Chinese business has always been a 'game for the brave' | Notes by Richard Liu

Author | Li Chengdong

Dong's Notes Episode 154:

A decade ago, I worked in the President's Office and Group Strategy Department of two major Chinese internet giants, conducting strategic research and analysis, while also dabbling in some investment work for startup projects.
To briefly describe my job, it involved meeting numerous e-commerce entrepreneurs based on the group's business development needs, obtaining first-hand industry data, analyzing the data, and then presenting it to the bosses to aid in business decision-making. Before reporting to the bosses, the most frequent challenge within the department was regarding the data. Thus, the first step to ensuring high-quality decisions was obtaining accurate first-hand information.
This applies not only to large companies but also to national decision-making. If a group of sycophants provides incorrect information, it could lead to entirely wrong policies, worsening the economy!

Many ordinary individuals with debts of hundreds of thousands feel hopeless, with families falling apart, as if they can never recover. Yet, around me, entrepreneurs who failed with debts in the millions or even billions continue to fight and start anew. It feels like no big deal—perseverance is key.

So, wouldn’t you say that for a country, outstanding entrepreneurs are even more scarce talents?

01

Entrepreneurship is never smooth sailing

 

Six years ago, I invested several million in a company, a relatively large early-stage investment at the time. Despite exhausting all efforts for three years, it ended in failure, leaving me with over a million in debt due to contract issues.

During the three years of the pandemic, I had to pivot to working for others, serving a top Xiaohongshu influencer in live-streaming e-commerce supply chain services. But it still felt like living under someone else’s roof!

Late last year, I shifted focus to cross-border e-commerce, targeting a very niche category—one my wife had tentatively explored years ago, which I encouraged her to try.

We’d touch base every month or two to discuss products, services, strategies, and adjustments, making incremental progress.

Now, monthly revenue has reached over two million, placing us at the top of this niche. Growth is steady month-over-month, profits are decent, and doubling next year seems achievable. If things go well, the earlier investment losses could still be recouped!

Around me, there are many such cases of entrepreneurs who failed but kept fighting and eventually succeeded.

The spirit of entrepreneurship: never give up.

02
In venture capital, the entrepreneur is the key factor

In an afternoon meeting, I reviewed funding progress with a project founder, who shared updates on financing and terms. I noted that this year, consumer brands securing funding are rare—it demands absolute strength and luck. And luck is part of strength!

This company operates in a fiercely competitive industry, facing formidable rivals who leave no room for newcomers’ luck.

That’s why I deeply respect this team. In venture capital, we invest in industries, but most importantly, we invest in people. If the people aren’t right, even the best industry or hand won’t succeed.

In today’s Chinese consumer market and cutthroat environment, have you figured out if you’re cut out for entrepreneurship? If you’re not holding an iron rice bowl in state-owned enterprises or as a civil servant, I suggest safeguarding your job. Don’t slack off—small Chinese bosses can’t afford idle hands. In this competitive landscape, inefficiency will doom them first.

03
How tough is it to be a Chinese entrepreneur?

Recently, I took a call from a Dolphin Research member who’d been "deep-sea fished"—a loss of over a million, not crippling but significantly impacting operations. After all, penalties must be justified, and you have to accept them. Months earlier, another Dolphin Research member faced a "deep-sea fishing" involving hundreds of millions.
Given that this is just a thousand-member consumer investment community, two cases this year alone—compared to none during the pandemic—speaks volumes about the risks entrepreneurs face. It’s brutally hard. Like crossing a single-log bridge amid an army, even if you outlast all competitors, victory isn’t guaranteed.
I mentioned recently that Chinese merchants have historically held low status and need power. Some retorted, "What privileges do they want? To lord over the people?" No—private business owners just seek basic rights: protection of private property and due process. When local finances tighten, you can’t have departments meeting KPIs by preying on businesses. It’s just too hard.

A close friend, formerly in the State Council, noted that even there, talent is abundant—not just for climbing to director-level but also for diverse life aspirations. He left years ago.
The "deep-sea fishing" issue is unsolvable amid local fiscal strains. Those wielding power won’t starve quietly when resources run low.
Why are merchants powerless? They can’t rob the public or provoke foreigners—private enterprises are the easiest targets. Locals first, then outsiders. So don’t claim merchants have status or property rights.
That’s why a recent national policy is critical: issuing 6 trillion in special bonds to address local debt. Previously, the stance was "solve your own problems," forcing local governments to improvise, worsening the post-pandemic business environment.

04
East vs. West in business: compare and reflect

Overseas, Chinese lack unity, struggle with hierarchy, and focus solely on grinding, while backbiting lets smooth-talking Indians dominate. Don’t mock Indians for shamelessly currying favor or nepotism—learn from it.

Chinese should ask: What can we adopt? Common sense says even domestically, low EQ bars you from management.

Conversely, Indians’ fertility, unity, and hunger for better lives abroad make them China’s global rivals. I’m bearish on India, but its diaspora will challenge us worldwide.

05
If you’re nobility, don’t stay provincial

A dragon in shallow water is teased by shrimp; a tiger on flatland is bullied by dogs.

A triumphant cat outswaggers a tiger; a plucked phoenix ranks below a chicken.

Over tea, a feng shui master heard a woman’s story: from a small town to the city, she bought a home and started a company despite her parents’ wish for her to stay.

The master reframed an adage: "A fallen phoenix is worse than a chicken; a tiger on flatland is bullied by dogs." Leaving was right.

He reinterpreted it: Destinies differ. Nobles shouldn’t stay small, lest they’re stifled and preyed on by petty minds. Aim high? Seek bigger ponds.

For the ambitious, a larger stage avoids small-town politics. As the saying goes, "The ocean lets fish leap; the sky lets birds soar."

06
Fit is best

No strategy fits all. Is "imitate then surpass" universally friendly? Does every industry need disruptive innovation? Not necessarily. Only strategies tailored to an industry’s needs succeed.