More than half of Chinese Hong Kong family businesses show multi-generational involvement, much higher than global average

HONG KONG SAR - Media OutReach - 16 December 2022 - Among global family businesses surveyed, those in the Chinese Mainland had the youngest businesses and the youngest CEOs amongst all the regions studied, according to a report by KPMG Private Enterprise and the STEP Project Global Consortium (SPGC). Moreover, about two-thirds of Chinese Mainland family businesses were managed by the first generation; while roughly the same portion of their Chinese Hong Kong counterparts were already run by the second generation. More than half (58%) of Chinese Hong Kong businesses polled showed multi-generational involvement, much higher than the global average of 35%, the report also found.

The report, titled "Nurturing Tomorrow's Entrepreneurial Leaders", is based on a global survey of 2,439 family business leaders in 70 countries/jurisdictions worldwide, coupled with a series of roundtable discussions with leaders in the family business community in February 2022. The report is based on survey analysis of 184 family business leaders with their corporate headquarters based in China. Among these, 126 were based in the Chinese Mainland while 58 were in Hong Kong.

The average longevity of businesses in the Chinese Mainland is 22.7 years, compared to the global average of 44.2 years, while the average CEO age is 47.4 years, compared to the global average of 52.4. Since Chinese Mainland family businesses had the youngest group of CEOs, they were more inclined to take risks. They tend to practice a more authoritarian style of leadership compared to global counterparts.

However, the world-leading entrepreneurial orientation in Chinese Mainland family businesses has not fully translated into financial and non-financial performance. This suggests that entrepreneurs should reinforce the emotional value of family ownership. Chinese Mainland and Hong Kong family businesses polled showed lower levels of "socioemotional wealth" � the intangible energy that drives families forward towards achieving their goals � compared to counterparts in other regions.

Karmen Yeung, National Head of Private Enterprise, KPMG China, says: "Young CEOs in the Chinese Mainland are possibly replicating a similar style of leadership as that of the previous generation. Family business leaders in Chinese Mainland should consider how they can evolve their leadership style. Furthermore, the intention of the younger generation of potential leaders to exit the legacy business may call for the development of a new anchor of the family identity to avoid liquidity events. For example, instead of focusing on the legacy business, the entrepreneurial family can sustain regenerative power via the family portfolio, supported by their family offices."

Compared with the global average of having 5.15 family shareholders, sampled Hong Kong businesses had 7.98 family shareholders on average, which was significantly higher than Chinese Mainland counterparts with a mean of 3.45 family shareholders. A high percentage (81%) of Hong Kong-based family businesses ran with a formal Board of Directors, as a result of their relatively long history of business operations and their larger business size. However, despite having a more dispersed ownership among different family members on average, only a small portion of the families (9%) operated with a Family Council.

Peter Lee, Partner, Family Advisory, Private Enterprise Practice, KPMG China, says: "While many family businesses in Hong Kong have established a formal board of directors to make strategic business decisions, we hope to see a larger number of families-in-business establishing a more structured family governance framework which may include a family council to make strategic family decisions. These separate forums for the family and its business can help to align the personal goals and interest of individual family members with the family business and to avoid complex discussions when family members voice their personal and familial concerns in board meetings."

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About KPMG China

KPMG China has offices located in 31 cities with over 15,000 partners and staff, in Beijing, Changchun, Changsha, Chengdu, Chongqing, Dalian, Dongguan, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Nantong, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Taiyuan, Tianjin, Wuhan, Wuxi, Xiamen, Xi'an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

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In 1992, KPMG became the first international accounting network to be granted a joint venture licence in the Chinese Mainland. KPMG was also the first among the Big Four in the Chinese Mainland to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG's appointment for multidisciplinary services (including audit, tax and advisory) by some of China's most prestigious companies.

About the STEP Project Global Consortium (SPGC)

The STEP Project Global Consortium is a global applied research initiative that explores family and business practices within business families and generates solutions that have immediate application for family business leaders. The STEP Project Global Consortium aims to be a leading global family business research project with an international reputation. The research insights are specifically drawn to be of relevance to developing new theoretical insights that can offer novel and valuable best practices recommendations to the business stakeholders and the practice community at large. Having a global worldwide orientation, the STEP Project Global Consortium offers networking opportunities for researchers, family business owners and consultants coming from five continents.