Family businesses in China have seen much stronger growth than the global average over the past year and are very bullish about future growth, according to PwC’s Family Businesses Survey.
Among the respondents from China, 84% report growth for their family businesses over the past 12 months, compared to the global figure of 65%. Furthermore, optimism for the future is high with 53% aiming for quick and aggressive growth over the next five years.
Similar to their global peers, China family business executives rank staff recruitment and market conditions as the key internal and external issues that they face over the next 12 months.
Over the next 5 years, Chinese respondents identify innovation, professionalization and attracting high quality talents as their top three challenges, with less emphasis on price competition which is recognised as one of top challenges for global family business executives.
"In general, family businesses in China are in reasonably good shape in terms of growth," says Jean Sun, PwC China Assurance Partner.
"Family businesses believe they hold some key advantages over non-family businesses including being more entrepreneurial and making decisions faster. In addition, they play a vital role in their country’s economy and society, including supporting community initiatives, job creation and adding stability to a balanced economy."
The survey indicates increased internationalization in the family business area. In China, 15% of sales currently are accounted for by international sales, the ratio is expected to rise to 21% in five years.
“Furthermore, 53% of China family businesses are planning to float or sell the business while 28% plan to pass on ownership to the next generation but bring in professional management. And in order to keep up with emerging global trends, the majority of Chinese family businesses recognise the importance and need of digitalisation,” said Sun.
Looking at family members' involvement and succession plans, the survey shows that more than 80% of Chinese family businesses have non-family members on the board, versus 34% globally.
In China, 22% of family businesses have some sort of succession plan, while only 6% have a robust and documented succession plan in place, lower than the global average of 16%.
"Family businesses in China seem to be more poorly placed than average in terms of the procedures they have in place to tackle family conflicts and the succession plan," says Richmond Li, PwC China Tax Partner.
Li explains that family businesses in China are still at the early development stage and may lack the experience to develop a comprehensive succession plan.
Li notes that the most valuable legacy of family businesses is not only the fortune they create, but also the culture of entrepreneurship that benefits society as a whole.