China family-run companies face succession issue

A new survey by Peking University has revealed that 80 per cent of the next generation are unwilling to take over their family business.

(REUTERS)

Chinese children are turning away from their family business in a trend that could cause havoc in the world’s second largest economy.

As China’s first generation entrepreneurs hit retirement age, a new survey by Peking University has revealed that 80 per cent of the next generation are unwilling to take over their family business.

The majority, are keen to take a different direction from their parents, China Daily reports.

"Unlike similar families in the West, the two generations in China face a far greater gap in values, beliefs and aspirations, due to the tremendous social transformation the past three decades," Jin Li, associate dean of the Guanghua School of Management, told China Daily. "Many are deeply confused and apprehensive about the succession issue."

This is a pressing issue for China that has more than 10 million private companies accounting for about 60 percent of GDP. Eighty per cent of these private firms were classified as family businesses at the end of 2011, according to the All-China Federation of Industry and Commerce.

The survey revealed this lack of interest is due to a generation gap. In sharp contrast with their elders, 88 per cent of the new generation have university degrees and 52 per cent of them studied abroad including in many leading institutions such as Harvard or the London School of Economics.

They have very little enthusiasm for traditional businesses and are more interested by innovation and western management systems, the survey showed.

It’s not just the children of business-owners who find the tradition difficult. First generation entrepreneurs may have had to compete with one thousand other business owners to succeed, but when it comes to passing on that legacy, the one child policy means they have only one child to choose from.