How the digital economy transformed entrepreneurship in China

Lin Zhang’s new book Labor of Reinvention: Entrepreneurship in the New Chinese Digital Economy (2023, Columbia University Press) traces the myriad local entrepreneurs, often in obscure and remote rural locations, using technology to reinvent their businesses and themselves. Paul French finds out more

Whether you are a villager using e-commerce to find new and more profitable markets or a middle-class urban woman reselling luxury goods, the entrepreneurship journey is never easy – global financial crises, the US-China trade war and the Covid-19 pandemic have all taken their toll. Lin Zhang also argues that rather than being liberating, digital entrepreneurship has perhaps also reinforced traditional Chinese ideas.

Whatever the conclusion, it’s a very Chinese story – one you’ve probably seen played out on the roadsides, shopping malls and wet markets of China – but never given detailed thought to. Paul French caught up with Lin Zhang, currently an assistant professor of communication and media studies at the University of New Hampshire, to talk grassroots digital entrepreneurship.

Your book turns many assumptions about China on their head. For example, you give so many great examples of technology and the digital economy opening up small-scale entry-level entrepreneurship opportunities. You call this phenomenon ‘reinvention’. Can you explain what is going on with the ‘labour of reinvention’?

By centring on the analysis of the “entrepreneurial labour of reinvention”, I am trying to problematise not only our traditional understanding of labour and entrepreneurship but also how the global phenomenon of digitalisation of labour has usually been conceptualised. We have always considered labour and entrepreneurship as two completely different activities and identities, if not belonging to two different classes.

Echoing many scholars of flexible and digital labour, I argue that recent technological and social transformations have rendered the distinction between the two increasingly blurred. For example, most of the participants of my ethnographic fieldwork see themselves as entrepreneurs, whether they are peasants doing e-commerce or college graduates starting up their own tech ventures. But if you examine their work experiences as either based on monopoly digital platforms or being dictated (and if they get lucky, eventually bought out) by venture capitalists, you see how in reality their desire for autonomy and flexibility has been channelled to restructure and redefine labour experiences and relations.

By highlighting this broader transformation as “reinvention” while focusing on the Chinese experiences with entrepreneurial labour, I emphasise the embeddedness of this new entrepreneurial labour regime in pre-existing social relations and institutional structures. I have underlined how entrepreneurial labour practices both build on and transform the multilayer and multi-pronged roles of the state in the economy and the family-based and gendered division of labour at the foundation of the Chinese economy.

You give a wide and fascinating range of examples of ground-level entrepreneurialism – from rural villages experiencing an e-commerce boom, to middle-class women reselling luxury goods. Could you perhaps give us a few examples of these reinventions that particularly caught your attention while travelling around China?

One example of booming tech entrepreneurship in China is the Garage Café, a café-style incubator/coworking space for early-stage entrepreneurs in Beijing’s high-tech district Zhongguancun. It was founded in 2011 by a venture capital manager turned serial entrepreneur. I situated the story of the Garage Café in Zhongguancun’s history as China’s science and technology centre reaching back to the socialist 1950s. As a prototypical example of reinvention, the Garage Café emerged as one of the new generation entrepreneurial spaces modelled after successful examples in the West. The café’s later struggle to stay competitive while holding on to its founding vision of supporting “grassroots” and early-stage entrepreneurs, complicated by the local state’s involvement in promoting it as a “model mass entrepreneurship and innovation site”, is reminiscent of ZGC’s troubled socialist experiments during the years of Great Leap Forward and Cultural Revolution.

Another example is the handicraft “Taobao Village” in which I did extensive fieldwork and lived among rural entrepreneurs for months. The county in Shandong province in which the Taobao village is based boasts more than 1,000 years of history in making handicrafts out of bulrush grass. The family-based gendered division of labour evolved as the villages in the area transitioned from subsistence economy to socialist county-owned collective enterprises to post-reform export-oriented family firms. Since around 2008, the villagers have embraced the entry of digital platforms like Alibaba and Pinduoduo into the countryside.

Both stories of entrepreneurial reinvention have captured how the articulation of historical legacies and digital/high-tech disruptions has shaped entrepreneurship in China’s new digital economy.

You also talk about how the surge in digital entrepreneurialism has occurred against the backdrop of global financial crises, the US-China trade war, and the Covid-19 pandemic. How have small-scale entrepreneurs avoided these massive problems to survive?

The 2008 global recession, the trade war and the pandemic represented both crises and opportunities for these entrepreneurs. The 2008 crisis led to massive layoffs in export-oriented factories, which forced many migrant workers to return to the countryside. This large-scale return of “migrant birds” converged with e-commerce platforms’ (e.g. Alibaba, JD, and later Pinduoduo) expansion into the rural market, which contributed to the post-2008 boom in rural e-commerce and digital entrepreneurship.

