China’s strategy of seeding mass entrepreneurship and startup proliferation emerged in the late 2000s and early 2010s as the country sought new growth engines beyond manufacturing and exports. After the 2008 global financial crisis, Chinese leaders recognized that reliance on export-oriented industries was unsustainable – many exporters went bankrupt around that time mitsui.com. In response, in 2010 the government identified Strategic Emerging Industries to cultivate through innovation. This push culminated in Premier Li Keqiang’s call for “mass entrepreneurship and innovation” in September 2014, announced at the Summer Davos forum mitsui.com. The slogan “大众创业、万众创新” (literally, “mass entrepreneurship and mass innovation”) became a centerpiece of China’s economic strategy, signaling a nationwide campaign to encourage new startups.
Following Li’s 2014 exhortation, the government rolled out extensive measures to foster a startup-friendly ecosystem. The 2015 Government Work Report formalized policies to reduce barriers for new firms – streamlining business registrations, offering tax incentives, expanding access to funding, and supporting incubators and tech parks mitsui.com. In the two-and-a-half years after the “mass entrepreneurship and innovation” initiative was launched, over 400 new supporting policies and regulations were implemented by central and local authorities mitsui.com. These included everything from easier financing (e.g. allowing pension funds and state banks to invest in venture capital) to the creation of hundreds of government-guided venture funds that would co-invest in startups alongside private capital mitsui.com.
The results were dramatic in terms of sheer numbers of new enterprises. The annual number of new business registrations in China skyrocketed from 1.76 million in 2010 to 5.53 million in 2016, reflecting the surge in entrepreneurial activity mitsui.com. By late 2010s, China had become second only to the U.S. in the count of tech “unicorns” (startups valued over $1B) and boasted a vibrant ecosystem across sectors mitsui.com. This “let a thousand startups bloom” approach – echoing Mao Zedong’s famous “Hundred Flowers” slogan – was a deliberate shift in development strategy as China entered a “new normal” of slower traditional growth. It aimed to harness the creativity of the masses and pivot the economy toward innovation-driven sectors.
Why did China adopt a strategy of proliferating hundreds of startups in strategic industries? The calculus was rooted in both economic and geopolitical considerations. From the perspective of Chinese policymakers, encouraging many competing firms in nascent industries serves multiple purposes:
In essence, the “thousand flowers bloom” strategy reflects a blend of socialist planning and capitalist competition. It takes advantage of China’s ability to mobilize resources top-down while also harnessing bottom-up entrepreneurship. The government’s strategic calculus is that nurturing an over-supply of startups early on will pay off later by yielding a handful of globally competitive firms in each target sector. As the next sections show, this approach has been applied in multiple industries – from electric cars to biotech – with mixed but often impressive results.
One of the most prominent examples of China’s mass-startup strategy is the electric vehicle (EV) industry. Around 2014–2015, China identified electric vehicles (especially battery electric cars) as a strategic industry where it could leapfrog Western automakers. Generous subsidies, tax breaks, and production incentives were rolled out to spur a homegrown EV ecosystem evboosters.com. The result was an explosion of EV startups – by 2018–2019 there were over 500 Chinese new energy vehicle manufacturers registered, ranging from serious tech contenders to local shell companies hoping to cash in on subsidies evboosters.com. Virtually any entrepreneur or local state-owned firm that could get a production license jumped into the EV gold rush.
This “let them all try” period quickly built China into the world’s largest EV market. Chinese EV startups produced everything from low-speed mini-EVs to high-end smart SUVs. The government’s strategy was evident: saturate the field with players and use subsidies to prime demand, then let competition winnow them. By 2020, however, the shakeout had begun. Beijing started phasing out EV subsidy programs after having spent an estimated $14+ billion on them over the decade alliancebernstein.com alliancebernstein.com. Simultaneously, giants like BYD (bolstered by early state support) and foreign entrants like Tesla (invited to China to spur competition) triggered a price war, squeezing weaker startups evboosters.com. Many of the smaller companies that lacked core technology or sufficient scale began to fold.
Survival of the fittest ensued in earnest. By 2023, the number of active Chinese EV makers had plummeted from the peak of ~500 to roughly 100 or so alliancebernstein.com. Industry analysts predict the consolidation will continue: perhaps only 25–50 EV brands will survive by 2030, with the rest eliminated or merged evboosters.com. This dramatic thinning of the ranks is illustrated by examples like the collapse of WM Motor (an early EV startup that went bankrupt after running out of cash) and Human Horizons (HiPhi) which ceased operations in 2024 despite once showcasing high-tech models evboosters.com. Figure 1 (below) summarizes the evolution of China’s EV startup cohort and its anticipated trajectory.
Figure 1: Shakeout in China’s EV industry – Over 500 EV startups emerged mid-2010s amid generous subsidies, but most have since collapsed. By 2025 only ~100 remain active, and <50 are expected by 2030 evboosters.com evboosters.com. The strongest (e.g. BYD, NIO, Xpeng) now dominate the market.
The EV sector showcases the Darwinian logic of China’s approach. In the early boom years (2015–2017), local governments and investors threw support behind all manner of EV ventures – creating what the International Energy Agency called an “overcrowded market” of hundreds of players evboosters.com. This achieved the government’s aim of jump-starting an industry from scratch: by 2023, China produced 6.2 million battery EVs – more than half of all EVs made globally (11.2 million), far outpacing Europe (2.0 million) and the U.S. (1.2 million) alliancebernstein.com. Chinese firms also forged robust domestic supply chains for batteries and motors, aided by state research programs (for instance, China became a leader in affordable lithium-iron-phosphate batteries through state-backed R&D alliancebernstein.com).
However, the toll of this “hundred EVs” strategy was a vast overcapacity and many failures. By 2020, China’s EV industry was running at only 5% of its manufacturing capacity – it could make 26 million EVs a year but was selling barely 1.4 million, meaning most factories sat idle merics.org. The government tolerated this inefficiency initially, prioritizing scale and learning-curve effects over short-term profits. Once the market matured, regulators shifted gears to encourage consolidation. They raised technical standards and capital requirements for EV makers, which naturally weeded out sub-scale companies. Only the strongest survived: firms like BYD (which had early state backing and vertical integration) and newer startups NIO, Xpeng, Li Auto (which secured massive private and public funding) are now emerging as the champions. Meanwhile, smaller local assemblers and fly-by-night entrants have been largely culled.
From a strategic standpoint, China’s EV startup bloom succeeded in its core mission — today China is the world’s largest EV market and exporter, and its top EV companies are fiercely competitive internationally. The cost was a period of wasteful investment and duplication: literally hundreds of millions of dollars sunk into EV models that never made it past the prototype stage evboosters.com. The government appears willing to pay that price for leadership in a critical industry. Western countries, by contrast, took a more cautious path with EVs (supporting a handful of players via grants or loans). The Chinese approach produced faster scale: for example, U.S. had essentially one major pure EV startup success (Tesla) in the 2010s, whereas China’s scattershot approach yielded several and an entire supporting ecosystem. The downside was many failed startups and potential bad loans – a painful but, in Beijing’s view, acceptable Darwinian outcome.