Micro Business in China

by | Apr 27, 2011 | General

Dan’s Travels – Part II

Ray Yang runs his travel agency out of a 10 by 15 office with two desks and a couple of laptops. When I walked in with my guide Rocky, there were four guys sitting around a coffee table smoking and playing cards—but I’ll get back to them later.

Ray graduated from university with a degree in tourism and worked for a large travel business before starting his own company two years ago. He paid $50,000 Yuan ($7,600) for a franchise from Easytour, which gives him a website and some marketing materials. He pays them a fixed monthly fee.

There’s nothing fancy about Ray’s business—his average customer makes about $11,000 per year and spends less than $800 on travel. His latest deal was a group of twenty flying to Taiwan for a week of touring on a bus — $1,195 each including air, hotels, and meals. Ray isn’t getting rich, but he’s doing better than when he worked for someone else.

Why do we care about Ray and his tiny little business? We think the ease of starting a business is important in gauging the reality of economic growth. If it’s harder to start from scratch there will be less competition for established businesses and less innovation will be the result.

We also want to understand how people near the bottom of the economy feel about the system and their chances to succeed. Here’s the deal offered by the Chinese government to it’s citizens: You can’t vote, but in return we will not tax your income and we will not make it particularly hard for you to start your own business. You are free to do well economically, but don’t ask too many questions.

At some point in the future guys like Ray will have enough wealth that they will start thinking more about politics, but that day is far off in China. For now economic freedom is more important to him than the other freedoms we take for granted.

So who were the four guys playing cards? I thought a couple were employees, but they were just friends from the area hanging out rather than making sales calls. Ray assured me that his two employees were out trying to get business for him. I wondered if maybe they were playing cards somewhere else.

Best regards,

Daniel A. Ogden

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