Most post-80s generation leery of family businesses

(Ecns.cn) -- Now's the time for the first wave of China's rich second generation born mostly in the 1980s to take over their family businesses, but only 18 percent of them are willing to do so, according to a survey conducted by Shanghai Jiaotong University.

The majority of these wealthy young adults face pressure from entrepreneurial parents who got rich after China enacted its reform and opening up policy in the late 1970s, said the survey, which polled 182 family-owned companies across various industries.

Some are accepting the reality, while others are choosing to pursue their own dreams despite the lack of successors. Under such circumstances, many aging business owners are trying to figure out alternative ways to avoid a drain on family wealth.

Successful transitions

In December of last year, the All-China Federation of Industry and Commerce (ACFIC) released the China Family Business Development Report, in which it showed that 85.5 percent of 3,286 private enterprises were classified as family businesses.

An ACFIC member revealed to Xinmin Weekly magazine that about half of China's GDP comes from family-owned businesses every year, a clear indicator of their contribution to the country's economic growth.

With such an important position in the economy, family-owned companies must carefully handle leadership transitions, since top-level successors will decide their future. However, 44.3 percent of them have never taken the issue into consideration, according to a report on Chinese private enterprises released by Bain & Company in April.

Among enterprise families that have pondered the issue, 45.4 percent hope their children will take over the businesses directly, while 19.33 percent plan to let their children inherit the stakes, the survey by Shanghai Jiaotong University found.

Though China's rich second generation are often criticized as being idle, arrogant and depraved, they usually have overseas educations. Most wealthy Chinese parents have sent their children to universities abroad, and some of the second generation has in fact already started to take over family businesses.

Liang Zaizhong, born in 1984, has been director at Sany Heavy Industry Co, Ltd since January 26, 2010, and is also the company's vice president and chief financial officer. He obtained his bachelor's degree from Britain's University of Warwick in June 2006.

Yang Huiyan, 31, daughter of Country Garden's founder Yang Guoqiang, has been executive vice chairperson since March 27, 2012. She received her bachelor's degree in marketing and logistics from Ohio State University.

Liang and Yang are examples of wealthy second generation kids that have reconciled themselves to the pressure and are doing well, but they are in the minority.

Gender imbalance

For families with more than one child the successor issue is even more complicated, especially since eldest sons are more favored by their parents, the survey revealed.

Of the 113 listed start-up companies, 15 have appointed eldest sons as chairmen or chief executives; only five have given top positions to second sons. As a result, younger children are relieved from the pressure and can engage in other businesses.

Yet it is often likely that there are no sons at all, only daughters. But because many Chinese people value males over females, some entrepreneurs let capable sons-in-law manage family businesses instead.

According to a report released by Forbes China last November, there were 19 listed family-owned enterprises where sons-in-laws were acting board directors or general managers.

Of course there are always extreme cases, when children refuse outright to inherit businesses from their parents, pointed out the Xinmin Weekly.

All three sons of Xu Lianjie, CEO of Hengan International Group, were reluctant to inherit the business. Xu could find no way to talk them into it, so he eventually allowed them to do whatever they liked.

With time, their careers all developed smoothly. Xu Qingliu, the eldest son, is engaged in capital investment; Xu Qingshui, the second son, is in real estate property investment; and Xu Qingchi, the youngest, is responsible for the chain operation of a trade group.

Xu Lianjie is happy that his sons earn their own livings, so has decided to support them in the pursuit of their dreams and help them establish their own businesses one day.

Unwilling

The survey by Shanghai Jiaotong University shows that 37.7 percent of rich second-generation kids do not want to inherit their family businesses, and 39 percent say their corporate management concept conflicts with their parents.

In recent years, some entrepreneurs have sent their children to high-end training classes tailored to members of the rich second generation. The classes include horse riding, swordsmanship, golf and wine tasting as well as various techniques for steering a company.

But many of the children have their own interests, and parents should not force them to inherit the businesses. Instead, parents should find other ways to protect the family wealth, and at the same time encourage their children to start their own careers.