The evolution and transformation of youth entrepreneurship in China: a sociological analysis

Deriugin Pavel Petrovich ORCID: 0000-0002-5380-8498 Doctor of Sociology Professor, Department of Applied Sociology, St. Petersburg State University 194354, Russia, Saint Petersburg, ul. Artists Ave., 15, k-1, office 456 ppd333@rambler.ru Other publications by this author     Cimtikov Zhomart Kudaibergenovich ORCID: 0000-0003-0770-488X Doctor of Politics Professor, Department of Political Science and Social and Philosophical Disciplines, Abaya Kazakh National Pedagogical University 050000, Kazakhstan, Alma-Ata, Dostyk str., 13 zhomart-67@mail.ru Other publications by this author     Chzhao Tsze ORCID: 0009-0005-2358-1244 Postgraduate student, Department of Applied and Industrial Sociology, St. Petersburg State University 191124, Russia, Saint Petersburg, Smolny str., 15, k-1d. 1/3, 9th entrance evazhao0726@gmail.com

Lebedintsev Daniil Aleksandrovich Graduate student, Higher School of Innovative Business, Moscow State University. M.V. Lomonosov 1/3 Smolny Street, Saint Petersburg, 191124, Russia daniil.al1997@gmail.com

Introduction. Modern youth entrepreneurship in China is a rapidly developing social institution (See, Mariotti S. Youth entrepreneurship is growing in China. https://www.huffpost.com/entry/youth-entrepreneurship-gr_b_1211007 (accessed 02/03/2024), which plays an increasingly important role in achieving economic growth, developing innovation and expanding opportunities to use the entrepreneurial potential of young people ^[1]. According to the international bank HSBC, young Chinese entrepreneurs make up 45% of the total composition of the social group of Chinese entrepreneurs. This figure is significantly higher than in other countries (See the Report on the Development of Youth Entrepreneurship in China (2021) http://www.yee.org.cn/qywtzgg/202202/P020220217617539224221.pdf (Date of application - 07/06/2022).

The scientific relevance of the research lies not only in the little-studied topic, but also in the lack of research revealing the basic patterns of sociodynamics of formation and features of values of youth entrepreneurship in China, strategies and technologies of its formation and development.

As shown in a number of studies, in the context of a rapidly growing economy and a significant increase in the number of university and college graduates, the Chinese government encourages new forms of entrepreneurial activity among young people, which are becoming an important resource of China's new economic strategy in the modern world ^[2]. In this regard, the study of complex social relationships between the historical features of traditional upbringing and education of young people in Chinese society and modern government programs for the development of youth entrepreneurship based on economic initiative and social activity of young people is not only of significant practical interest, but also a certain scientific problem ^{[3, 46]}.

The Evolution of Youth Entrepreneurship in China: a socio-historical review

The formation of youth entrepreneurship in China has gone through a number of evolutions and stages, qualitatively differing in features, recognition of the role and importance in the life of China ^{[4, 146]}. Researchers of youth entrepreneurship in China note that the stages of its formation are actually determined by institutional socio-historical factors of entrepreneurship development in China as a whole ^[5]:

Stage 1: Youth entrepreneurship in the transition from subsistence farming to a planned economy (1945-1950).

Within this stage, youth entrepreneurship was mainly spontaneous, non-institutional in nature and manifested itself as facts of entrepreneurial activity of individual individuals. During this period, enterprising youth, at best, had the right to act proactively only as part of rural communes, to function exclusively in the patterns of traditional forms of labor organization, and often such activity was forced in relation to the younger generation ^[6].  The vast majority of enterprising young people could not go beyond the activities of the commune. Such a patriarchal way of life was the result of a long peculiar history of China, riots and wars that influenced the socio-economic image and level of development of Chinese society in the middle of the twentieth century. The situation was complicated by poorly developed transport and communication systems, lagging economic development and currency depreciation ^{[7, 142]}.

With the transition to a planned economy, state production and marketing plans were introduced, which led to the creation of government-controlled markets. In the early 1950s, the new government successfully contained inflation, made efforts to revive the economy and restore industrial systems damaged during the war. The share of industry in national income was no more than 10%. Two thirds of industrial production is concentrated in the Shanghai area and in Northeast China. The industrial structure was dominated by textile and food production. The general state of production and agriculture formed the main strategies for youth participation in economic life.

