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.

KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited (“KPMG International”) operate and provide professional services. “KPMG” is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively.

KPMG firms operate in 144 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.

KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

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.

Economic statistics to date show that China’s economy is recovering in 2022 despite the impact of a number of negative factors, with GDP in the third quarter increasing by 3.9% year-on-year. Entering the fourth quarter, the gradual optimization of pandemic prevention and control measures has eased concerns over excessive prevention and control, boosting market expectations for a continued recovery.

Deloitte China CFO Program Leading Partner Norman Sze says, ”Respondents were more cautious about the outlook for China’s economy at the time of the survey. However, CFOs still believe China is better positioned than other economies to recover growth, as other major economies are showing signs of a slowdown similar to recessionary levels. Indeed, more than 40% of respondents feel optimistic about China’s economic outlook over the coming year. Recovery from the pandemic has become the major external risk concern for CFOs surveyed. The proportion of respondents concerned about this has surged from 49.0% in the previous survey to 71.9%. The recently announced pandemic prevention and control optimization measures are expected to help ease market concerns in the long-term.”

From an industry perspective, the pandemic and the subsequent economic recovery is the top external risk in all sectors. More than 80% of respondents from the consumer industry, the life sciences and healthcare industry, and the technology, media and telecommunications industry consider post-Covid recovery to be a major concern – an even higher proportion than the overall 71.9%. Supply chain challenges have more impact on the consumer industry, and inflation has a greater impact on the energy, resources and industrial sector. Therefore, respondents in these two industries regard these external risks as the second most worrying, respectively.

The percentage of respondents who consider inability to drive growth to be the most concerning internal risk factor has increased to nearly 60% from under 40% in the previous survey. The second most worrying internal risk factor is cost pressures. In addition, inability to drive growth is a concern for more than 80% of respondents from the consumer industry, the life sciences industry and the medical industry – a high level compared with the overall response.

From the internet to artificial intelligence, digital technology is transforming many aspects of how businesses operate and grow, and digitization is becoming a key pathway to realizing long-term value. As part of this process, the digitization of an enterprise’s finance function plays a major role in building a digitally intelligent enterprise. This CFO Survey assessing enterprises’ progress toward digitization, CFOs’ challenges in driving digitization, and drivers of finance digitization to illustrate the overall development of digitalization.

More than half of the respondents believe that their organizations are making progress in the area of digitization and more than 30% say their organizations have achieved a significant acceleration of progress toward digitization since the year before. In addition, among the respondents, 40.6% rate their company’s level of digitization as on a par with the industry average, and 23.5% consider their company’s level of digitization as above the industry average or leading the industry.The number of enterprises that are embracing transformation in the age of digital intelligence and making substantial progress in this area is growing. However, many believe their digitization journey is still at a preliminary stage. Electronic invoicing is now widely used by finance departments as they make progress toward digitization, although more leading edge technology, such as process mining, data-oriented process analysis, and machine learning, is still being explored.

“As enterprises accelerate the digitization of the finance function, CFOs are encountering some challenges in driving this transformation. Roughly half of respondents view siloed information systems and databases within their organizations as the biggest challenge in driving digitization. At the same time, CFOs are also facing challenges arising from inadequate awareness and a lack of skilled digital talent among employees.” Norman Sze adds, “In the face of a new wave of technological and industrial revolution, enterprises need to accelerate accounting digitalization and the expansion of their accounting functions. When it comes to digitization, finance departments need to adopt innovative technology to further automate processes and embrace a new mindset that drives digital transformation across multiple areas – from institutional processes to organization-wide talent and information systems.”

To this end, Deloitte suggest enterprises establish integrated systems for their finance functions – comprising business finance, operational finance, and finance expertise – and clearly define these functions. When supported by a sound, integrated system of processes and procedures, organization and talent, and information management, finance departments can be clear about their priorities and focus on implementing digitization.

• Operational finance: Orders, procurement, payments and receipts, account closure and consolidation, and other bookkeeping matters. Transformation should focus on achieving a high level of process automation and using multiple technologies to streamline processes and realize automated finance control.

• Business finance: Performance management, planning and budgeting, reporting and analysis, and decision-making support. Transformation should focus on generating data-driven business insights that can be accessed anytime, anywhere, and on creating a platform with strong analytics capability that provides professional finance advice to inform business decision-making and establishes itself as a partner for internal stakeholders.

• Finance expertise: Expertise in tax, funding, professional accounting, external relations, and risk compliance. Transformation should build a forward-looking expert team to provide insights and strategic advice across different areas of finance, which drives internal process and system enhancement to continuously empower other operational and business finance functions.

