The Delicate Challenge Of China's Second-Generation Entrepreneurs
The first generation of entrepreneurs who built their businesses after the 1978 Chinese economic reform are giving way to their children, just as resentment against the rich explodes.
BEIJING - Last week, Liu Chang took over from his father Liu Yuonghao at the helm of the New Hope Group, the leading agribusiness operator in China. This is yet another big family-owned business handing over its operation to the second generation.
The private entrepreneurs who built their business empires after the Chinese economic reform launched in 1978 are getting older. Now it is time for the Fu’er dai (“the second generation of the rich”) to succeed to their parents. Over the next five to ten years, we will be able to see how this succession plays out.
The burden that will fall on these "post-1980s" youths – who were born with a silver spoon in their mouth – is not light. They have to preserve what their parents created while seeking to grow the family business in new and bigger directions. This is of utmost importance, as these private enterprises play a role in China's future prosperity and social stability.
In 2012 the private economy accounted for over 60% of China's GDP, employing about 75% of the total workforce. Meanwhile, family businesses account for over 85% of China's private companies.
The young successors' primary social responsibility is to take good care of the businesses they inherit. By “good care,” we mean that their primary objective should be to make a profit. Once profit is assured, only then can these second generation entrepreneurs start thinking about other things, like charity and politics.
Thirty years after the launch of the Chinese economic reform, the general public has come to a consensus that the basic duty of private companies is to be profitable. When profits are good, everyone benefits – profits lead to new employment opportunities, steady incomes for those employed by the companies, returns for investors and abundant tax revenues for the government.
Without the accomplishments of China’s private entrepreneurs in the past 30 years, the country’s economic development would be much less impressive. But the new generation should do even better.
The first generation of private entrepreneurs started their businesses in an era of economic upheaval – going from a planned economy to a market economy. The accumulation of these entrepreneurs’ wealth grew in a somewhat barbaric way. It is important that their successors be more in line with corporate responsibility in accumulating their wealth.
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Rich people aren’t evil and merciless
Corporate responsibility is about fairness, integrity, compliance with contracts and the law. Just as French philosopher Montesquieu wrote, "The natural effect of commerce is to bring peace."
Not only should the new generation of entrepreneurs continue creating wealth but they should also to be more in line with corporate responsibility. Unrestrained and unregulated growth will eventually become a thing of the past and Chinese entrepreneurs will conform to international trade standards and be sustainable in their development.
To fulfill their responsibilities, the Fu’er dai need the government and public opinion to provide a suitable environment for business growth and entrepreneurship. It is the government's duty to provide private companies with a fair environment for competition. Though private business has long occupied an important role in the Chinese economy, it does not have a high status. The government has introduced a series of policies to protect private companies and promote a fair environment, but its implementation of these policies are lacking and results have not been as positive as expected. Financing problems, difficulty in accessing monopolistic sectors, etc., have not been solved by the new policies and have hindered the growth of the private sector.
Last year, a report presented to the 18th National Congress of the Chinese Communist Party stated "We must unswervingly encourage, support and guide the development of the non-public sector, and ensure that economic entities under all forms of ownership have equal access to factors of production in accordance with the law, compete on a level playing field and are protected by the law as equal." We hope that this promise will be followed through and implemented.
In terms of public opinion, the "hatred of the rich" mentality should be eliminated. The economic reforms of the past 30 years have allowed the accumulation of wealth – but also the accumulation of contradictions. The widening divide between rich and poor has created two distinct and opposing camps, between ordinary people on one side and the nouveau riche on the other.
This mentality reflects the people’s sense of powerlessness in front of the wealth divide, but it is also a symbol of the deep influence of the Communist ideological propaganda, according to which the “rich are merciless.” We need to change this mindset. People who accumulate wealth through legal means are not evil – they contribute to society.