Aug 21 2007
Entreprenuership: The Fourth Powerful Factor of Production
Published by Michelle Close at 7:47 am under
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WikipediaEntrepreneurs From China Flourish in Africa- New York Time, August 18, 2007
One of my AP students recently asked me to explain why entrepreneurship was considered one of the four factors of production by economists. He questioned the nature of this “fourth factor of production” because unlike the other types of resources it was less obvious to him how this resource fit into the product market. In the product market, good and services are paid for directly by consumers. but how did entrepreneurs play a direct role in this market.
Part of the problem is that entrepreneurs truly belong in the factor market, a market that students new to economics are less acquainted with and one that both AP and IB students will be learning about this semester. Entrepreneurs are the “behind the scene” people. They are the “big ideas” people. They visionaries in business who figure out how to utilize all the other factors of production in order to make a good or service that will result in a profit.
I found the above New York times article about Chinese Entrepreneurs who have “taken the big risk” of moving to Africa in search of a better life and good profits extremely interesting. Chinese entrepreneur are moving into new territories in order to seek their fortunes, in places that many others have not dared to go before them because of a fear of violence, a fear of unfriendly governments or a fear of people. These are places where poverty and opportunity are rampant. Mr.Yang, an entrepreneur from the Fujian Province in China is a true risk taker and can teach all economics students about the meaning of entrepreneurship: the good, the bad and the ugly.
What set him apart was his destination. Instead of the traditional adopted homelands like the United States and Europe, where Fujian people have settled by the hundreds of thousands, he chose this small, landlocked country in southern Africa.
“Before I left China,†said Mr. Yang, now 25, “I thought Africa was all one big desert.†So he figured that ice cream would be in high demand, and with money pooled from relatives and friends, he created his own factory at the edge of Lilongwe, Malawi’s capital. The climate is in fact subtropical, but that has not stopped his ice cream company from becoming the country’s biggest.
Stories like this have become legion across Africa in the past five years or so, as hundreds of thousands of Chinese have discovered the continent, setting off to do business in a part of the world that had been terra incognita. The Xinhua News Agency recently estimated that at least 750,000 Chinese were working or living for
extended periods on the continent, a reflection of deepening economic ties between China and Africa that reached $55 billion in trade in 2006, compared with less than $10 million a generation earlier.
Today, in many of the countries where the new Chinese emigrants have settled, like Chad, Chinese-owned pharmacies, massage parlors and restaurants serving a variety of regional Chinese cuisines can be found; the Western presence, once dominant, has steadily dwindled, and essentially consists nowadays of relief experts working international agencies or oil workers, living behind high walls in heavily guarded enclaves.
At first, this new Chinese exodus was driven largely by word of mouth, as pioneers like Mr. Yang relayed news back home of abundant opportunities in a part of the world where many economies lie undeveloped or in ruins, and where even in the richer countries many things taken for granted in the developed world await builders and investors.
Conditions like these often deter Western investors, but for many budding Chinese entrepreneurs, Africa’s emerging economies are inviting precisely because they seem small and accessible. Competition is often weak or nonexistent, and for African customers, the low price of many Chinese goods and services make them more affordable than their Western counterparts.
Not everything that these entrepreneurs have touched is pretty. Some locals have come to resent Chinese entrepreneurs and accuse them of entering local markets where local business owners can not compete with such low prices.
Africans view the influx of Chinese with a mix of anticipation and dread. Business leaders in Chad, a central African nation with deepening oil ties to China, are bracing for what they suspect will be an army of Chinese workers and investors.
“We expect a large influx of at least 40,000 Chinese in the coming years,†said Renaud Dinguemnaial, director of Chad’s Chamber of Commerce. “This massive arrival could be a plus for the economy, but we are also worried. When they arrive, will they bring their own workers, stay in their own houses, send all their money home?â€
In Zambia, where anti-Chinese sentiment has been building for several years, merchants at the central market in Lusaka, the capital, said that if Chinese people wanted to come to Africa, they should come as investors, building factories, not as petty traders who compete for already scarce customers for bottom-dollar items like flip-flops and T-shirts.
“The Chinese claim to come here as investors, but they are trading just like us,†said Dorothy Mainga, who sells knockoff Puma sneakers and Harley Davidson T-shirts in the Kamwala Market in Lusaka. “They are selling the same things we are selling at cheap prices. We pay duty and tax, but they use their connections to avoid paying tax.â€
Whatever becomes of official Chinese-African economic ties, entrepreneurs like Mr. Yang will continue to take a leap of faith in the name of profit. He sounds like one “smart cookie” who as learned how to be a successful entrepreneur in Africa
After nearly seven years in Malawi, Yang Jie, the ice cream maker, seems to have learned better. Greeting his workers at the ice cream factory, he begins the day by asking, “How did you sleep last night?â€
One quickly replied, “Very well,†sounding a bit formal.