The US-China trade war has created some barriers to Chinese exports to the US market. It has also destabilised mutual venture capital investment and put sanctions on many more established Chinese high-tech companies. However, the sanctions and trade barriers have also facilitated an unprecedented shift in the Chinese IT startup scene to prioritise the domestic market, indigenous innovation and Chinese (and sometimes state) capital. One Zhongguancun chip design firm founder told me jokingly: “I have to thank Trump. If not for his sanctions on Huawei and ZTE, Chinese tech companies would never have made up their minds to become more self-reliant in chips. Now they have no choice…The state had been promoting semiconductor independence for years, but the market didn’t really take it seriously; they thought the government was just crying wolf. Now the wolf has finally come.”

Whether their entrepreneurial endeavours could survive these crises depend on many factors, but one thing is for sure: they must keep reinventing themselves to brave the constantly shifting currents of economic and geopolitical uncertainties.

You suggest that though part of China’s new technological and liberal market economy, digital entrepreneurship is also reinforcing traditional Chinese ideas about state power, labour, gender and identity, as well as perhaps reinforcing traditional family and generating new inequalities. How does this happen?

Let me give an example using the case of gendered social media reselling, or daigou. Many entrepreneurs in the daigou business are transnational mobile middle-class women seeking flexibility and mobility in an alternative career. They do so to, for example, balance between motherhood and work, accompany their loved ones to study/work abroad while still generating decent income or earn some extra cash while studying or working full or part-time. I situate this popularity of female digital entrepreneurship like daigou in a broader trend towards refeminisation and retraditionalisation in Chinese society and among ethnic Chinese immigrant communities abroad. In doing so, I show how a younger generation of women, under the renewed pressure from the patriarchal society to prioritise (if not return to) the family, has turned to digital entrepreneurship to reconcile the tension between “living for others” and “living for oneself”. Ironically, the formalisation of these entrepreneurial endeavours in the past decade or so has made digital labour increasingly competitive and demanding, which ends up reinforcing these gendered dilemmas and structural gender inequalities.

We’ve seen the Chinese government become somewhat uneasy at the power and spread of domestic tech companies. What is the government’s response to the rise of grass-roots entrepreneurialism within the digital economy and how far can they regulate its growth and development?

The Chinese state has struggled with the competing demands to promote economic development, maintain equity and strive for independence and indigenous innovation since its founding in 1949. In this light, the state has been generally supportive of grassroots entrepreneurship within the digital economy as entrepreneurship helps to curb unemployment and digitalise traditional manufacturing and service industries. One of the reasons why big digital platforms (like Alibaba) have received so much support from various levels of government is because of their essential roles in driving economic restructuring and absorbing surplus labour and over-production through grassroots entrepreneurship. This state-led enthusiasm about entrepreneurship reached a new height during the peak of the “Mass Entrepreneurship and Innovation” campaign in 2015-2016 when we witnessed a surge in digital entrepreneurship of all types around the nation.

However, grassroots entrepreneurialism and the state’s attitudes towards various grassroots entrepreneurial activities also ebb and flow with shifting state priorities and macroeconomic cycles. After the 2015 stock market debacle and worsening geopolitical environment, the priority of the Chinese state had shifted more towards maintaining financial security, social stability and technological sovereignty, which was further reinforced by toughened regulation of the Big Techs, determination to reduce carbon emissions, and the protracted zero Covid policy. In this new context, some entrepreneurs, such as those in crypto currency speculation and mining, p2p finance, digital games and after-school education, faced intensified state regulation. But others, like rural e-commerce, chips, EV and biotech continue to be encouraged, if not prioritised. We also see the pendulum swing back to a less regulated environment entering 2023 as the state’s priority shifted back to boost economic development and robust GDP growth.

The problem here, as I raised in my book, is how these financialised cycles of boom and bust, intensified by the campaign-style promotion and regulation of industries, have generated excessive risks and uncertainties for entrepreneurs. The lack of protection for grassroots entrepreneurs (or entrepreneurial workers) runs contrary to the state’s mission to redress inequalities and maintain social stability. So, if we take a longer view of the evolution of state-business relations in China, we see how the party-state has continued to grapple with the development-equity-nationalism tensions and how the campaign-style regulation of business has persisted. In a way, the government is still finding a balanced approach to dealing with domestic tech firms. Small entrepreneurship, especially those mediated by big digital platforms (e.g., e-commerce, live-streaming, restaurants, ride-hailing, etc.), is inevitably impacted by macro-economic cycles and regulatory environment, but their relations with the government are also quite different from that of the Big Techs.

We’re now in a post-covid China and many restrictions are relaxed, so areas like home delivery may see a slight downturn after a peak during the lockdowns. What does the future look like for small-scale entrepreneurs in the digital economy going forward?

The overall prospects for small entrepreneurship post-covid are promising as the Party-state has prioritised boosting economic growth and employment. But we also have to be sector specific. As daily activities return to normal, businesses like restaurants, cafes and shops will likely recover to pre-pandemic levels. But sectors like live streaming e-commerce and home delivery groceries, for example, will see less online traffic and might have to readjust their business strategies. Of course, macro-economic conditions, such as weak overseas/domestic demands, high local governments debts and a bearish stock market, will also impact sales and the support/ investment that small entrepreneurs could receive.