Summary of Key Points
A large number of first-generation entrepreneurs from Chinese private enterprises (mostly those who started businesses in 1992, known as the "92 Generation") have reached retirement age, and over 3 million private businesses will face the challenge of succession in the next decade. The methods of succession are clearly diverging: some second-generation heirs are unwilling to take over traditional industries (such as manufacturing), leading to changes in business ownership; others try to continue with the old industries but fail due to industry cycles; yet others use family capital to invest in new sectors like AI and renewable energy, achieving cross-cycle succession. At the same time, the founders do not completely withdraw from the business but transition from day-to-day operators to strategic guardians. True succession is about passing on capital, industry knowledge, and entrepreneurial spirit, not just the company itself.
1. Unwilling to Take Over! 40% of Second-Generation Heirs Clearly Reject the Family Business
Many second-generation heirs show no interest in their parents' traditional manufacturing businesses. For example, Xia Ding, the son of Xia Zhisheng (the founder of Zhejiang Meida, the first company listed in the integrated stove sector), resigned after two and a half years to work in investment in Hong Kong; his daughter Xia Lan (with a background in securities) also left after four months. In the end, 85-year-old Xia Zhisheng had to sell control of the company to a cross-border e-commerce firm. Guo Zhanchang, the founder of Tianjin Ruixin Technology, whose only daughter directly stated, "I don't want to live like you did," forcing him to sell the company to a state-owned enterprise at the age of 73.
The data is even more striking: 90% of the first-generation entrepreneurs hope their children will take over, but only 30% are willing to do so, with 40% explicitly refusing. Among the second-generation heirs from Zhejiang who refuse, 58% pursue financial investment or private equity, 22% start their own businesses in non-traditional industries, and very few are willing to manage the factories. This is not a sign of disloyalty; it's a change in the times—the hardships of old industries (such as working in factories daily) and the shift in value logic (from growth markets to stable markets) deter young people.
2. The Challenges of Continuing with the Old Business
Some second-generation heirs try to carry on the family business but end up failing. For instance, Li Zhaohui, who took over Shanxi Haixin Steel at the age of 22, led the company into bankruptcy after fifteen years; Luo Yuhong of Haixiang Pharmaceutical sold all his shares due to gambling; and Hu Jiajia of Metersbonwe lost 3.3 billion yuan and closed numerous stores within seven years of taking over.
Why does this happen? It's not that the second-generation heirs are incompetent; it's that the logic of the old industries has changed. The steel industry faces overcapacity, the clothing industry is undergoing consumption upgrades, and the integrated stove market is affected by real estate adjustments—these industries are not worthless, but their markets are shrinking. A research report by Dongwu Securities shows that 61% of second-generation heirs see a decline in their family businesses' profitability. They are not inheriting a gold mine but a mine that could explode at any time.
3. Switching to New Industries
Other families choose to "inherit the capital rather than the business," investing the money earned from old industries in new sectors. For example, the family office of Zhu Xingming, the chairman of Inovance Technology (a leader in industrial automation), has invested in advanced technologies such as humanoid robots and nuclear fusion; Wang Huiewen, co-founder of Meituan, has invested in AI models and hardware through his family fund.
Venture capitalists are now targeting the second-generation heirs of listed companies, as they possess the capital and industry resources accumulated by their parents, making them potential investors. These second-generation heirs are not wasteful; they are scouts, using the profits from old industries to buy into new sectors and ensure the family's wealth grows across cycles.
4. Founders Retire, but Not Completely
Chen Dongsheng handed over the CEO position at Taikang to Liu Tingjun while retaining his role as chairman; Li Shufu stepped down as chairman of Geely Automobile but still serves as the chairman of the holding company. They do not withdraw from the business but transition from day-to-day managers to strategic guardians, focusing on setting direction, managing culture, and making major decisions.
The "founder model" is very popular in Silicon Valley: After Airbnb's Brian Chesky relinquished control, the company's profits soared. Elon Musk emphasizes the importance of this model, stating that in an era of rapid technological change, the conventional approach of professional managers is insufficient. Founders' ability to make strategic decisions (such as Chen Dongsheng's bet on the elderly care industry ten years ago and Li Shufu's acquisition of Volvo) is unique and difficult to replicate.
5. The Secret to Succession for Three Generations
The key to success for Chinese private families is not just preserving the business but passing on three essential elements: ① capital (earned from old industries); ② knowledge (the ability to identify opportunities and risks); ③ entrepreneurial spirit (the courage to invest in new sectors). Second-generation heirs do not need to use the same tools as their parents; they need to use their parents' perspective to pursue new opportunities in AI, renewable energy, and other fields.
The succession process has begun, but true succession is not about taking over an old business; it's about stepping forward to a new challenge.