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Venture Capitalism China style : The Communist way to Start-Up Boom

Anywhere else, an incubator like Dream Town would be a vision of venture capitalists, angel investors or technology stalwarts. But this is China.

Boris Sullivan

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The Chinese government is lavishing benefits like free rent and cash handouts on homegrown start-ups in an effort to move beyond the factory floor.

In Dream Town, a collection of boxy office buildings on the gritty edge of this historic city, one tiny company is developing a portable 3-D printer. Another takes orders for traditional Chinese massages by smartphone. They are just two of the 710 start-ups being nurtured here.

Anywhere else, an incubator like Dream Town would be a vision of venture capitalists, angel investors or technology stalwarts. But this is China. The Chinese Communist Party doesn’t trust the invisible hand of capitalism alone to encourage entrepreneurship, especially since it is a big part of the leadership’s strategy to reshape the sagging economy.

Which is why the government of Hangzhou — a former royal capital that has been a major commercial hub for more than a millennium — built Dream Town and lavishes resources on start-ups. The businesses here get a slate of benefits like subsidized rent, cash handouts and special training, all courtesy of the city.

Chemayi, which offers car repair services through a smartphone app, is staying rent-free at Dream Town for three years and is applying for as much as $450,000 in subsidies from city authorities to help pay salaries and buy equipment.

A Swell of Subsidies

After submitting a 10-page proposal in 2014 to join a Hangzhou incubator, Ai Binke sat nervously before a committee of tech industry executives who questioned his future prospects. His software company, Yun Ran Internet of Things, had only four employees, and its business deals had been small. But his start-up, Mr. Ai explained to the committee, had great potential.

That was sufficient for the judges to award him 100,000 renminbi in subsidies. The bulk, roughly 70 percent, was instantly transferred into his corporate bank account. “As long as you run projects that are encouraged by the Hangzhou government, you can get the subsidies,” said Mr. Ai, 29. “It’s not very difficult.”

Source: Venture Communism: How China Is Building a Start-Up Boom

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