HK enterprises need successors with wisdom and courage
Updated: 2013-01-18 07:01
By Eddy Li(HK Edition)
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I saw a commentary the other day on a news stand titled, "Without successors to take over, HK companies are holding tight in defense", which truly reveals the fact that there is a lack of successors for Hong Kong companies on the mainland. The many Hong Kong-funded factories on the mainland face an uncertain future because the younger generation has no intention of moving in to take over.
Why would this happen? Based on enquiries into the surviving Original Equipment Manufacturer (OEM) companies in the Pearl River Delta, the article focuses on a typical case in Dongguan.
Statistically speaking, the number of Hong Kong OEM enterprises in Dongguan has dropped by 60 percent, from 78,000 to 32,000 in the past six years. The drop is quite severe. One of the reasons lies in the deteriorating business environment. The other is attributed to the aging of many entrepreneurs, whose offspring refuse to take over their businesses.
So why don't most "second generation" kids carry on the family business? According to the report, it is probably because of declining profits, different management philosophy, lack of a hardworking spirit, the choice of transforming into ownership by public shareholders and unpromising prospects.
From my point of view, however, the first four reasons are not crucial and the unpromising future is the most essential one. I believe the younger generation has a feeling that Hong Kong companies have lost their superiority over the mainland factories, and the golden period of development has passed, too. Facing the increasing cost and greater competition, even if they are willing to struggle for their survival, they still can't have big expectations, and hence, aren't interested in inheriting.
It is undeniable that with the development of mainland companies, Hong Kong companies have encountered their biggest competitors. With comparably fewer government preferential policies and increasing requirements for environmental and labor protection, the commercial environment is at its worst time, especially with the influence of fatigue economy in Western countries.
The situation began on the Pearl River Delta years ago, when the policy of "make ways" was out to attract high-end talents and industries and to move out of the labor-intensive industries. There is no ground for blaming the policy. But how many companies could manage to survive under such major reform? As noted by some Hong Kong businessmen, "Government doesn't permit the employment of workers without middle school certificate, causing an increase in labor costs, without noticing that the policy only scares away companies."
No wonder, most second-generation people are not inclined to take over. I want to point out, however, that different periods actually have seen various obstacles in uniquely difficult environments.
The situation was also challenging when Hong Kong companies first invested in the mainland at the beginning of the mainland's economic reform. For example, under the macroeconomic environment of central planning, our companies adopted "pay by the piece" compensation, triggering great social contradictions because many workers rushed to work for these factories and widened the income disparity.
Moreover, Hong Kong enterprises were so productive that the raw material supply couldn't keep up. At that time, the mainland government wasn't aware of the concept of "market economy" and things were in a mess. We can only imagine how hard it was running a company not owned by the state.
I hope that young people can understand that senior businessmen have gone through hardship, too. They struggled and succeeded through their wisdom, courage and perseverance. These are the spirits we should never abandon.
Of course, the changing times requires flexible and creative minds - on one hand we refine our products, on the other hand we seek chances to transform and upgrade. The eternal rule in doing business is "move forward, or you'll fall behind".
The author is vice-president of the Chinese Manufacturers' Association of Hong Kong.
(HK Edition 01/18/2013 page3)