Second-Generation Chinese Reluctant To Take Over Family Business Control - Study

Tom Burroughes

27 November 2015

A survey of family-owned businesses in China finds that fewer than half (40 per cent) of potential heirs want to take over the helm from their parents – a potentially major problem in China where the Communist Party’s one-child policy, which was recently adjusted, makes succession a central concern.

The findings are in the Chinese Family Business Succession Report, released in Beijing earlier in November; it was produced by the research office of the All-China Federation of Industry and Commerce (ACFIC), the family business committee of the Chinese Research Institute on Private Economy, a number of universities and the Lee Kum Kee family.

Among the findings from the report, for which fieldwork was conducted in 2014, 15 per cent of the second generation family members rejected taking over a business. The findings suggest a delicate problem of business transfer, the report’s authors said.

China has, until recently, adopted a one-child policy, one of the effects of which has been to create a gender imbalance in favour of boys, as well as the issue of how an ageing populace can be supported. Similar issues of demographic shifts are also pressing in countries such as Japan and parts of the West where birth rates are low.

The report outlines the history, current state, trans-regional comparisons and trends of the family businesses in Greater China. Harry Yeung, senior vice president of LKKHPG, said the report aims to assist family businesses to sort out and explore innovative practices.

At present, the private sector accounts for more than half of China's GDP; family businesses account for more than 80 per cent of the private economy.

“After over 30 years of rapid development, the majority of the first generation of family businesses are about to retire. Meanwhile, China's family businesses come to the critical period of family succession, with confronting issues intertwined with the `new normal’ of comprehensive deepening of reforms, economic slowdown, and transformation of industrial structure,” the issuers of the report said in a statement.

The report has three chapters: the first consists of the family business succession reports of mainland China, HK SAR, Macau SAR, and Taiwan respectively; the second is comprised of cases of 16 representative family businesses in cross-strait four regions and Singapore, and the third is made up of opinions given by scholars around the globe.

According to the survey conducted in 2014 mentioned in the report, only 40 per cent of the second generation expressed a willingness to take over the family businesses, 15 per cent rejected this idea, and 45 per cent beheld a subtle reference. This reflects the dilemma of family succession in which the senior generation are willing to hand over the business while the younger generation are not willing to take over.

LKKHPG is a member of Lee Kum Kee Group, a century-old Hong Kong enterprise.