In the name of the fathers

Some regard them simply as spoilt brats, but others see them as the nation's future leaders

With China's private businesses playing a more significant role in the economy, appropriate successors are considered vital for the future of family-owned firms.

A sudden surge in new social clubs founded by the adult children of wealthy families, the so-called rich second generation, has recently turned public attention to the challenges of business succession. At the same time, experts have underlined the crucial importance of clan influence in cultivating successors.

"There has been an obvious recent trend in the growing number of groups set up by such young successors," says Martin Hang, 28, publisher of the magazine Fortune Generation.

Based on Hang's research, by July 2013 at least 150 elite clubs formed by young entrepreneurs had emerged in China in recent years. In the east coast province of Zhejiang, some counties have more than one of these clubs, Hang says.

From 2008, people born at the beginning of China's reform and opening-up process entered their 30s. "That's the time when children from families who launched ventures in the reform's early stage are forced to step up and take over," he says. "Most were born after the 80s."

Hang's publication also serves as a publicity vehicle for Relay China Youth Elite Association, a group that offers young entrepreneurs and successors from private companies a platform to exchange ideas on business, self-improvement and making their voices heard.

The association is one of the country's most influential and successful elite clubs for younger people.

"Our main objective is to assemble young up-and-comers rather than just being a gathering of second-generation people from rich families," says 30-year-old Chen Hao, 30, a co-founder of the club.

"We don't consider money as the sole reason for recruiting a member. We also give membership to young entrepreneurs without family connections who are recommended by members."

Chen says there is nothing secretive about his club, but excessively negative media reports have damaged the reputations of the rich second generation and even the after-80s generation.

"We believe it's necessary to show our positive influence and our corporate values to society and communities through an association like ours," he says.

Ling Chao, the young vice-president of Orient Holdings Group, says he benefits from being a member of the club. "We always share valuable experiences and ideas and we all believe in hard work."

As with many other clubs, Chen's is seen in a positive light by most parents who are running businesses and are anxious to convince their children to take over their company as soon as possible.

A hotel chain owner from Hubei province, who called himself Lao Xu, says he was concerned about his 24-year-old son.

"A young man of his age would never accept even a tiny piece of advice from his father, but peer influences might be able to guide him to the right track," Lao says.

Over the next decade, more family businesses will face the challenges of succession. The process may be a turning point for China's real economy - the manufacturing and services sectors, which are dominated by family-owned businesses.

In June 2012, 87.4 percent of the country's private-sector companies were recognized as family businesses, according to a survey by the Chinese Academy of Social Sciences. With the increasing number of family businesses, the problems of succession have attracted public and government attention.

In 2010, the organizing department of Jiangsu province, where the private sector constitutes more than half of the economy, used public resources to stage a training project targeted mainly at young people likely to inherit private businesses.

An unnamed official told the Yangtse Evening Post that private enterprises were respected as major taxpayers and that all of society would benefit from good young entrepreneurs inheriting their family businesses.

Zhang Lan, chairman of food service group South Beauty Co, once said that the new generation could not handle difficult times as well as their predecessors and that more work had to be done to ensure the running of private businesses was passed on successfully.

"I think they (the rich second generation) will be more important for China's social and political development," says Professor Michel Hockx, an expert in the culture of China and Inner Asia at the University of London.

"They will constitute a privileged, financially independent upper class. They will not be satisfied with the economic privileges enjoyed by their parents' generation.

"Chinese people like to think in terms of generations but this way of thinking masks the variety of individuals covered by the term. Some of these children of rich families might display negative behavior. Others, on the other hand, will be able to gain the best education and will go on to be China's future leaders."

Sun Yunxiao, deputy director of the China Youth and Children Research Center, echoes that view and suggests it is ridiculous to conclude that "wealth leads to spoiled brats".

"It is dangerous to think that the members of the fathers' generation should be not only the ones to make money, but also the only ones of good character."

At a Berkshire Hathaway shareholder meeting in May this year, Warren Buffett, one of the world's richest men, was approached by an estate planning lawyer for advice on how his clients should determine how much to leave their children.

Buffett answered that the size of an inheritance is probably not the significant factor in determining what sort of people children will grow up to be.

"I think more kids are ruined by the behavior of their parents than by their inheritance," he says.

Contact the writers through qiubo@chinadaily.com.cn

(China Daily Africa Weekly 09/13/2013 page15)