“Don’t tell me a lie,†Mr. Yang answered with a sly, friendly smile. “It’s O.K. to tell me your worries.â€
Be sure to check out the slide show in the article.
About the author: Michelle Close teaches AP Economics and IB Economics the Shanghai American School where she is also the CAS coordinator for the IB program. Michelle has taught in a wide variety of school settings for the last twenty years and truly values teaching, living and traveling abroad.
Michelle has been living in Shanghai with her husband Kevin and two children, Maya and Cooper since 2006 and she previously taught at the Columbus School in Medellin, Colombia. She calls Boston and The Bay Area her home away from home. Related posts:
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I didn’t realise that the chinese market has extended to areas like Africa! Although it was reasonable to find a few in San Francisco, I hadn’t known that Africa also experienced an influx of Chinese entrepreneurs.
It is easy to understand the worries of the Africans. As it is, Africa’s economy is not flourishing and the possibility that the Chinese will intervene with their economy is probably not welcomed. I think it’s sensible to expect Chinese immigrants to “come as investors”, instead of them swindling money from the locals.
I’m not particularily surprised that the Chinese have extended to Africa, we’re opportunists by breed (only valueing family, longevity and prosperity), but never at such large numbers!
But I think it’s a good thing for both Africa and China, but only if the Chinese do employ African workers and not only their own kind (which is understandable, we’re more familiar with our own kind, we know more about them). At the very least, new people bring new innovative ideas and sometimes change is good for everyone, Chinese entrepreneurs with foreign ideas might be just what the African economy needs.
Even though there will always be hostilities, that can’t be helped, if you tried to make everyone happy, you’d end up with everyone unhappy.
Wow. Chinese people really are everywhere.
I think that the Chinese people are going to mess Africa up, and the fact that Africans already feel resentment towards Chinese just makes me feel more disinclined to go to Africa, lest I be mistaken for a petty merchant and be killed or worse, kidnapped to be some slave, sifting for diamonds everyday.
Anyways, I think that if Chinese people want to continue to thrive in Africa that they should not only make money there by selling cheap goods, but also show publicly that they are putting a portion of their profits into investments for industry that would hire Africans.
This would imply that there would be a period of greater marginal cost than marginal benefit for Africans, but the idea of stirring up a economically stagnant region and then investing in utilities for greater economic development would be beneficial to all the nations in Africa.
It’s amazing the innovative ideas that entrepreneurs can come up with. Truly, it is an overlooked aspect of Economics and even though it is pool is “unlimited”, each unique idea can only come from the right entrepreneur. Opening an ice cream factory in Africa doesn’t seem too farfetched, but doubtfully few would either think of the idea or accept the conquest. The idea was just great when I read it, and the best part was, anybody could have come up with that, but only Mr. Yang had the idea and pursued it to the end.
Taking chances isn’t for everyone, but to the successful entrepreneur its a for-sure road to the cash.
I’m actually quite surprised that Chinese have spread all the way to Africa. I’ve always thought that since China’s economy is developing so fast, that most Chinese would stay put in China, or at least go to already-developed countries, such as the USA or Europe, or Korea. But this article goes to show the extent that economy has impacted people’s lives. Decades ago, I really doubt that Americans would come live in China. Similarly, I don’t think the Chinese even thought of going to a place like Africa.
Chinese presence in Africa may have a negative effect on Africa’s economy. Like stated in the article, the Chinese seem to be “investing” but most of them are trading, just like the local Africans. Most African nations are not wealthy, and they depend on the flock of tourists to survive. With the Chinese present, they are basically “stealing” their profit. If this continues on, I think that there will be a great impact to the lesser-developed nation’s economies.
There was once a documentary series in Hong Kong that was about the Chinese people in different countries of the world. There was this one thing this show said that really made an impression on me. It was – “you can find at least one Chinese person in every country of the world”. I was little then and didn’t really realize the significance of this statement, but what I thought was really awesome back then was that they even found Chinese people living, not visiting, in the middle of the Sahara desert and even countries like Czechoslovakia.
Now, with this article, I see the true significance of that fact. It cannot be only contributed to the large population of the Chinese, but a large part of the reason can be traced to the drive of the Chinese people to seek opportunity and their ability to find that opportunity and use that opportunity.
