China – succession in the era of the single-child policy

If demography poses a threat to China, then its coIf demography poses a threat to China, then its collateral effect will be business management according to generational lines. Family businesses in China represent important developments, demonstrated by different studies that converge on an unexpected aspect: children are not always willing to take over the reigns from their parents. In any case, China remains a conservative society, in many ways patriarchal, where barriers to membership clearly play a superior role to those in industrialized nations, especially the US. In the past, social dynamics were reduced and a child’s destiny was almost always dictated by the parents’ activities. Confirming its still peculiar social fabric, however, China is showing some developments. Children’s independence is sudden and much greater than in the past; it’s one of the collateral effects of China’s enormous changes. The new entrepreneurial class will soon retire. Born in the 80s with Deng Xiao Ping’s reforms, this time parents are looking to their single children for succession, imposed upon them by tradition and convenience. Nonetheless, the descendants do not belong to the same country as their parents. They have frequently studied abroad (for the very purpose of taking over the company), but there they learned or came into contact with other lifestyles. They grew up in prosperity and they’re experimenting with a different use of freedom. They are familiar with social mobility in a historically immobile culture; ultimately, their destiny isn’t marked, unless by well-being. This novelty isn’t striking the family exclusively. The economic value of private business is, in fact, huge and capable of generating 60% of the Chinese GDP. Almost 40% f the 762 companies quoted on the Shanghai and Shenzen stock exchanges (the A shares) are managed by families. Clearly, there appears to be the risk of a general economic decline if transitions do not occur according to reasonable criteria. Until a few years ago, there were no doubts about continuity; now, the lack of specific managerial preparation—with deep roots in universities—sharpens the generational defections. Obviously, the single-child policy has not helped succession. It’s one of the numerous effects of this draconian law that has defeated underdevelopment but created a series of mortgages for the future. Now, responsibilities are condensing on a single descendent, subjected to stronger family pressures in an already highly competitive society. The same problem has arisen for companies of the Chinese diaspora. Numerous progeny left the business patriarch free to choose his successor. At the same time, the business model is maintained across constant successes. Control always resides in the hands of the family, and the Board of Directors is incapable of making crucial decisions. The organizational structure remains simple, with little access to information. Important decisions are frequently made informally, without the verbal trappings of conferences. In the end, auto-financing prevails, in an administration framework that leads back to the founder. This style of conducting affairs has revealed itself to be valid in Southeast Asia, where constraints were fewer and Chinese entrepreneurs could create value for their own qualities in a basically free environment. China will need to imagine the removal of some barriers to avoid that generational problems become the umpteenth monkey wrench in the works that has threatened growth and development until now.