Quarter of family businesses in sales decline: survey

Around 27 percent of family businesses on the Chinese mainland recorded a sales decline last financial year due to the economic downturn, compared with 16 percent in 2014, a PwC survey released on Thursday has found.

During the same period, the proportion of Chinese family businesses that aimed to grow steadily rather than aggressively increased from 41 to 65 percent.

Jean Sun, PwC China Assurance Partner, said the main challenges facing Chinese family businesses over the next 12 months would include market conditions, exchange rates and company reorganization.

"In view of the current complex environment, family businesses in China should put focus on business transformation and innovation, proactively monitor the general economic situation, invest more on people and talent retention, and my even engage professional advisors to support their development," she said.

Conducted earlier this year, the global survey included samples of 48 family businesses on the Chinese mainland whose annual sales turnover ranged from $10 million or less to above $1 billion. In terms of sector distribution, manufacturing accounted for 47 percent of the Chinese samples, retail accounted for 11 percent and real estate nine percent.

More than 70 percent of Chinese family businesses cited the continual need to innovate as a top challenge over the next five years, among several other key challenges such as the general economic situation, competition and attracting/retaining talent.

To better handle these challenges, more than half of Chinese FBs plan to establish new entrepreneurial ventures and sell in new countries. Currently, almost 80 percent of FBs in China export their goods or services, and the proportion will increase to 88 percent in five years.

Thanks to China's "Internet Plus" initiative that connects traditional industries with innovative information technologies, 67 percent of FBs in the Chinese mainland understand the tangible benefits of moving to digital and have realistic plan for measuring them, higher than the global average of 59 percent.

Partly because of digitalization strategies, 43 percent of FBs in the Chinese mainland plan to pass the business ownership but not the management onto the next generation. They will bring professional management into the firm, as 19 percent of them would like to go public, said PwC China Tax Partner Richmond Li.

Family businesses have significant market presence in terms of job creation and contribution to gross domestic product. A 2014 study by Tharawat magazine, the Arabian publication for family businesses, shows that 85.4 percent of China's private enterprises are family owned, generating 65 percent of the country's workforce and 65 percent of GDP.