a difference in identifying an entrepreneur, the percentages are still telling.

Only slightly more than five per cent of the Argentinian entrepreneurs polled by the Inter-American Development Bank (IDB) own equipment or machinery; the average entrepreneur employs nine workers for his or her business.

This is largely because of the Argentinian tax system. According to the IDB paper, “Entrepreneurship, Entrepreneurial Values, and Public Policy in Argentina”, is “highly non-continuous, meaning that the marginal rates for business have drastic jumps in size”.

Almost 40 per cent of Argentinian entrepreneurs are not registered as taxpayers because of the complexity of the registration process and the cost of expected taxes. A medium-size company can spend over 453 hours preparing, filing, and paying taxes, compared to 194 hours for countries in the Organization for Economic Cooperation and Development.

In addition, 47 per cent of entrepreneurs do so by necessity, and not by choice or opportunity. Although Argentina has a large middle class – the class most likely to take advantage of entrepreneurial activity – its financial sector is largely underdeveloped.

Credit to the private sector amounts for only 14 per cent of Argentina’s GDP, compared to Brazil’s 53 per cent and Chile’s 97. Only half of Argentina’s registered firms have a loan, which the IDB says may be because of the effect of inflation and political instability on the financial market.

This political instability also breeds the possibility of corruption among entrepreneurs; almost one fourth of businesspersons say that a typical firm would bribe government workers to secure a contract. Additionally, senior management spends 20 per cent of its time complying with government regulations, which the IDB takes to mean possible lobbying for special treatment.

Registered Argentinian entrepreneurs cite this corruption and instability, along with tax rates, to be their three main problems, whereas non-registered entrepreneurs give crime and a lack of access to credit.