Entrepreneurship is as important as the other three factors of production. Without entrepreneurship, all the land, labor, and capital would be just lying there. Without Mr. Yang in Africa, which is on most people’s lists as the last place they would want to live, all the resources that could be made into ice cream and could have led to huge profit would just have been neglected.
The recognition of Africa as a potential investment by the Chinese is beneficial for the continent. China itself once had a closed economy, as a result, their technology, industry, and power could not compete with the Western nations. Now however, China is opening up to foreign developers and investors, and cities like Shanghai and Beijing are becoming some of the fastest growing cities in the world. Thus, poor and underdeveloped countries in Africa need the foreign help, and i’m pleased to see that the Chinese are taking the initiative to take big risks in unknown conditions with unfamiliar cultures.
i’m also surprised to hear that chinese people had already started spread to places like africa. it is pretty smart of Mr. Yang to invest in africa, gaining superiority and becoming the heads and leaders of less developed countries. However i think i agree with caleb that “I think that if Chinese people want to continue to thrive in Africa that they should not only make money there by selling cheap goods, but also show publicly that they are putting a portion of their profits into investments for industry that would hire Africans.”
so that it could bring up africa’s work opportunities as well as the economy.
Woaa I’m quite surprised to find out that chinese people have travelled all the way to Africa to invest. However, I think that the chinese investors aren’t really helping the African economy by trading goods like the local Africans. If the Chinese people want to profit more from the investment in Africa, they should set up industries such as icecream factories (as opposed to selling icecream on the streets). This would create more job opportunities for the Africans and the percent of unemployment would go down. When a country utilizes all their resources to their maximum potential, they can produce at the curve at the production possibility frontier and the economy would thrive.
What interests me is the fact that Chinese, and not western entrepreneurs are the ones who are willing to go to Africa despite the discouraging factors of danger and fear of violence, people, and unstable governments. I assume that this is because western entrepreneurs are accustomed to a higher standard of living, whereas Chinese people have a wide range of situations in their own country from extreme poverty to wealth, and they are ready to go to places that western entrepreneurs would never dare to go, because… why? Are they braver? Better at adapting to uncomfortable situations? Or just hungrier for profit? In addition, if Chinese entrepreneurs are more willing to risk their personal comfort for the sake of revenue, does this mean that their entrepreneurial ability is worth more than that of westerners? To a certain extent, this article shows that the entrepreneurship of people from countries with a lower standard of living can actually be a more valuable resource than those from countries that are more well-off.
Yeah, this article really shows how the Chinese are a great supply of entrepreneurship. The Chinese seem to be more daring to enter into areas considered too dangerous for Westerners. I wonder why that is. Maybe it’s because they are willing to take the larger risk in search for a larger profit. Maybe it’s because in China there is more localized poverty as well, so it is easier for them to adjust. Who knows?
This also shows that entrepreneurship really is a resource because without it there can be no production.
This article reflects a reality in the Chinese economy. An incredibly large population resides in China, where it is difficult to obtain excellent opportunities to succeed. It seems odd for developing nations to be seeking new opportunities in the long-established markets of developed nations, so it makes sense for these people to be seeking markets that still have even more opportunity in growth.
I believe that the extent of Chinese government protection or diplomatic relations with the African countries may also be an important factor in Chinese people taking risks in Africa. Whereas we often hear of difficult relationships between the Western world and Africa, we rarely hear of very direct conflicts between China and Africa.
Like everybody else who’s commented, I’m surprised that the Chinese would be interested in going to Africa, what with the poverty and lower standard of living in those countries as well as what seems to be a rather strong discriminatory sentiment among some Asian folk against people who aren’t Asian or Caucasian (How many of you guys have heard about Asian parents who go, “You can marry anyone you love, as long as they aren’t…” ‘Nuff said.)
That aside, Yang seems to have really embraced the spirit of entrepreneurship; you have such a brilliant, yet simple and doable idea that allowed Yang to penetrate a newer market with great potential rather than competing with others in long-standing markets. It is a bit disconcerting though, that many Chinese are just going to Africa to peddle their fake name brand goods rather than actually investing and helping the economies in Africa.
I think that this article emphasize on the fact that our world revolve around a cycle. China is becoming a global leader like US and Western Europe used to be. The US back in the early to mid 20th century opened up Chinese market, and now China is simply doing the same thing on opening a new African market. Of course, abundant entrepreneurs is the cruccial element that set off China’s expansion.