During this period, an economic policy is being built, within the framework of which the development of entrepreneurship is allowed.  At the same time, the meaning of the new economic policy was to ensure the functioning of the private sector of industry and trade in strict accordance with state production and marketing plans. A similar strategy has been implemented in agriculture. A state-controlled grain market has been established in rural areas, allowing farmers to sell surplus produce at market prices. In general, the Government sought to create an integrated management system focused on ensuring equality between economic units, providing basic guarantees for human survival, including youth. Collective interests were proclaimed as values that stand above any individual aspirations, regardless of gender, occupation or age, which limited the likelihood of self-employment of young people and any individual work of young people outside of collective efforts ^[8].

As a result of the efforts made, a socio-political environment has been formed to curb entrepreneurship, including among initiative youth. The entrepreneurial activity of young people was extremely limited and did not imply a specific state strategy – support and development. As before, at best these were small initiatives of individual young people within the framework of peasant communities and such initiatives were aimed mainly at solving food problems and overcoming hunger.

Stage 2: Transition to an industrial society (1951-1966): centralization of the economy and increased political activity of young people

The policy based on the development of numerous peasant communes proved unsuccessful. In 1958, the transition to the intensive development of the industrial economy began, the policy of the "Big Leap". During this period, there was an influx of technical specialists: the invitation of technical experts, mass training and retraining of industrial workers, as well as the adoption of Soviet models of industrialization ^{[9, 140]}. The first five-year plan (1953-1957), which focused on industrial development, is being developed and implemented. Collectivization of the socialist type is taking place with an emphasis on economic growth and financing of industrialization. Government policy has increasingly focused on stimulating economic growth based on the socialization of production and the centralization of management. China began to imitate the economic model of the Soviet Union, taking into account the specific Chinese characteristics. Thus, the Government has begun the macroeconomic mobilization of young people for large-scale industrial events with an emphasis on collective will. This policy has led to the formation of a unified and homogeneous social structure with centralized management and without taking into account any age differences.

During this period, a controlled social environment is developing in Chinese society, where youth entrepreneurship and initiative still have no place. The widespread use of centralized management leads to restrictions on the space for entrepreneurial, professional and social activities of young people ^{[10, 103]}.

But it was not only the centralized strategy of economic development of Chinese society that limited the role and importance of youth entrepreneurship. In 1966, the Cultural Revolution began. The main goals were political in nature, and the youth in the perspective of the Cultural Revolution is considered as the main active revolutionary force ^{[11, 265]}. There is a growing awareness of the role of youth education, the destruction of traditional culture and the persecution of dissent. The economic importance of youth entrepreneurship is still underestimated. Naturally, in such a socio–political situation, any initiative and attempts to demonstrate personal economic activity of young people were impossible ^{[12, 146]}. This was reflected not only at the level of practical activity, but also in relation to the scientific initiative of young people. It is worth noting, for example, that during this period sociology, as a science, and young sociologists began to be criticized, due to accusations that their research was aimed at reducing the degree of class struggle ^[13].

Such a socialist model of youth mobilization, where it was considered primarily as a political force, at the same time implied its limited importance in the economic sphere ^[14]. As practice has shown, such a strategy also proved unsuccessful for the development of youth entrepreneurship: the elimination of private property and the restriction of market relations practically suppressed the entrepreneurial activity of young people.

Stage 3: Transition to an open society (1967-1978): Constitutional changes in the understanding of the political role of youth in society

At the initial stages of the present period, the current model of power assumed the active use of the power of young Red Guards to exacerbate the class struggle in Chinese society within the framework of the Cultural Revolution and the destruction of traditional Chinese culture, the persecution of intellectuals. During this period, individual and private farms, including youth entrepreneurial initiatives, faced harsh and fierce criticism and restrictions. The consequences of the Cultural Revolution rightly include the destruction of the four basic foundations of traditional Chinese society: ideas, culture, customs and habits.

At the same time, after 1975, the stratification of Chinese society took shape and the formation of social strata of society based on political identity and commitment to revolutionary values took place.  Constitutional changes were introduced, which significantly limited the freedoms and independence of that part of the Chinese youth who did not show a certain political activity ^[15]. Those young people who were inclined to join the official elite (ganbah) were encouraged, but this did not imply any entrepreneurial initiative of young people in the economy.

By the time the Cultural Revolution ended, attitudes towards youth issues had changed somewhat. In particular, the focus on the formation of a democratic socialist state in China suggested considering the role of youth in a different way. The state increased its efforts to study the processes in the youth environment, including the analysis of its participation in the economy and entrepreneurship ^[16]. In general, it can be stated that the era after the Cultural Revolution laid the foundation for recognizing the role of market foundations and youth entrepreneurship in the subsequent stages of China's development.

