WantChinaTimes.com

Knowing China through Taiwan

  • Sunday, August 31, 2014
  • RSS

Unsuccessful successors: China's struggling family businesses

  • Staff Reporter
  • 2012-02-21
  • 15:15 (GMT+8)
Zong Qinghou of Wahaha Group has moved his family and capital overseas to try to keep his family business alive. (Photo/Xinhua)

Zong Qinghou of Wahaha Group has moved his family and capital overseas to try to keep his family business alive. (Photo/Xinhua)

Zhejiang, Shanxi and Fujian provinces used to be the three major sources of entrepreneurs in China. Yet family-owned firms from the three provinces have almost vanished amid problems with successors, reported Chinese-language weekly Innovation Finance Observation.

Firms both young and old in the three provinces are facing a litany of problems, a slackening stock market, sluggish real estate and an unstable renminbi exchange rate. Without government protection and banking support, they are having difficulty coping with economic problems and government efforts to restrict liquidity. Li Jianwei, a professor at China University of Political Science and Law in Beijing, notes that the average lifespan of private enterprises is just 2.9 years in China, compared to 30 years in Japan and 40 years in the United States.

Founders of existing firms are also confronted with the problem of how to pass their companies on to their children.

Entrepreneurs in the provinces have varying approaches to succession. One business owner in his fifties arranged to make his wife financial manager and assigned his brother as production manger. According to his plan, one of his children will take over the company, while the other will become a public servant. The offspring of other relatives will acquire a position in his factory, according to their experience.

Lou Zhongping of Soton, a drinking straw manufacturer in Zhejiang, said that trust is the main concern for those choosing successors. It has been difficult for manufacturers to employ managers from outside as most are in the real estate and information technology sectors, Lou added.

Luo singled out an employee from within his company and trained him as a manager from scratch. The Soton chairman does not arrange for his family members or relatives to manage his company directly, but plans to assign his daughter the title of chairperson. "The chairperson must be someone from the family for the stability of the company," Lou was quoted by the weekly as saying.

Pan Zhihong, who made a fortune in the Shanxi soft drink industry and is now chairman of a furniture company in Beijing, said he does not worry about whether his son would become his successor. "I taught him my beliefs. The most important thing has been not making money, but being honest," Pan said. The entrepreneur will not leave all of his money to his children, but plans to donate some to charity. He donated 1 million yuan (US$159,000) to the Sichuan earthquake relief efforts in 2008 and 5 million yuan (US$794,000) for local road construction and development.

In Fujian, meanwhile, family succession has not been popular. Entrepreneurs in the province are known for their risk-taking and insist that businesspeople should create their own careers. Xu Jingnan, chairman of Fujian Pike Group, which produces sportswear, said that if his children are not capable of handling his business, he will not leave it to them.

The report said although professional managers can be more effective, most entrepreneurs still choose to put their sons or daughters in top positions.

 

 

References:

Wu Lizhong  吳立忠

Lou Zhongping  樓仲平

Soton  童集團

Pan Zhihong  潘志宏 

Xu Jingnan  許景南

Fujian Pike Group  福建匹克集團

Who's Who

  • Wang Guosheng (王國生)

    Wang Guosheng (王國生)

    Wang Guosheng is the governor of Hubei province. Born: 1956Birthplace: Dong'e county, ShandongProfession: PoliticianMarital Status: MarriedCareer: ...