ODU Business Professor Launches Multiyear Study of China’s ‘2Rich’ Generation
One of the seismic changes that will occur in China in the decades ahead is one of the world's largest transfers of wealth between generations.
As the Chinese economy has opened up, starting with the country's economic reform in the 1970s, a class of successful entrepreneurs was produced, whose wealth rivals old money dynasties in the West. Their children, known in China as the 2Rich, have grown up knowing nothing but opulence.
Now, many of these second-generation wealthy citizens are in a position to take the reins of companies founded by their parents.
Shaomin Li, Eminent Scholar and professor of international business in Old Dominion University's College of Business and Public Administration, and research collaborator Seung Ho Park of the China Europe International Business School, launched a multiyear study of China's 2Rich generation in 2013.
They wrote about their initial findings in a guest op-ed in the Feb. 27 edition of the Financial Times of London. See a link to the article on the Financial Times website (registration required).
In the article, Li and Park say that the 2Rich have a reputation of living a lavish lifestyle, and not having the desire to "toil in the field" as much as their parents did in amassing their fortunes.
Li and Park found there is an overwhelming desire among the aging entrepreneurs to keep control of the successful companies in the family. "This leads to our next questions: Do the 2Rich have the desire to take over the family businesses? If they do, are they then ready to fill in their parents' shoes?" Li and Park asked.
The authors found that the offspring of the business magnates are well prepared, both in schooling and in hands-on experience with the companies. But many of them believe their parents are not comfortable with handing over the companies.
"When we asked the 2Rich about the reasons to be the successor, 80 percent said because of their parents' poor health and lack of energy and only 20 percent said because their parents think they are ready and mature. Majority consider 'lack of experience' as a major challenge to be the successor," Li and Park wrote.
Despite this, the survey found that almost all of the 2Rich are eager to make changes to their inherited companies, should they assume control. Nearly all (97 percent) believe the businesses need significant change.
"We also detect some unwillingness to take over the family business. A considerable proportion of the 2Rich, at least two out of ten, chose to start their own businesses, mostly in different areas to 'prove themselves.' Besides 'prove themselves,' 'the family business is too old fashioned' is another dominant reason for not wanting to follow the family business," the authors wrote.
Li is the Haislip-Rorrer Faculty Research Fellow and professor of management and international business at ODU. He studied in China and also worked in his home country as a business executive, qualifying him to be an expert witness before the U.S. Congress on China's reform. Li is the author of 13 books and more than 100 articles, which have appeared in Harvard Business Review, Journal of Business Ethics, Journal of International Business Studies, The Wall Street Journal, The New York Times and many other publications. In 2008, he received Virginia's top honor for university faculty, the State Council of Higher Education for Virginia Outstanding Faculty Award.
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