Stage 4: Transition to a legal society: "Four modernizations" (after 1978), which give impetus to youth entrepreneurship

In 1978, the Government of the People's Republic of China recognized the importance of individual entrepreneurship as an addition to socialist public ownership, including measures for the development of entrepreneurship among young people. Deng Xiaoping played a crucial role in recognizing the importance of private enterprises and creating a legal platform for their development. The new legal status of entrepreneurs has allowed the private sector to revive and stimulate the participation of young people in entrepreneurial activities ^[17]. The Government has made reasonable conclusions about the role of small, including youth, businesses, which has led to the revival of entrepreneurship.

Nationwide trends in entrepreneurial growth and market transformations have positively changed the perception of youth entrepreneurship. Young entrepreneurs began to form as relatively independent structures in urban and rural areas (see, GUIHEUX G. [Rec.] // Perspectives chinoises. – Hong Kong, 2008. – N 2. – pp. 118-120. – Rec. ad. op.: Carolyn L. Hsu. Creating market socialism: how ordinary people are shaping class and status in China. – Durham); Initially, small and inefficient youth business enterprises appeared, engaged in simple business areas such as street vendors and market stalls, small retail, catering services, handicrafts, etc. This period was marked by a group of comprehensive the reforms called the "Four Modernizations". They were initiated by the Chinese leadership in the late 1970s, in particular, after the Third Plenary Meeting of the 11th Central Committee of the Communist Party of China (CPC) in December 1978. These reforms have become an important part of the efforts to restructure and modernize the Chinese economy, aimed at transforming various sectors of the country's economy and society ^{[18, 7]}.

The four key areas of the economy that modernization was aimed at, where young resources were needed, were:

1.                 Modernization of agriculture, which assumed a more active reliance on young people, ensuring a transition from traditional, labor-intensive farming methods to more mechanized and efficient approaches. The goal was to modernize China's agricultural sector by introducing new technologies, improving farming methods and increasing productivity, which required the active involvement of young people.

2.                 Industrial modernization also involved the involvement of young people in the development of advanced technologies aimed at developing new industries and increasing the overall efficiency of industry. The development of this area of the economy involved the modernization of China's industrial base and the training of engineers, mainly from among the youth.

3.                 The modernization of the national defense assumed the strengthening of the country's armed forces with numerous human resources from among young people, through technological advances, strategic planning and organizational reforms. This component was aimed at modernizing China's defense capabilities.

4.                 Modernization of science and technology. The Chinese leadership recognized the significant role of young people in the development of science and technology in stimulating economic growth and global competitiveness. The main focus here was on the promotion of new scientific research, technological innovations and education systems ^[19].

It is worth noting that the development of business behavior of young people was significantly influenced by factors such as region of residence, ethnic origin, migrant status, marital status, etc. In addition, Chinese youth were particularly influenced by the values of pragmatism and rationality. Thus, Chinese sociologist L. Lin ^[20] identified four stages of the formation of values of modern Chinese youth, which are considered by the author as a consistent change of phases of the "ideological" (formation of the socialist identity of youth); "radical" phase" (criticism of the values of Western culture and at the same time recognition by youth of the value of a good life); "analytical and critical" phase (critical analysis of Western values and disappointment with these values); the phase of "change and innovation (1990)" recognition by Chinese youth of the important role of individual initiative and creativity, respect and preservation of national values.

Towards the end of the 1990s and the beginning of the 2000s, the state began to make significant efforts to study and understand the processes taking place in the youth environment, including the analysis of youth participation in the economy and entrepreneurship. The Government's recognition of youth entrepreneurship as a significant social process marked a shift in awareness of the potential contribution of young entrepreneurs to the development of Chinese society.

Thus, the qualitative characteristics shown in changing the role of youth entrepreneurship in China at various stages of the development of Chinese society mark significant shifts in the perception of market transformations as a decisive factor in the formation of a social stratum of young entrepreneurs. This was facilitated not only by the significant economic achievements of the country, but also by the stratification of society based on different understandings and different approaches to entrepreneurship. The dominance of socialist values and their subsequent impact on youth entrepreneurship, combined with stimulating government decisions, have shaped the landscape of modern youth entrepreneurship in China and its specific values.

