China’s family businesses need to be more proactive in succession planning, sustainable investing and shared-value creation, accounting agency PricewaterhouseCoopers said.

Family businesses, defined as companies built within a family or having at least one family member on board of directors, reported rapid sales growth in China, higher than the global average. Revenue increased by 75 percent on the Chinese mainland and 55 percent in Hong Kong for the last financial year, compared with the global figure of 69 percent, according to the China Report of Global Family Business Survey 2018 released by PwC on Thursday.

We believe that it is important for family businesses to involve the next generation in the business not only to ensure succession but also as a means to tackle digital disruption. 

John Wong, PwC China and Hong Kong

Riding on their sales increases, Chinese family offices are more confident, with 26 percent expressing “quick and aggressive” growth aspirations over the next two years despite the recent market uncertainty, compared with 16 percent of their global peers. 

However, the survey showed innovation and economic environment as two major challenges from their point of view. 

Regarding the importance of corporate values and generating profit, about 71 percent of mainland family businesses have a clear sense of value and purpose as a company compared with global counterparts, at 79 percent, the report showed.

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“Most respondents in both Chinese mainland and Hong Kong suggest that values and purpose have helped to increased sustainability, create a competitive advantage, and retain talents and increased revenue and profitability,” said Benson Wong, entrepreneurial and private business regional lead partner for PwC Hong Kong, at a press briefing on Thursday.

Whether leadership and management would be passed to the family’s next generation or a professional manager is complex topic among business owners. The survey found fewer next generation family members working in the family businesses. 

“The emotional attachment that first generation owners have to the businesses they have created may form part of the reason they are unwilling to let go. Another reason could be the lack of interest from the next generation themselves. We believe that it is important for family businesses to involve the next generation in the business not only to ensure succession but also as a means to tackle digital disruption,” said John Wong, PwC China and Hong Kong family business and private client services leader.

The participation of next generation in their family businesses accounted for 57 percent on the mainland this year, much lower than two years earlier, when it was 71 percent, according to the same survey released in 2016. That indicator grew in Hong Kong – 58 percent this year compared with 44 percent in 2016.

Wong thought the reason behind that was the different age structure of family members in charge of business between Hong Kong and mainland. Family businesses are more mature in the city after years of heritage, so in most cases the second generation and even the third are taking the helm at their firms. Things on the mainland are different, basically because the first generation who built their business from scratch are still “in their prime”.

Compared to global peers, family business owners in China are less inclined to plan for succession although they have strong aspirations of preserving wealth and continuity, the survey also showed.