Fostering Entrepreneurial Spirit – What does it mean?

By Cai Hairuo

Since the reform and opening up, generations of China’s best entrepreneurs have flourished in both internal and external markets through fierce competition, and have made a great contribution to China’s economic and social development. The fostering of entrepreneurial spirit will encourage the entrepreneurs to make even greater contributions and will also bring greater individual vitality.

September 25 saw the importance of entrepreneurial spirit officially endorsed by the Chinese government for the first time, with the release of a special document by the State Council. The guideline represents a move to foster a healthy environment for the development of entrepreneurs, to encourage a strong entrepreneurial spirit, to spur the initiative of entrepreneurs, to provide practical all-round protection for the legal rights of entrepreneurs，and to further develop a fair and transparent business environment under the rule of law.

What roles does entrepreneurial spirit play in the present era? 
— The entrepreneurial spirit can enhance innovation and ambition

The Chinese government places a high value on the positive role entrepreneurs and the entrepreneurial spirit play in economic development and social progress. Encouraging the entrepreneurial spirit can provide further protection and motivation.

President Xi Jinping emphasized in the speech addressed at APEC Summit in 2014 that “market vitality comes from the people, especially from business leaders and their entrepreneurship”.

During the two sessions of 2017, Premier Li Keqiang pointed out in Report on the Work of the Government that “we will inspire and protect entrepreneurship, and ensure that entrepreneurs can run their businesses and make investments with peace of mind”.

The present situation, with changes in economic and social development, demands no less.

Entrepreneurs are a key element in micro economic activities. Stimulating entrepreneurial spirit is beneficial to the efficiency of this sector. Entrepreneurs also play a vital role in allocating resources, so enabling them to invest and do business without extra worries can help to promote better allocation of resources in the market and propel supply-side structural reform.

At the same time entrepreneurs are key players in innovation, so optimizing incentive mechanisms and better protecting intellectual property rights will stimulate their individual initiative, and will help China’s industry to become more intelligent, informationalized and technology-driven.

Regulation of ethical principles follows market and government regulation as a third lever. If entrepreneurial spirit is encouraged, innovation and other forward-looking activities will expand in scope. The issuing of the guideline is a key move to respond to what most concerns entrepreneurs, to guide their prospects, to regulate their activities, and to encourage their innovation.

What changes should be made to foster a fair and transparent business environment?

From an internal perspective, a clear definition of entrepreneurial spirit should be formulated so as to spur individual vitality.

The guideline proposes three measuresto encourage the core of entrepreneurial excellence: encourage the entrepreneurial spirit of patriotism, dedication, compliance and hard work; encourage the entrepreneurial spirit of innovation, quality and excellence; encourage the entrepreneurial spirit of serving society.

Xinhua News has commented that these three measures provide a clear answer to questions that China faces. China still has a long way to go to achieve fairness and transparency under the rule of law in protecting intellectual property rights and ensuring fair market competition. In addition, major changes have taken place in market demand, supply conditions, and resource availability, which have posed challenges to the ambition and innovation of some entrepreneurs. We therefore need to clearly define the entrepreneurial spirit and stimulate its contribution to micro-economic activity; this will give entrepreneurs the courage to strive for success, explore new business opportunities, confront challenges, seize opportunities and launch new undertakings.

From an external perspective, protecting the legal rights of entrepreneurs can boost fair competition and creditability in business, and help to foster a more transparent and open relationship between government and entrepreneurs.

First, the government should accelerate the construction of a long-term mechanism to protect legitimate intellectual property rights. Disputes over property rights, problems of patent infringement, and inappropriate interference from the government have all occurred in recent years and have harmed the legal rights of entrepreneurs. In order to remove their worries and concerns, the guideline raises the idea of protecting rights by the rule of law – rights of property, innovation and independent operation will all be secured by law. This allows the authorities to improve the protection of property rights at the highest level, to regulate systems of economic operation, to create a predictable business environment and to guarantee to the public and to entrepreneurs a sense of security about their property. They will be able to rely on a stable society and consistent economic growth.

Second, the government should abolish all regulations that hinder fair and honest market competition. Fraud, counterfeiting and tax evasion still occur in China. The guideline prioritizes the regulation of an orderly market. The authorities will also strengthen the supervision of inappropriate competition and fight against fragmented local protectionism. The establishment of credit systems will be accelerated, information from all sectors will be integrated to set up a ‘credit archive’ for entrepreneurs, so as to encourage integrity and punish dishonesty. Supervision mechanisms will be simple, fair, and standardized, the range of mandate of governmental management will be further clarified so that heads of enterprises in both the state and private sectors will be treated equally. All of this will help to encourage more innovation and entrepreneurship.

Third, the government should establish a close and clean relationship with entrepreneurs, where communication channels and interactions are more transparent and standardized.

In the future, competition among companies will be decided by their core competitiveness. rather than any special advantages by secret means. Relations between government and entrepreneurs will be more transparent and open. New healthy, incorruptible, open and transparent relationships will be the trend, adapted to the New Normal of China’s economy. The authorities should therefore encourage entrepreneurs to communicate with relevant departments proactively, explaining what is happening in their businesses to the governments, solving their problems through common channels, and protecting their legal rights under the rule of law.

How can we make the transition quick and clean?

The guideline has set clear goals and methods, with a specific roadmap for implementation.

The government should accelerate the transformation of government functions, delegate matters of government power, control, and public service performance, and provide high-quality and practical services to entrepreneurs. Such moves have been ongoing since 2012, with apparent positive progress. However, the restrictions on market access, government bureaucracy still exist and lead to higher costs. There are also cases of absence or improper enforcement in supervision and inspection. Therefore, interactions between government and entrepreneurs need to be stronger and more transparent.

Source: Xinhua, China Daily, Liao Wang Institute, Zhisland，www.gov.cn