Apart from the great entrepreneurial ability, Yang and many ambitious Chinese investors are truly courageous to attempt to develop an African market. I’ve heard from my dad that because African governments are highly unstable and power is seized from one to another, a business favored by an older regime might be eliminated as soon as the new regime takes over. Profit might be high, but risk too.
Has anyone noticed, whether in a shopping mall or at Gubei Carrefour on the escalator, that there are televisions with advertisements on them? Apparently, that invention was the work of entrepreneurship by, you guessed it, a Chinese man. As someone mentioned above, Chinese people are indeed an amazing source of entrepreneurship. Their work extending all the way to Africa is amazing, though, but not that surprising.
I think Angel has an interesting point, but I would guess that Chinese businessmen in Africa do their best to stay out of the politics and focus on running their business. In fact, I would guess that in times of political upheaval and change, it’s the Chinese businesses who weather the storm most successfully, since they’re probably focused on making money and fulfilling society’s wants, not proving their political allegiance.
I’m also surprised to read that there are Chinese entrepreneurs in Africa. I think it was smart for Yang to invest in producing ice cream in Africa, instead of investing in other countries with more well-established markets and competing with many other ice-cream makers. Entrepreneurs must not be afraid to take risks, and should carry out their “big ideas,” and if successful, they like Yang will make a lot of profit.
However, the fact that many Chinese who go to Africa not only bring their own workers, but also send their money home, may prove to harm the African economy. It is essential for there to be circular flow in the economy, and if the Chinese do not put the money they earn back into the economy, it would most definitely hurt the economy in Africa.
Ahh the chinese spreading like a plauge… (don’t take offence).
It is interesting to see that Chinese entrepreneurs are located in Africa and it is a very smart move but this may stray off a bit from entrepreneurship but I remember reading a news article about China seeking nuclear power in African nations. With China growing so rapidly, there is no surpise here that China is seeking energy resources from otehr nations. On the outside its very positive to establish trade with African nations who are desperate for trade and economic growth however in exchange for nuclear power, china is not only exchanging money but also weapons. Now I am not too sure to what extent these weapons are used just for secuirty or for corrupt means but maybe some one should look more into this. I could be wrong.
Wow… I’m surprised Chinese people would go to Africa to open businesses, but also smart at the same time since there is probably less competition. All the Chinese people that went to Africa to open businesses really took a big risk because starting an enterprise is very risky. If ones enterprise was to fail, the entrepreneurs could lose a lot or even all of their money. And in order to start it they have to dig into their own personal stack of cash. Like how Mr.Yang borrowed money from family members. Also to open a Chinese store which is filled with their culture is risky because there is a possibility it doesn’t fit with the African culture and then the business would not be successful.
Mr.Yang had the performed the three fucntions for being an entrepreneur. He had an innovation, which was to ice cream. He had an organization, opening the factory and hiring workers. And last but not least he took the risk of going to Africa with some money and opening the business.
So…I think we’ve established that it’s surprising that there are Chinese entrepreneurs in Africa.
I understand where some anti Chinese sentiment can arise from, especially if they are there to compete with Africans, instead of help them. It seems as though many entrepreneurs are in Africa purely through self interest, to maximize profit as much as they can. I feel that Chinese and Africans should work similarly to the circular flow model – the Chinese can profit from African consumers, but Africans can also better their financial issues through employment in Chinese factories. However, it’s still relieving to know that in this still growing economic relation between China and Africa, there are still Chinese entrepreneurs like Mr. Yang who seem to genuinely care about the people in his host country.
I didn’t realize there were so many Chinese in Africa. I mean, 750,000…wow!
I must admit that I think going to Africa is a strange choice, but these entrepreneurs should be admired for taking such a huge risk; they have no idea if they will succeed there, they have a language and culture barrier, and they will truly have to keep their prices low in order to survive. Also, I think they are smart to go to developing countries in Africa because they have a chance of succeeding there, whereas if they went to America, their chances of succeeding would be much lower due to increased competition.
The Africans are worrying (and they should be!). If the number of Chinese entrepreneurs continues to increase, then the Africans would be put out of work because they can’t compete with such low prices. This will cause the unemployment rate to increase. However, if the Chinese were to build factories (as stated in the article), then they would be able to hire Africans, and both sides would benefit.
I find that the expansion of the Chinese Market especially to Africa is both amazing but also unexpected. It makes me wonder what countries in the world hasn’t had the influence and benefits from the Chinese Market.
