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PwC’s Global NextGen Survey 2022 – China Report
In a world where change is the only constant, the breadth and depth of responsibilities that the next generation (NextGen) of leaders in family businesses are facing have never been more complex and challenging. PwC’s Global NextGen Survey 2022 – China Report reveals that NextGens in China are coming to terms with the change in reality. And as a new generation of business leaders emerges in China over the next decade, the differences in their management approach and competencies are likely to translate into new ideas, insights and actions that challenge the status quo, all while putting their own stamp on their family legacy.
Business (the engine)
The business needs to grow 10% every two to three years through organic growth, diversification or impact investing to serve the family interests.
Future focus: Develop the capabilities to drive digital transformation and capture opportunities in environmental, social and governance (ESG).
A united family, supported by a strong constitution and governance, supports growth.
Future focus: Establish a generational contract to bolster succession planning and sustainable transformation.
Adequate wealth reserves ensure that the family maintains or enhances its position.
Future focus: Family Offices can strengthen business prospects and foster asset diversification.
With growth essential to business survival, the NextGens will need to reassess both their family businesses and their own priorities while working with the current generation to progress further. The NextGens will also need to cement their own position in the family business in the wake of the pandemic and prove their mettle.
Amidst the ongoing pandemic and geopolitical tensions, business survival has never been more precarious. To ensure survival, achieving sustainable growth in the New Normal is imperative; and the rule of thumb is that the business needs to grow by 10% every two to three years to ensure family wealth is kept at a constant level with generational growth.
Business priorities will determine the trajectory of the family business. 72% of Chinese NextGens believe that achieving business growth should be their company’s priority over the next two years (Global: 65%) followed by adopting new technologies (China: 52%; Global: 44%).
While ensuring business survival is essential at times of unprecedented challenges, digital transformation seems to be one of the most effective and time-tested ways to enable long-term growth for family businesses. The NextGens will have the opportunity to leverage their skills as the digitally native generation to drive operational change. To facilitate this transformation, they need to step up to plate and win the buy-in of the current generation.
NextGens see the potential for family businesses to lead the path to sustainability with their influence in the business world. More than half of those surveyed in China (51%; Global: 64%) believe family business can lead the way in sustainable business practices. They also feel the urge to do so with 62% in China saying they ensure sustainability is at the heart of everything they do (Global: 55%)
With the NextGen’s belief in the role family businesses can play in driving sustainability, there is the potential for China’s NextGens to help deliver sustainability outcomes ahead of their global counterparts. However, to realise this vision, the NextGens need to develop their skills and knowledge in ESG. Following which, they will have the expertise to develop a comprehensive and sustainable ESG strategy that clearly outlines initiatives that align with their goals, which will then drive financial performance.