If Mao Zedong’s life had gone differently, he could have run a family business – his father’s wish was for his son to take over the family farm. It was not to be, and during his and his communist successors’ reign pretty much every family business in China was destroyed.
Of course, If he were alive today Mao would be shocked at how capitalism has thriving in China – and how much of that extraordinary growth is driven by family businesses. Management consultancy McKinsey reckons family businesses account for around 40% of the country’s private sector GDP. Some say it’s higher – as much as 60%.
That figure is not surprising. For one thing, most of the businesses that began in the early 90s are still controlled by their founders, or the second generation.
But also, family firms are a good cultural fit with China. Simon Lee of the Center for Family Business at the Chinese University of Hong Kong Business School says that “it is easier to manage and understand a family business as Chinese culture treasures family structure and family business. Chinese people see family as a source of culture and experience.”
The family, he says, is seen as “source of knowhow consisting of experience, value, culture and technology. There is a Chinese saying that ‘Elders are treasures’. Chinese people regard old family members as symbol of wisdom, definitely not an inconvenience.” This, says professor Lee, is also one reason why Chinese firms are attracted to family businesses overseas.
However, Chinese family firms have their own unique problems. For instance, the one-child policy might make choosing a successor easier, but it can also place pressure on that one individual. Many Chinese entrepreneurs talk about the next generation as the so-called “2Rich” – the spoiled kids of the generation that did all the work, and might not be fit to take on the business.
Here are five family businesses in China to watch:
Hoi King Hong founded the Shanghai-based hotel and property company Powerlong 22 years ago. Hoi remains chairman, but his son, the 36-year-old Hoi Wa Fong is chief executive. Wa Fong’s sister, Hoi Wa Fan, is a non-executive board member.
Powerlong is a good example of how the extraordinary economic growth rates of the country have created many billion-dollar businesses in China in the last 20 years. With its origins in the garment industry in Fujian province, Powerlong today is one of the biggest shopping mall operators in China with revenues of more than $1bn.
Founded by He Xiangjian in 1968 in the town of Shunde in Southern China, the Midea Group is one of China’s biggest listed businesses. The household and commercial appliance maker had revenues of $18.7bn in 2013.
He retired from the day-to-day running of the business in 2012 but continues to be chairman of Midea Holdings, the parent company. The billionaire has repeatedly said that Midea isn’t a family business and he appointed a non-family manager to replace him, but his only son He Jianfeng is a director in the business and the family still own a big chunk of it
Jiangsu Huaxi Group
A family business very much linked to where it began – in the village of Huaxi. It was founded by Wu Renbao, who was the Communist party boss for the village and set up various companies, which have thrived as China has prospered. Today, there are more than 60 subsidiaries of the Jiangsu Huaxi empire, a number of them run by Wu family members.
Neoglory Holdings Group
Based in the city of Yiwu, south of Shanghai, and founded in 1995, Neoglory designs, manufactures and sells jewellery. It is big, with more than 20 subsidiaries and it’s also a family business. Started by husband and wife Yu Yunxin and Zhou Xiaoguang, their eldest son Yu Jiangbo is now the general manager of the business and is the designated successor.
Yiwu Danxi Wine Industry
The wine maker can trace its origins back to the 14th century when a doctor called Zhu Zhenheng living in the province of Zhejiang, south of Shanghai, made the wine for medical purposes. Descendants of Zhu founded Chi’an Community Wine Factory in 1979, which was renamed Yiwu Danxi Wine Industry in 1984.