Private wealth briefing: succession planning for Chinese family businesses

As China’s private enterprises mature and their founders age, the question of how to pass on both wealth and values to the next generation is a growing priority for Chinese family businesses.

Cindy Cheng from our Hong Kong SAR office explores the cultural nuances of succession in Chinese families and the importance of preparing the next generation. She also examines the wealth structuring tools available to help ensure a smooth and successful transition of family legacies, both in China and across international markets.

Chinese family businesses are navigating a marked generational shift in aspirations and mindset. Millennials and Gen Z heirs have grown up exposed to global ideas, often developing career ambitions beyond the traditional family firm. A recent study found that around 80% of China’s next generation were unwilling to take over the family business, reflecting clear differences in values, outlook and interests between founders and their children.

Many younger family members are drawn to emerging sectors such as technology, finance or entrepreneurship, diverging from the industries that fuelled their parents’ success. At the same time, most Chinese business families remain influenced by Confucian philosophy, which places a high value on filial piety and respect for elders. Historically, leadership of the family business was expected to pass to the eldest son, aligned with patrilineal norms, but this traditional preference is evolving.

In families across China, daughters are increasingly recognised as equally capable successors and are taking leadership roles in the family business or family office. Confucian values instil a strong sense of duty among heirs, but the nature of generational difference is changing. With China’s rapid and pioneering digital transformation, elder and younger generations have both learned to embrace new technologies as part of everyday life and business.

The differences that remain are less about technology adoption, and more about broader approaches to leadership, governance and international strategy. Younger leaders may bring fresh perspectives on globalisation, sustainability or corporate culture, while elder founders contribute hard-won business wisdom and established relationship networks. Bridging these complementary strengths through open dialogue and mutual respect is key to harmonious succession.

The scale of the succession challenge

The urgency of succession planning is underscored by both the scale and the economic importance of family businesses in China. More than 80% of China’s private enterprises are family-owned, contributing over 60% of the nation’s GDP. These firms have been the engine of China’s growth over the past four decades, collectively employing a significant share of the workforce.

Many were founded in the 1980s and 1990s and are now facing their first large-scale generational transition, yet few families are formally prepared. Studies indicate that only 16% of mainland Chinese family businesses have even a tentative succession plan, and a mere 3% have a firm plan in place. Figures in Hong Kong SAR are similar and indeed the global picture is not much better.

A Chinese proverb cautions that “wealth does not go beyond three generations”, and global statistics support this: only 30% of family businesses survive into the second generation, 13% into the third, and just 5% beyond that. Without a structured succession roadmap, a lifetime’s achievements can quickly unravel.

Cultural factors often delay proactive planning. Founders may hesitate to relinquish control or doubt their successors’ readiness. Meanwhile, the next generation may wish to follow a different professional path.

As family members increasingly pursue diverse professional paths, businesses are evolving towards a more flexible leadership model, combining family leadership where appropriate with the professionalisation of management structures. Thoughtful succession planning helps ensure the business can thrive under any leadership model, while preserving family values and influence.

Increasingly, families are also grappling with the complexities of multi-jurisdictional succession with family members residing in Hong Kong, Singapore, London, Vancouver, Melbourne, New York or Dubai. Cross-border planning and global governance are now essential considerations in succession strategy.

Five strategies to foster harmony and continuity

To navigate these challenges, Chinese families are tending to adopt a more inclusive, strategic approach to succession:

• Encourage open, transparent dialogue across generations
  Progressive families are clarifying expectations, fostering mutual respect and defining shared values. Formal tools such as family charters or family councils can support this process and help pre-empt potential conflict.

• Engage experienced advisers
  Wealth planners and family business consultants can provide an objective perspective and help mediate sensitive discussions. Many families also work with external governance specialists to design robust frameworks that align cultural values with modern governance best practice.