About the CFO Survey
Since 2011, Deloitte has conducted CFO surveys in different markets, collecting and tracking CFOs’ perspectives on major issues such as the business environment, company strategy, and financial priorities, to provide financial decision-makers with relevant insights. Data collection for the Deloitte China CFO Program’s 2022 2^nd CFO Survey was completed in September 2022. The respondents were CFOs from the Chinese mainland, Hong Kong SAR, and Macau SAR, of which 53.1% work in privately-owned enterprises, 28.1% work in foreign or multinational enterprises, and 15.6% work in state-owned enterprises. The respondents working in companies across a wide range of industries, including energy, resources, and industrials; financial services; technology, media, and telecommunications; consumer; life sciences and healthcare; and government and public services, with annual revenue ranging from less than RMB1 billion to more than RMB40 billion.

Download the full report here.

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About Deloitte China

Deloitte China provides integrated professional services, with our long-term commitment to be a leading contributor to China’s reform, opening-up and economic development. We are a globally connected and deeply locally-rooted firm, owned by its partners in China. With over 20,000 professionals across 30 Chinese cities, we provide our clients with a one-stop shop offering world-leading audit & assurance, consulting, financial advisory, risk advisory, business advisory and tax services.

We serve with integrity, uphold quality and strive to innovate. With our professional excellence, insight across industries, and intelligent technology solutions, we help clients and partners from many sectors seize opportunities, tackle challenges and attain world-class, high-quality development goals.

The Deloitte brand originated in 1845, and its name in Chinese (德勤) denotes integrity, diligence and excellence. Deloitte’s professional network of member firms now spans more than 150 countries and territories. Through our mission to make an impact that matters, we help reinforce public trust in capital markets, enable clients to transform and thrive, and lead the way toward a stronger economy, a more equitable society and a sustainable world.

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Dr Andrew Chiew, founder of Clinixero, “During the pandemic, our patients had difficulty coming to our wellness centre. This was when we decided to convert our consultations entire online so that we can reach out to our patients near and far. You can say that we are one of the healthcare providers that adopted tele-consultation very early and entirely. And because of that, we were able to reach out to 934 diabetic patients, from just about 50 patients before the start of pandemic. We are so grateful that Malaysia Book of Records recognized our efforts.”

The award was given at the Sweet Retreatz dinner attended by 40 patients and their family and friends coming from as far as Penang, Terengganu, Sabah, Sarawak, and Singapore. This is the first time, post-pandemic, that Clinixero and their patients are gathered and meeting onsite for the two-day retreat in Kuala Lumpur where patients share their experiences with each other with regards to the management of their blood sugar. 12 patients were also recognized for their visible improvements after joining the Clinixero programme.

Datuk Michael Lim, 60, who was awarded Best in Blood Sugar Award said, “I have had diabetes since 2001. Over the years, I have spent a lot of money on various methods to manage my sugar level but without success. Before joining the Clinixero Programme, my sugar level was around 8 on average. On an empty stomach, it is around 7 and after meals, it will usually spike up to 9 and above. After the programme, my blood sugar measures at around 5 before food and 6+ after food.”

The winner of Best in Weight Loss Award Henry Kung used to weigh 113kg – and since following the programme, his weight has dropped to 72kg. “I used to eat meals that are high in carbohydrate such as noodles and such. Since switching to the diet prescribed by Clinixero, I have been able to enjoy eating more than ever while still losing weight,” explained the 62-year-old. “I am so happy that managing my diabetes is a process that I can enjoy.”

Kindergarten principal Cherry Tee, 42, was awarded the Transformational Award. She said, “Before joining the programme, I eat six meals a day. And I don’t control what I eat – nasi lemak, fried chicken – you name it, I will eat it! Initially, I was skeptical if I could endure fasting. I made a complete switch in my mindset and now, I have completely changed the way I approach my lifestyle.” Tee added, “My advice to those who are still struggling is that, you have to believe in yourself, and tell yourself that you can do it.”

Dr Jasmine Chiew, co-founder of Clinixero said, “We are very proud of how far our patients have arrived. In addition to following our Clinixero Protocol, a Reversing Diabetes Programme managed by qualified doctors that includes detailed customized meal plans and careful removal of medications, I must attribute the success to their discipline and perseverance in “reversing” Type-2 diabetes.”

“The secret to our success is by treating the root cause of our patient’s problems and not just the symptoms. Our mission is to help 10,000 patients manage their blood sugar, blood pressure, and their weight: hence delaying and preventing any possible complications resulting from diabetes. Diabetes is expected to affect seven million Malaysian adults aged 18 and older by 2025 and this is a major public health risk. We hope to be able to play our part by helping as many patients as we can,” concluded Dr Andrew.

Hashtag: #Clinixero

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