Source:Global Times Published: 2011-12-13 0:04:00
China's family-owned enterprises will face complex challenges as they go through management transition in the coming 5 to 10 years, a first-of-its-type report on the state of Chinese family-owned businesses said Monday.
Family-owned enterprises in China had good capital base and made a strong contribution to industrial added value and tax revenues amid the global economic crisis over the past two years, said the report based on a survey of 4,614 businesses.
Family-owned businesses are important to China's economy in view of the fact that 90 percent of private businesses, which contributed 70 percent to employment, 60 percent to GDP growth and 50 percent to tax revenues, are family-owned businesses, Zhao Zi, a researcher from All-China Federation of Industry and Commerce, told the Global Times.
Family-owned companies have witnessed a listing boom since 2006. A Forbes magazine survey last month showed that listed family-owned companies' return on total assets was 6.66 percent, compared with 1.75 percent of the State-owned listed companies.
However, Forbes noted that family-owned businesses are entering a phase of downturn as the second generation leaders of the businesses failed to perform as well as their predecessors, a view Li Xinchun, head of the School of Business of Sun Yat-sen University and an expert on family-owned businesses, said he could not agree with.
"A boom is naturally followed by a slowdown," Li told the Global Times. And it is "too early to say" how the second generation leaders will perform as most of them have not finished taking-over yet.
The coming five to 10 years is critical to family-owned businesses due to both external and internal challenges.
"Family-owned businesses are more vulnerable to tightening policies," Li said. "They need to handle problems of financing difficulties and unfair competition at this period."
Financing difficulties have partially led to collapse of many businesses, and some business owners in Wenzhou have fled out of the country.
Hu Fulin, president of Zhejiang Center Group, fled to the US in September, leaving behind debts of up to 2 billion yuan ($314 million) including 1.2 billion yuan in high-interest loans.
"On the other hand, they need to meet challenges of building modern corporate management systems and focus on innovation," Li noted.