New | I’ll do it my way: Only one in five of China’s second-generation rich willing to take over family business
Most ‘fu er dai’ studied business management abroad, giving them a natural edge in overseas expansion, but they tend to lack confidence in living up to their parents’ legacies
Only one in every five of China’s second-generation rich, or “fu er dai”, is keen to take over their family business, a study shows, highlighting the challenges of succession within the country’s private economic powers.
Only 20.5 per cent of those polled expressed interest in taking up the baton from their parents, according to a report by researchers from Peking University’s Guanghua School of Management. Nearly 70 per cent preferred to start their own business while the rest said they would rather take up a traditional job such as becoming a doctor or lawyer.
The study, which spanned two years and was based on interviews with more than 500 family-owned Chinese firms, was released in Beijing on Wednesday as the management school – in partnership with the University of Oxford’s Said Business School and the Harvard Business School – announced an executive education programme for executives of family businesses in China.
The research was led by the management school’s associate dean, Professor Jin Li.
“Chinese family businesses are at a historic turning point,” said Eric Thun, Peter Moores Associate Professor in Chinese business studies at Said, said. “At the same time as confronting the challenges in the domestic market that are common to all Chinese firms, many are making leadership transitions from the first to the second generation.”
Family-owned firms play a major role in China’s economy. More than 85 per cent of the country’s private companies are family-owned businesses, and by July last year, 747 of these firms were listed in China’s stock markets, according to the report.
Unlike their Western counterparts, this would be the Chinese family-owned companies’ first generational transition, as most of them were set up only after China opened up three decades ago.
The study found that more than half of the second-generation rich studied abroad. Two-thirds of them majored in business management, which gave them an edge for expanding their family businesses overseas.
Most of the second generation, however, appeared to lack confidence in dealing with businessmen from their parents’ generation as well as senior staff within their family firms’ management. They also found it challenging to live up to their parents’ legacies, which would pose a threat to business stability, the report said.
On the other hand, Chinese entrepreneurs – who tend to value a family’s collective interests over that of an individual – often have high expectations for their offspring, in most cases, their only child, because of China’s one-child policy.
About two in every five of the entrepreneurs interviewed said they hoped their children would take over their business. Fifty-five per cent said they would allow professionals to manage the company, but have their family remain the main shareholders.
On part of the research, which interviewed businessman in the affluent eastern Zhejiang province, found that more than half of the second-generation rich would “completely submit to their parents” in the face of conflict within the business. About 20 per cent said they would remain in the firm while 26.7 per cent said they would choose to leave.
Lack of trust in professional management specialists is common among family business owners, but more are now considering looking for successors outside of the family, should their children choose not to take over, the report said.