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HSBC

Gap widens between younger and older Chinese entrepreneurs in attitude to business

HSBC survey shows difference in attitude and investment behaviour between younger entrepreneurs and their older peers, which poses challenges to family businesses, especially

PUBLISHED : Wednesday, 11 July, 2018, 1:40pm
UPDATED : Wednesday, 11 July, 2018, 11:03pm

Younger Hong Kong and mainland Chinese entrepreneurs are starting to show a widening in the gap between their attitudes and investment behaviours with those of their older peers, which poses both opportunities and challenges for family businesses, especially.

The younger generation now views “social impact” as their most important consideration when setting a new business, and are also happier to adopt the role of business “angel” – or mentor to other start-ups – than their parents’ generation, according to a new study released by HSBC Private Banking released on Wednesday.

The largest lender in Hong Kong and the second largest in Europe, HSBC revealed in its third “Essence of Enterprise” report a widening divide in attitude and investment behaviour between the latest generation of entrepreneurs, the so called, “millennial” entrepreneurs, and those between 18 and 35-years-old, compared with those 55-years-old and above.

Some 3,700 entrepreneurs in 11 markets – mainland China, Hong Kong, Singapore, the UK, Germany, France, US, Switzerland, Australia, the United Arab Emirates and Saudi Arabia – were included in the poll.

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“The gap between the two age groups of entrepreneurs shows the new generation of businessmen and businesswomen are willing to take [greater] risks and introduce new way to do business,”said Joe Ngai, McKinsey’s managing partner for Greater China.

“This will provide both opportunities and challenges to many family business in Asia and Hong Kong.

“It also poses challenges for family businesses, as the younger generation is using very different methods to run their business from their parents or grandparents, who thought very differently from their younger successors.

“They consider the younger ones tend to take a too high a risk or not pay enough attention on profitability,” Ngai said.

“Older employees may also not agree with their younger bosses, and this could create management problems.”

However, Ngai said if the two generations could work out their differences or if the senior ones helped lead the younger successors to make changes, it would create a new generation of talent better able to expand new business lines or services to their companies.

As an example, some old Chinese brand restaurants could allow their sons or daughters to expand into western food or more trendy restaurants, he added.

“This would help family businesses to move forward to attract younger customers, and help break the old Chinese adage, that ‘wealth will not pass through three generations’” Ngai said.

According to the HSBC report, one in five surveyed considered social responsibility, being active in the community, or being environmentally responsible, as their top priority as a business owner.

But just over a third (35 per cent) of those aged under 35 named “social impact” as their chief motivator, compared with 19 per cent of those aged 55 and over.

More than half of millennial entrepreneurs in those 11 markets already act as “angel investors” for private start-ups or other non-listed businesses without proven track records, compared with 37 per cent of entrepreneurs over 55-years-olds, who prefer to invest only in more established start-ups.

Younger mainland Chinese entrepreneurs are actually taking the global lead in terms of angel investing, with 53 per cent saying they have invested in other private, non listed businesses, against 48 per cent in Hong Kong and 45 per cent across Asia-Pacific as whole.

A resounding 67 per cent of younger Hong Kong entrepreneurs said they view angel investing as a way to “connect and collaborate with peers”, while their older counterparts generally considered angel investing “as a way to diversify and grow their investment portfolio”.

“It’s clear millennial entrepreneurs want to do well, but it would be wrong to dismiss this as youthful idealism that will act as a brake on financial success,” said Kevin Herbert, co-head of North Asia of HSBC Private Banking.

It’s clear millennial entrepreneurs want to do well, but it would be wrong to dismiss this as youthful idealism that will act as a brake on financial success
Kevin Herbert, co-head of North Asia of HSBC Private Banking

“They know their business cannot have the impact they are looking to make without sustainable growth, and they are focused on achieving both,” Herbert said.

“They see similar compatibility when it comes to angel investing; they are happy to invest in the wider business community, to contribute to each other’s successes and to learn from one another.”

The two age groups of entrepreneurs also expressed clearly different views on learning.

The over-55 year olds are more likely to have learned from their own experience, while the millennial entrepreneurs like to have more formal professional training, education and mentoring.

Thirty-seven per cent of the under-35s said they regularly turned to individuals such as lawyers and accountants to act as mentors to them, versus just a quarter (24 per cent) of over-55 year-olds.

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