I’ll be honest that I was surprised when I learned that entreprenuership is considered to be one of the powerful factors of production as it is distinctively different from the other factors. However, without entreprenuership, there would be no production.
Entreprenuership is priceless, therefore I believe that the Chinese Market will successfully expand all around the world.
I find that the interest in Africa was highly interesting and unexpected at the same time. If the Chinese truly have its famed entrepreneurship (hard word to spell :/), then they must have also realized the great potential in Africa. The continent’s diverse environment allows for a greater usage of “land” (the resource), while the Chinese entrepreneurship is there. Land has become increasingly scarce as China faces overpopulation. Additionally, according to the article, labor is also present, so it all boils down to whether or not there is a great amount of capital; it is obvious that (in a Laplace-like style) that Africa has potential to develop into the next China.
The Africans has both bright view and negative view on increase of Chinese entrepreneurship, since the competition in the market is totally disadvantageous for themselves. Chinese cheap goods are preferred to those of western or African goods, and thus weakens the competition or eliminate competition. Chinese entrepreneur knows how to avoid taxes, and they produce the goods in the low cost so that they can sell them cheaper then other entrepreneurships. To keep their positions stable in African economy, Chinese entrepreneurship should be cooperative with other entrepreneurs so that the competition in the market economy enables them to produce better goods in lowest prices.
I knew that a lot of Chinese people were spread out all over the world for business, but I never thought that they would reach Africa! I guess overpopulation in China is causing 750,000 people to go to Africa and other countries. Like Helen said, it is a good thing that Mr. Yang’s entrepreneurship allowed all the resources in Africa that could be used to make icecream to be effectively used, instead of being neglected. However, it is unfortuante that the local business owners in Africa are competing with Chinese entrepreneurs. Since the Chinese products are being sold in Africa at such low prices, the price of local products would have to decrease in order to compete. Mr. Yang’s success is inspiring a lot of Chinese entrepreneurs to go to Africa to seek their fortunes, but then how would the local businesses survive?
It is very fascinating to know that Chinese people have started businesses up in Africa. I thought that it would be the last place a Chinese person would be seen at but apparently not. Now that successful businesses in Africa have started up and attracted more entrepreneurs it is only a matter of time before more nations come. Africa certainly has the capabilities to become a big market like South East Asia is at the moment but I believe that it will still be a long time before that ever happens.
I think that going into Africa is a pretty interesting idea for a Chinese entrepreneur. It is certainly brave, but nonetheless a smart idea. Who would have guessed that Chinese people would choose to bring businesses to Africa and that trade between China and Africa would be so high. Local business will obviously compete, and it is bad that he is taking business away from them, but I give him respect for staying in Africa. He has certainly taken a risk but risk taking can greatly help the economy.
Wow. Well unlike everyone else. I did realize the Chinese were everywhere!
I mean, we are in China! Although Africa is off the beaten path, I think these entrepreneurs deserve a pat on the back. Just for trying out Africa and getting lucky like our friend Yang, he has opened up a third world country to the billion Chinese people. Its obvious that the Chinese are smart business men, just look at how they have millions of dollars in the American economy. With this being said I don’t necessarily blame the Africans for getting angry, I would be scared and mad too if I felt so vulnerable to an outsider. I don’t think that they should be too worried yet because the Chinese have good intentions and although they are hard to compete with they are doing a good thing for these countries.
First, it was quite surprising to know that China has go all the way to Africa to set a new business leaving its huge and successive market. After reading this article, I could sense current status of Chinese economy and its markets, which I guess is already full and very competitive. But I agree with the people of Zambia. Africa, compared to the other continents, is a poor and weak continent. I think China shouldn’t take everything away from those poor people. Moreover, I think it’s better for Chinese to head Vietnam than Africa because all the western eyes are on Vietnam and it’s also very close to China. I think I heard that Vietnam is a growing market like how Chinese market was before few years. One last thing, I guess now Chinese are everywhere.
I think is really amazing how Chinese enterpreneurs actually brought in markets and competition into Africa. Barely anyone could have expected to bring in new markets into Africa. I think this article shows the importance of enterpreneurship is as a resrouce of production. I think enterpreneurship is actually the most important resource of all becuase with such creativity like this people could actually make huge amount of profits. But I do also feel uncomfortable about the fact that Chinese enterpreneurs are taking over local markets with their low prices. Chinese people are amazing to have brought into action such brilliant ideas, but they should at least try to respect the local economy.
I agree that its really amazing how far the Chinese influence has reached, even into Africa! This demonstrates how in the market when people see an opportunity the can make money of they take it.