Chinese firms can learn from co-ethnic US counterparts

The experience of Chinese-American firms in the US can provide insights on strategies to grow small businesses in China.

Chinese-American companies, like other minority firms in the US, face considerable barriers to success, yet they are a vibrant entrepreneurial presence all across the country.

According to the latest government data available - the Survey of Business Owners - there are about 500,000 Chinese-American firms with annual sales of $142 billion. To get an idea of the comparative sense of the value of these Chinese-American firms, a recent WPP report estimated the value of the top 100 Chinese brands in China to be $379 billion.

There were also close to 145,000 female-run Chinese-American firms with sales of $26 billion and an annual payroll of $4.2 billion.

In total, Chinese-American firms employed 782,738 people and had an annual payroll of $21 billion. The growth of these firms both in number and sales was much higher than that of all the businesses in the US.

One usually associates Chinese-American businesses in the US with the all too familiar "Chinese Restaurant" in big cities or small towns across the country. However, the figures show that the top sector for these firms was in the professional, scientific and technical services area with 16.4 percent of the firms in that sector and $9 billion in sales.

The second-largest presence was in the accommodation and food services sector with 12.7 percent of the firms in that sector and $18 billion in sales.

There also have been a number of recent high-profile reports that document the strong presence of immigrants from China in the high-tech sectors of the US.

The sector with the largest revenue was wholesale trade with sales of $54 billion.

While Chinese-American firms can be found in nearly every state in the US, the top five states, accounting for most of these firms, are California, New York, Texas, New Jersey and Hawaii. California accounted for almost 40 percent of Chinese-American firms in the country and 48 percent of revenue.

For historical reasons, Chinese-American firms concentrated in certain sections of some large cities that became what is popularly called Chinatown. Recent research helps us get a sense of the economies of these Chinatowns. The Asian American Federation in New York estimated recently that there were more than 6,000 firms owned by Chinese Americans in New York's Chinatown in 2008. Deposits in banks operating in the area were estimated to be $6.8 billion in 2005.

Chinatown, San Francisco, is smaller than the one in New York. According to the city of San Francisco, Chinese-American firms there paid an estimated $120 million in sales tax in 2008.

The experience of Chinese-American firms in the US points to the fact that entrepreneurship is a core element of the Chinese DNA. All over the world, the Chinese diaspora displays this characteristic. Small businesses could flourish in China and become a potent engine of economic growth.

From the experience of Chinese-American and other minority firms and as documented in the research of Robert Fairlie and others, we find that the critical factors for business success are: availability of startup capital; educational levels; work experience in running a business; and political and cultural factors.

Reports on Chinatowns in New York and San Francisco suggested some other areas that are also important for success; such as: movement from price competition to quality, service and uniqueness; improving customer service; focus on market demand; developing business and trade associations; cultural heritage tourism; and technical assistance to help firms perform better.

As China helps its small businesses thrive and nurtures entrepreneurship, the experience of Chinese-American firms can provide a glimpse of both the possibilities as well as the infrastructure necessary for small businesses to grow. Chinese-American entrepreneurs could also be tapped to become mentors to entrepreneurs in China.

Bruce Corrie is an economist with expertise in minority business development in the US. He is associate vice-president at Concordia University-St. Paul, Minnesota. Zhang Xiuping is vice-dean of the department of management at Minzu University of China in Beijing.