IE University China Center presents joint report on Family Businesses in China with Cheung Kong Graduate School of Business
The report examines the role of private family-run enterprises and the challenges they face in the near future.
IE China Center co-hosted today with Cheung Kong Graduate School of Business the webinar, “Understanding Family Businesses in China: the Path, the Trend, and the Future,” to launch a joint report examining the role of private family-run enterprises and the challenges they face in the near future.
Since China’s economic reforms in 1978, huge numbers of private family enterprises have been set up and now play a major role in the economy. Many statistical sources suggests the contribution of the private sector to GDP in China has grown to at least 60% in recent years, of which 85% are from family-owned private enterprises, making a major contribution toward technological innovation, as well as creating jobs. Now, with the post-pandemic economic recovery, private family-run enterprises in China play a more significant role than ever before.
“This report follows on Chinese vs. European Entrepreneurship: A comparison published by IE China Center in October 2019. In both cases, the aim is to shed light on what we believe will continue to be one of the pillars of the global economy—regardless of ongoing change— namely family businesses and start-ups, and all this from the perspective of China, which will play a key role in this new century,” said Felix Valdivieso, Chairman of IE China Center.
“Based on the records of 338 companies during a five-year time span, we have been able to achieve a more complete understanding of family businesses in China and their role in the country’s economic success, while anticipating some developmental patterns for the near future.”
Dr. Bina Ma, Academic Director of IE China Center
Among the report’s main conclusions, Dr. Bin Ma points out, that Chinese family businesses have shown steady and healthy growth over last four decades becoming a key driver of Chinese economic development. However, the COVID-19 pandemic has posed a huge challenge, and a general setback for family business development is expected in China. Similar influential patterns have also been observed in other countries, showing growth for internet-based businesses such as distance education platforms, online retailers and gaming, etc.
Chinese family business owners show a high degree of confidence in a return to normality, based on their expectations of both a relatively short recovery period and effective assistance policies initiated by the government. This confidence is also built upon the cultural values of collectivism (e.g., prioritizing family and friends as financial sources) and a long-term outlook (e.g., maintaining high levels of saving) common to Chinese society.
Meanwhile, cultural values are also expected to shape the post-pandemic strategies of Chinese family businesses in terms of setting long-term visions and strategic goals, building synergy with business partners, reserving more cash flow for risk control, developing a close relationship with the government based on trust, and so on. Thus, the report predicts a relatively fast recovery of Chinese family businesses from the COVID-19 pandemic. In general, Chinese culture still play an influential role in the way Chinese family businesses are run, an understanding of which is a must for any Western company looking to create partnerships.
Dr. Xinyu Fan, Assistant Professor of Economics at Cheung Kong Graduate School of Business, believes this is a unique opportunity for a “double transformation”. On the one hand, next generation of entrepreneurs use their knowledge and passion for technology to embrace and advocate for the digital transformation of their family businesses, while accumulating authority, technical expertise, and management skills in the process. On the other hand, digital transformation can facilitate the transformation of family businesses, as the next generation of entrepreneurs exemplifies their qualities and vision for the future.