Among the main features of the development of modern youth entrepreneurship in China, researchers identify the following trends:

1. The significant role of youth entrepreneurship in China in reducing youth unemployment. Youth employment for China is not just a financial issue, employment is crucial for the future socio-economic condition of the country. The slowdown in economic growth has significantly affected young workers, manifested in a high youth unemployment rate of 21.3% as of June 2023 ^[21]. The constantly changing economic landscape requires a continuous detailed study of the potential of entrepreneurial initiatives of Chinese youth as a means of reducing unemployment.

2. The growing number of applicants to higher education institutions in China is changing the trajectories of youth entrepreneurship. As of 2019, China has reached a milestone when the total enrollment rate exceeded 50%, which marked the "universalization" of higher education. However, problems have arisen in the field of employment of a growing number of college graduates. Despite a record 11.58 million college graduates in 2023, there is also a historically high unemployment rate among Chinese youth. Without the development of new areas of youth entrepreneurship based on higher education, there is a danger of a new level of youth unemployment.

3.            Youth entrepreneurship is becoming more and more "regional". Regional differences show that the preference for employment in their hometown after studying in a large city is more pronounced in the eastern regions, amounting to 59%, compared with a relatively lower 24% in the northeastern regions. The decision to work locally is largely dictated by practical considerations that emphasize the critical importance of creating a supportive environment for talent in their hometowns to retain and attract a younger workforce (See, Du Qiongfang Authorities to launch a 4-month campaign to boost youth entrepreneurship// Global Times 08/09/2023 URL: https://www.globaltimes.cn/page/202308/1295932.shtml (Accessed at 10.12.2023)

4. Multifaceted government support and encouragement of entrepreneurship among college graduates and young entrepreneurs. Within the framework of the developed programs, it is planned to organize incubation bases for the development of resources that meet the needs of entrepreneurs; conduct events to expand channels linking investment and financial services with entrepreneurial projects; conduct trainings to provide practical experience to young entrepreneurs, lectures on entrepreneurship; provide talent recruitment services and implement a policy of subsidizing and lending to startups. This policy implies the creation of a more favorable environment for young people, allowing them to master entrepreneurial enterprises without excessive academic pressure ^{[22, 149]}. Since the late 1990s, the Chinese Central Government has been pursuing a policy aimed at encouraging college students and graduates to actively participate in entrepreneurial activities. This push intensified with the introduction of the policy of "mass entrepreneurship and innovation" in 2015, which corresponds to the "new normal" of the Chinese economy ^{[23, 68]}.

4.                 Encouraging young people to participate in innovative and entrepreneurial activities. In particular, a Chinese youth competition is held annually in Wuhan, the capital of Hubei Province, aimed at encouraging innovation and entrepreneurship among the country's youth in the digital space ^[24]. With more than 5,000 projects presented in the latest edition and the participation of more than 500 experts, entrepreneurship mentors, investors and representatives of youth entrepreneurial organizations, the competition is evidence of a dynamic ecosystem supporting young innovators. Since its foundation in 2014, more than 2.15 million people have participated in it. The competition is recognized as one of the most influential platforms stimulating youth innovation in China (China Youth Innovation and Entrepreneurship Competition launched in Wuhan//Wuhan Huangpi District People's Government 08/28/2023 URL: https://www.huangpi.gov.cn/English/MediaCenter/WuhanNews/202308/t20230828_2254231.shtml (Accessed at 10.12.2023)

5. Simplified taxation. small organizations. The standard rate is 25%, which is higher than the OECD average. However, there are special provisions for small and medium-sized enterprises reflecting the desire to stimulate their growth; a reduced VAT rate (SMEs with annual sales exceeding the initial threshold, but below industry restrictions, have reduced VAT obligations of 3%) ^{[25, 47]}. In addition, preferential tax treatment for persons with income below 1 million yuan; small taxpayers with monthly sales of less than 100,000 yuan are exempt from VAT; small taxpayers subject to VAT at a rate of 3% can enjoy a preferential rate of 1% from January 1, 2023 to December 31, 2027; enterprises, those who are individually owned can benefit from a 50% discount on VAT payable in respect of a portion of taxable income not exceeding 2 million yuan until December 31, 2027. In general, such a policy is aimed at easing the financial burden and supporting the growth of small and micro firms (See, Z., Zhou Q. China's Tax Incentives for Small Businesses (Updated)// China Briefing 08/14/2023 URL: https://www.china-briefing.com/news/chinas-tax-incentives-for-small-businesses / (Accessed at 10.01.2024)

