Family businesses in China and Hong Kong less aggressive when it comes to growth, says PwC study
Economic climate getting worse,with 75 per cent of Hong Kong businesses citing market conditions as their biggest challenge for the next 12 months
The economic climate has hurt Chinese family businesses and many are becoming more conservative about their future, a Pricewaterhouse Coopers study has found.
Only 73 per cent of Chinese family businesses recorded sales growth in 2016, still higher than the global average of 64 per cent, but down from 84 per cent in the most recent study in 2014, according to the survey released on Thursday.
Chinese and Hong Kong family businesses are now more cautious, with 65 per cent of businesses aiming to grow steadily rather than aggressively this year, up on 2014’s 41 per cent who were aiming for steady growth.
“People are more conservative this time. In the last report we saw that they were more optimistic about the future, they could see faster growth,” said PwC Hong Kong entrepreneurial group assurance partner Kitty Chung.
“Last time, a lot of people were more aggressive and [thought] they could grow faster. Now it’s more toward the steady category.”
A major factor in the changing attitude was the economic environment, with market conditions seen as the key challenge for the next year by 75 per cent of Hong Kong businesses surveyed.
“It’s difficult. Hong Kong [and] China are exposed to the global environment,” said Chung, responding to the Post’s question about how local businesses could deal with the economic challenges. “All over the world there are a lot of uncertainties.
“We can’t isolate ourselves from other factors. It’s bound to be affected by external factors.”
The challenging economic environment had prompted Chinese businesses to explore the use of technology, which explained why 67 per cent of them recognised the importance of digital technology, PwC Hong Kong private client services leader John Wong said.
A major area where mainland Chinese and Hong Kong family businesses differ is bringing the next generation into the business.
Over 70 per cent of family businesses in China have next generation family members working in the business, similar to the global average of 69 per cent, but well above the 44 per cent in Hong Kong.
This was because Hong Kong parents prefer to send their children overseas for study, Chung said.
“[The children] may not be interested in their own family business and they will choose their own career,” she said.
“A lot of people in China are still very traditional in [their thinking], they prefer their siblings to be the successor. Hong Kong used to be very traditional, but now it’s gradually moved to be more open.
“[Family business owners] can’t force their children to take up their business.”
In China, a quarter of respondents admitted that the views of their family were misaligned with the business strategy compared to a fifth in Hong Kong.
Family businesses in Hong Kong and China have improved on their succession plans since the last survey, with 10 per cent having a robust plan in place, but still worse than the global average of 15 per cent.
PwC interviewed 2,802 senior executives from family businesses across 50 countries between May and August. The survey is conducted every two years and is this year’s is the eighth of its kind. One hundred family business senior executives in Hong Kong and China were interviewed for the study.