Ling Chen - Family Business in China, Volume 2: Challenges and Opportunities

The People's Republic of China has been established for over 70 years, but the history of its private enterprises goes back only a little more than 40 years. Most of these private enterprises were established after the launching of reforms and the opening up of the economy in 1978. Forty years later, the entire society of China has become more dynamic and creative due to the efforts of a large group of innovative, wealth-creating entrepreneurs who created new combinations of the production factors that have made China a powerhouse in the world economy.

In March 2011, The Economist magazine attributed the power that has driven China's economic take-off to Bamboo Capitalism. It is not the state-owned enterprises that are changing China, but the private enterprises whose average return on investment is 10% higher than that of state-owned enterprises. Thanks to the gradual deregulation of the economy, entrepreneurial activities have sprung up like after-the-rain mushrooms. But entrepreneurial activities in China are not equally distributed geographically. In general, the coast areas have more entrepreneurs as well as a greater degree of privately-owned enterprises compared to inland, and the south has more than the north.

Most of China's private enterprises start from scratch and scale up gradually from small to large. They have made great contributions to the smooth progress of economic reform by providing sustained, stable, and healthy growth in the national economy. Chinas private enterprises can be roughly divided into three categories: (1) those that were allowed to start up after the reforms of 1978, (2) derivative enterprises that were formerly state-owned , collectives, or township, communal, and brigade enterprises, but were transformed into privately-owned firms, and (3) foreign private enterprises that have been established and developed through foreign capital and Sino-foreign joint ventures. With the passage of time, the differences between the three types of enterprises have gradually declined. They all face challenges that are similar to those faced by Western enterprises, including survival and development, succession issues (especially for family businesses ), innovation , and localization/internationalization .

Thousands of years of political, economic, and cultural factors have stamped a deep family stigma on the current social and economic organizations operating management. The great cornerstone of Chinese culture always comes back to the concept of family , which plays an important part in the cycle of self-cultivation, family harmony, country governance, and peace of the world. The family unit, not the individual, is the most basic cell in Chinese society.

In fact, one important reason why the State of Qin was able to unify China in 221 BC was due to the launching of the Shang Yang Reform in its early stage. One of the core contents of the reform is to use family household as the unit to recruit soldiers. Also, in order to ensure sufficient tax revenue, fathers, sons, and brothers were not allowed to live together after adulthood. Such early legal requirements for family separation led to the later miniaturization of Chinese families (grown tree gets branches, and grown adult gets independence).