China seeks to groom 'fuerdai' into business leaders

Faced with a generation of business tycoons nearing retirement, China is training their successors -- often the children of businessmen -- to take the reins.

China's second-generation rich are known as "fuerdai," a title rarely used as a compliment or mark of respect in the country. Members of this wealthy group are expected to take over family businesses in the next decade, leading to a number of programs to prepare them for the responsibilities.

The latest effort was a program in south China's Guangdong Province to train the successors of private business tycoons through experience in State-Owned Enterprises (SOEs).

Li Baiwei is among the first group of 48 trainees who finished the six-month program this week. The program was launched by the organization department of the Foshan City committee of the Communist Party of China.

It aimed to equip potential private business leaders with management ability and entrepreneurial skills through training at 36 SOEs. Over half of those participating were young successors of family-owned companies, said Liu Yuanxin, deputy head with the department.

If he weren't about to inherit a family business in China, 24-year-old Li would still be a garage owner in Ottawa, Canada. At his father's request, he gave up his dream job and returned to Guangdong to be general manager of a private technology firm.

"I know some theories about businesses management, but lack real experience. This program gives me a good opportunity," he said.

China's success over the past three decades has spawned a number of rich and powerful business people. According to tradition, most of these soon-to-retire business leaders in their 50s and 60s plan to transfer their positions to their children or relatives.

However, they have found it difficult to groom their children for the roles themselves due to limited technological knowledge and a changing business world.

Hong Bo, board chairman of a local restaurant, has signed his son up for the training program. He is among the first wealthy generation that benefited from China's reform and opening.

Hong said although irresponsible behaviors by "fuerdai," including several murder and rape cases reported by media, have ignited public ire and bias against the group, he has tried his best to teach his son to be a good person.

"All parents hope their kids can have a bright future. This program in Foshan is an ideal way to train young people like my son, who will take responsibility for developing a family business in the competitive market," he said.

As a famous manufacturing base in China, the added value of Foshan's private economy in 2012 exceeded 400 billion yuan (about 65 billion U.S. dollars), contributing over 60 percent of the city's total GDP.

In the next five years, nearly 90 percent of entrepreneurs in Foshan will hand over businesses to their children, according to Liu. But of the city's 4,000-plus rich second generation members, most have overseas education backgrounds but lack practical management experience.

"That's why we decided to kick off a training program to teach the successors how to be responsible business leaders," Liu Yuanxin said. The development and upgrading of private firms are very important for the local economy.

Based on the plan, about 500 young entrepreneurs in the next three years will attend the training program to strengthen their loyalty to the country and improve management skills via working in state-owned enterprises.

China has explored various programs to solve the succession problem faced by private firms.

Many training courses have also emerged. In east China's Zhejiang Province, a nine-day training program costs nearly 80,000 yuan.

A program several years ago to train 1,000 successors to private business leaders by the local Party school in east China's booming Jiangsu Province sparked debate on whether the program was an abuse of government resources.

Similarly, opinions are divided over the latest training program organized by Foshan.

"SOEs have long been blamed for resources monopoly and inflexible methods. What can private firms learn from them?" said netizen "Liaowudaoren" on Chinese microblog service Sina Weibo.

"I think this training program builds close relations between private tycoons and local officials, leading to more corruption and a wider wealth gap," another Weibo user, "Zongjiaolian," said online.

In response to doubts, Liu Yuanxin pointed out these potential private business leaders worked as assistants to general managers or middle-level managers in SOEs without pay, adding that no public funds were used except for some human costs.

According to Pang Songgang, an official with the local organization department, the program will be expanded to a one-year term and allow a second group of trainees to work in large private firms, listed companies and village committees in addition to SOEs.

"The performance of private firm successors has an impact on the country's economy as a whole," said Bao Yujun, chairman of the China Private Sector Association.

He said it is too early to say whether the training program in Foshan is successful or not, and only time will tell.