Chinese family businesses tend to grow steadily: PwC

According to findings from the PwC bi-annual global survey of family businesses, there is an upward trend in proportion of family businesses in China, whose aim is to grow steadily rather than aggressively, compared to the results two years ago.

PwC interviewed over 2,800 family businesses in 50 countries from May to August in 2016. The annual turnover of these businesses ranges from 5 million U.S. dollars to 1 billion dollars.

It showed that 64 percent of family businesses in the survey have seen sales growth during the past year. During the same period, 73 percent of the surveyed family businesses in China saw sales growth compared with 84 percent in the 2014 survey.

In terms of internationalization, 80 percent of family businesses in China currently export goods or services (up from 66 percent in 2014).

It indicates that the proportion in international sales will increase to 88 percent in five years. The key considerations when they choose new export markets are economic and political stability of the country followed by the size and growth potential of the market.

Compared with results two years ago, there is growth in proportion of Chinese family businesses whose aim is to grow steadily rather than aggressively.

Previously, many Chinese family businesses adopted an aggressive strategy in running their businesses, and sometimes even turned to a total new industry. Now, they have realized the importance of focusing on their core business. So we see a steady trend of family business management, said Rebecca Wang, PwC China Tax Partner.

The main challenges facing Chinese family businesses over the next 12 months are market conditions, exchange rates, innovation, staff recruitment and retention, as well as competition. Rebecca Wang suggests that in view of the current complex business environment, family enterprises in China should focus on business transformation and innovation, proactively monitor the general economic situation and may even engage professional advisors to improve profitability and ensure long term development.

According to the survey, only 10 percent of family businesses in China have a robust, documented and communicated succession plan in place. The situation is improving gradually but the percentage is still lower than the global average of 15 percent.

Actually, many issues now facing family business come back to a lack of strategic planning, especially in the areas of succession planning, professionalizing the business, managing growth, innovation and digital disruption.

"The next generation plays an important role in creating the family business' future. Many family businesses underestimate the impact of digitization. It shows that it is very fruitful to involve the next generation in strategic planning of the family businesses, and have them become the change agents for business transformation and digitalization," Rebecca Wang comments.