Possibly the most intriguing geographical part of the world for family offices is Greater China. Family Capital is continuously asked about family office activity there. Typical questions are: how many are there, what are they doing, and how are they evolving compared with their counterparts in the US and Europe?
From an outsider looking in, it is difficult to get an idea of the nature of the family office ecosystem in mainland China. Although they do exist, and we have listed the main ones in the link below, it is an opaque market and one that doesn’t correspond very well with what’s going on in other parts of the world.
Broadly, there are three aspects of the China family office world – the ones that exist in mainland China; mainland China family fortunes who’ve set up a family office in Hong Kong; and mainland China families who’ve established family offices outside of the region altogether, usually in the US.
It is the mainland China families with investment offices in Hong Kong that is the most dynamic strand of the three. Indeed, in the greater China region, Hong Kong has the most active family office sector. Here there are many family business fortunes that have been around for decades and have set up investment groups to channel surplus earnings into investment opportunities outside of the remit of the family business.
Arguably, the person who’s done this the most and most dynamically is the multi-billionaire, Li Ka-shing. The nonagenarian continues to do so through various investment and holding companies, including one of the most active family-backed venture investment groups in the world. Li’s investment prowess would match any of the most sophisticated family investment groups in the West.
Some serious mainland fortunes have set up investment groups in Hong Kong, including Alibaba’s Joe Tsai. Another source of family office activity in Hong Kong is individuals and families from outside the region who’ve set up investment groups in the Special Administrative Region. They have come from the UK, Russia, and the US.
The Taiwanese family office scene is very small and represents only a fraction of the family offices on Family Capital’s list.
Although there is a very strong family business culture in Hong Kong and Taiwan, as well as a growing one in China (see our latest 750 Top Family Businesses), that hasn’t translated, with the possible exception of Hong Kong, into an equally viable family office scene in the region.
There are a couple of reasons for this, including excess capital still being ploughed back into businesses and holding companies, which oversee sometimes big conglomerates doubling up as investment vehicles. Also, mainland China billionaires often buy foreign assets using special purpose vehicles based in offshore centres rather than using family office structures.
But in the case of China, there is one other big reason why family offices aren’t so prevalent in the world’s second-biggest economy – the ephemeral nature of much of the wealth there. Although vast fortunes have been made in China during the last 30 years, the omnipresence of the Communist Party of China often makes those fortunes precarious.
Fall out with the CCP, which many entrepreneurs have, then your fortune can disappear very rapidly.
The latest developments in China suggest this situation isn’t about to ease anytime soon.