Perspectives from ISB

China has a problem with family businesses: a sizeable number are preparing to hand over control to the next generation. However — in a development that some say will hurt and others think might help the world’s second-biggest economy — some may not stay in business at all.

More than half of the children of the wave of entrepreneurs that built China’s export economy after former leader Deng Xiaoping opened the Communist nation to free market capitalism in 1979 do not want to succeed their parents as bosses of their family firms, surveys and academic studies suggest. Instead, they would rather work for themselves or in fashionable industries such as banking, investment and technology.

“What China is facing is a big social and economic loss,” says Joseph Fan, co-director of the centre for economics and finance at the Chinese University of Hong Kong. Observers of the trend pin the cause on factors from the individualism of Chinese millennials to the fact their business-owning parents have worked so hard to succeed in a business they neglected to involve their children in their companies. Children of entrepreneurs who sent them to school or university in the West can also return home inspired to start their own venture that is based on experiences they had abroad.

Professor Jean Lee, co-director of the Centre for Family Heritage at the Shanghai-based Ceibs says, “China’s family business sector has lacked that culture of raising and educating the children in the ways of the family business and the family business culture”. She explains that busy entrepreneurs “do not groom their children to take over”. Many are “raised by grandparents and then they are often sent to the west for boarding school and university”, she adds. “The bonding with the family is not very strong, and those who return to China come back full of new ideas and aware of other career options.”

Yang Liu, the mainland Chinese-born founder of men’s apparel company JoeyWears and a director of global female entrepreneurs’ association SheWorx, says many young Chinese business founders in her network were also born into family businesses that they now choose not to work for. “When the family has money the kids have a lot of options,” she explains. “They get educated abroad and then they can choose what to do next. The family business does not really excite them when they can start their own company or invest in other start-ups.”

Gym founder Mr Li says, “China is changing. When my dad started out perhaps China did not have enough buildings, so we needed companies to construct them. But now we have different problems such as obesity and chronic diseases like diabetes. What China needs now is companies that can help people construct not better buildings, but better bodies. So I want to solve this new problem.”

Source: Rovnick, Naomi, December 13, 2017,