• Strengthen governance structures
  Tools such as family constitutions, ownership–control–management (OCM) frameworks, and family councils ensure clarity around ownership, leadership roles and decision-making processes. Increasingly, families are moving from informal arrangements towards professionalised, merit-based involvement, bringing in talented non-family expertise where needed.

• Invest in family education and stewardship
  Many families are now focusing on preparing the next generation for thoughtful stewardship through structured wealth education programmes covering governance, philanthropy, family history and global investment principles. This helps heirs contribute meaningfully to the family’s legacy, whether or not they take an operational role in the business.

• Use philanthropy to build a shared sense of purpose
  Establishing a family foundation or engaging in charitable initiatives enables different generations to collaborate around shared values, even if their professional interests differ. Philanthropy can also provide a powerful platform for different generations to collaborate, strengthening family unity and reinforcing shared values beyond the business itself.

Wealth structuring tools for legacy preservation

Effective succession planning also relies on carefully crafted wealth structures. International hubs such as Hong Kong SAR, Dubai and other well-known offshore jurisdictions offer specialist private wealth vehicles that enable families to transition ownership and assets smoothly, efficiently and securely.

Families typically combine these structures to suit their individual needs. For example, they may use a trust or foundation to hold core business interests, a family investment company for liquid investments, and a private fund for alternative assets.

Key structuring tools include:

• Family trusts
  A proven mechanism for passing on family wealth. Trusts protect assets, offer flexibility, and provide long-term control over how wealth is distributed. Offshore trusts, particularly through Hong Kong and BVI are popular with Chinese entrepreneurs seeking asset protection and continuity.

•  Private foundations
  Foundations, especially through DIFC or ADGM in the UAE, are an increasingly attractive vehicle for Chinese families. They combine strong governance with flexibility and privacy and can hold a broad range of assets.

• Family Limited Partnerships (FLPs)
  FLPs offer a way to transfer economic value to the next generation while maintaining management control, making them ideal for gradual wealth transfers. (They are more familiar to families with existing experience of partnership structures and so may not suit all.)

•  Family Investment Companies (FICs)
  A versatile tool for holding and growing family wealth through a familiar corporate structure. FICs allow for differentiated share classes, enabling senior family members to retain control while passing on economic rights to the next generation.

• Private family funds
  Many families are establishing private family funds to manage portfolios in a professional, centralised manner. This structure supports risk diversification, professional investment management and intergenerational governance.

Family offices increasingly play a central role in coordinating these structures and ensuring they are properly aligned with the family’s overall legacy and governance strategy.

Preferred jurisdictions: Hong Kong SAR and Dubai

• Hong Kong SAR
  A trusted common law jurisdiction with a long-established private banking and trust industry. The Hong Kong government is proactively enhancing its family office and wealth management offering through incentives and regulatory support.

• Dubai (UAE)
  A rising hub for Asian wealth, offering political stability, tax efficiency, and cutting-edge private wealth structures through DIFC and ADGM. Dubai also provides confidentiality and an attractive lifestyle, making it a popular choice for Chinese family principals.

Families are increasingly taking advantage of both centres, combining Hong Kong’s proximity to mainland China with Dubai’s international neutrality and tax advantages.

Conclusion

Chinese family businesses stand at an important crossroads. They must reconcile deep-rooted cultural values with modern realities: globalised heirs, emerging technologies and evolving business environments. Succession planning is the bridge between tradition and progress.

By fostering open communication, engaging professional guidance and implementing robust governance and wealth structures, families can avoid the common pitfalls of unplanned inheritance and secure their legacy for generations to come.

With a global network of offices, including Hong Kong SAR and Dubai, our teams are well placed to support you in crafting bespoke succession strategies that blend cultural understanding with international best practice.

Please note that this article is intended to provide a general overview of the matters to which it relates. It is not intended as professional advice and should not be relied upon as such. Any engagement in respect of our professional services is subject to our standard terms and conditions of business and the provision of all necessary due diligence. © Praxis 2025