Family businesses are China's economic engine but face succession challenges, report

Family businesses are China's invisible economic engine but their importance is threatened by their inability to survive generational shifts.

This is the main finding of a new study by the All-China Federation of Industry and Commerce, in collaboration with Sun Yat-sen University, Zhejiang University and family-controlled sauces giant Lee Kum Kee.

The report, based on a survey conducted in 2010, found that 85.4% of China’s private companies are family businesses, in which an individual or a family controls at least 50% of the firm.

In addition, the controlling family is actively involved in the management of 55.5% of the businesses examined. 

By guaranteeing market supply, encouraging investment and increasing the country’s exports, family businesses greatly contributed to China’s rapid economic growth, the study said.

However, according to the report, while more than 40% of Chinese businesses owners hope their children will take over the company in the future, only 35% of next-generation members intend to do so.

The study found that Chinese private firms are relatively young compared to their western counterparts, with an average age of nine years.

The majority are located in the east of the country and operate in the manufacturing industry, although more and more are focusing on wholesale and retail.