6. The Special Bureau for Internal Affairs and Youth Affairs and the Commission for the Development of Youth Entrepreneurship. In accordance with the Youth Development Plan from the end of 2022, activities are being carried out aimed at expanding mainland and international internship and exchange programs, fostering entrepreneurial spirit among young people (Home and Youth Affairs Bureau launches new round of Funding Scheme for Youth Internship in the Mainland// HKT 10/18/2023 URL:  https://www.info.gov.hk/gia/general/202310/18/P2023101800547.htm (Accessed at 12/10/2023) The China International Youth Exchange Center (CIYEC), founded in 2004, plays a key role in international youth exchange and cooperation. The recent launch of the Chinese-Russian Nanjing Base Youth Business Incubator exchange project is a testament to China's commitment to providing resources and political support to youth entrepreneurship. This initiative, sponsored by the China International Youth Exchange Center (CIYEC) and the Russian Ministry of Education and Science, is an example of a growing trend in international cooperation to empower young entrepreneurs. Upcoming CIYEC events, such as the China-ASEAN Young Entrepreneurs Economic and Trade Cooperation Fair and the International Silk Road Forum in Liangma, underscore China's commitment to strengthening global youth entrepreneurship ties (See, China International Youth Exchange Center// China Daily 03/15/2021 URL: http://en.ciyec.org.cn/2021/03/15/c_157343.htm (Accessed at 10.12.2023)

7.                 The inclusion of youth entrepreneurship in the International Alliance of Young Entrepreneurs Associations (IAYEA) in partnership with global associations of youth entrepreneurs. The purpose of the alliance is to provide policy advice, promote practical cooperation and support youth incubation projects around the world. International cooperation, incubator programs and forums create an ecosystem that nurtures creativity, promotes exchange and contributes to the creation of a global community with shared opportunities for young entrepreneurs (See, China to Set up Global Alliance for Young Entrepreneurs// ChinAfrica 12.21.2022 URL: http://www.chinafrica.cn/Homepage/202212/t20221221_800316522.html (Accessed at 10.01.2024)

8.                 Measures to ensure the survival of youth startups.  It should be noted that the high level of entrepreneurial intentions, during the transition to real entrepreneurship, is relatively low, the survival rate is not high, it is 53.62%, which indicates problems in maintaining entrepreneurial endeavors. The fear of failure, the desire for stability, and the impact of parental expectations affect the landscape of Chinese startups. There is a widespread cultural fear of failure in Chinese society based on an emphasis on academic and professional success ^[26]. Young entrepreneurs may be reluctant to take significant risks due to the potential stigma associated with failure affecting their personal and social standing. The preference for a stable job may deter people from engaging in entrepreneurship, as it is perceived as a more risky career path (See, Fu H. The Evolution of China's Entrepreneurship and Innovation Ecosystem // Fund Financing 10.08.2018 URL: https://www.linkedin.com/pulse/evolution-chinas-entrepreneurship-innovation-ecosystem-hang-fu-%E4%BB%98%E8%88%AA- (Accessed at  10.01.2024)

Conclusion

As Russian researchers emphasize, in Chinese culture, the attitude towards entrepreneurship was more stable and positive. The basis of entrepreneurship is rationality, pragmatism, and respect for social hierarchy ^{[27, 250]}.

To a large extent, this conclusion is relevant for youth entrepreneurship in China. The results of this study also confirm the validity of this conclusion: the relationship between historical transformations, educational structures, government initiatives and youth entrepreneurship is the real basis of the national economic strategy for young entrepreneurs. The key features of the formation of youth entrepreneurship in China include:the relatively late emergence of youth entrepreneurship in the process of socio-economic transformations; the decisive role of state policy in the formation of youth entrepreneurship; the importance of youth entrepreneurship as a means of solving problems of youth unemployment; significant links of youth entrepreneurship with the processes of economic modernization and urbanization; harmonization of the values of socialist management and the principles of market economy, which had a predominant influence on the attitude of young entrepreneurs to his goals and ways of doing business.

The developing nature of youth entrepreneurship in China reflects not only economic shifts, but also complex socio-cultural dynamics influenced by global events, ideologies and changes in society. The current state shows the dynamic interaction of the individual aspirations of young entrepreneurs, public policy and global influences shaping the entrepreneurial spirit of Chinese youth. Government initiatives, international cooperation and education reforms demonstrate a multifaceted approach to the development of youth entrepreneurship. The constant attention of scientists and the promptness of policy are crucial for understanding the complex interaction of factors shaping the entrepreneurial behavior of Chinese youth.

Funding: the research was carried out at the expense of a grant from the Russian Science Foundation No. 24-28-01448 https://rscf.ru/project/24-28-01448/

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