By EO Editorial Board
Issue 621, May 27, 2013
News, page 1
Translated by Wong Siu Tan
Original article: [Chinese]

Liu Chang (刘畅), the daughter of "China\'s richest chicken farmer" Liu Yonghao (刘永好), has just taken up her new position as co-chairman of agribusiness firm New Hope Liuhe Co. The move follows her father's announcement that he was retiring as the company's chairman and is another example of a family business that has begun the process of "generational transition". As the entrepreneurs who built up their fortunes during the era of "reform and opening up" reach retirement age, the second-generation rich (富二代) have begun to step up. This process will peak over the next five to ten years.

These baling hou (80后), a popular generational marker in China to refer to those who were born in the 1980s, who were born with silver spoons in their mouths, will have to shoulder heavy responsibilities. Within their families, they need to defend and maintain the business created by their parents and at the same time look for opportunities to expand and develop. Due to the crucial role that the private enterprise plays in the broader Chinese economic structure, the question of whether the transition to a new generation of managers can be handled smoothly, not only matters to the families themselves, but is also related to the development of economy as well as social stability. In 2012, over 60 percent of China's GDP was generated by the private sector and 75 percent of the country's work force is employed by private companies. Over 85 percent of the country's private firms are family businesses.

In this sense, the first social duty of these young business people is to continue running their family business successfully, innovate where they need to innovate, develop what they need to develop and transform what they need to transform. The only standard to measures their work is profit. If they have the ability, we can also talk about these young entrepreneurs contributing to society through charitable endeavors or a career in politics. The idea of how to define a successful business person has continued to change over the past 30 years. It has been widely accepted by society that a basic function of the entrepreneur is to run a successful company and help society by providing a stable income to workers, offering job opportunities to those seeking work, giving investors a chance to make money and increasing the tax revenue of government. The parents of these rich kids have made a huge contribution to society in this way.

Of course, these young successors should also attempt to exceed the achievements of their parent’s generation. The first generation of private entrepreneurs started their business during a period of economic transition and often they accumulated their wealth in what could be considered a more or less uncivilized (野蛮) manner.

The second generation needs to make money in a way that is more in keeping with the "spirit of business" (商业精神). This "spirit of business" is about fairness, integrity, sticking to agreements and adhering to the law. The younger generation should continue to make money, but they should do it in a way that is more standardized and in keeping with the times. Earlier uncivilized methods will finally become a thing of the past. Only if companies act in accordance with business standards that are recognized internationally will they be able to develop sustainably.

These are the two major social duties of this emerging generation of entrepreneurs. However, in order to be successful, they also need support from both government and society at large, to provide the right "soil" in which enterprises and entrepreneurs can thrive.

The government should provide an environment in which fair competition can take place for entrepreneurs. Although the private economy accounts for an important part of China's overall economy, for a long time now it has not has not had a good reputation. Although China has launched various policies that emphasize the need to give fair treatment to non-public economic institutions, they have been poorly implemented.

Problems that remain include unequal standards in relation to access to various industries; difficulties in obtaining financing and a lack of protection have always limited the development of the private economy.

In a report to the 18th National Congress of China's Communist Party last year, Chairman Hu said that "We must unswervingly encourage, support and guide the development of the non-public sector, and ensure that economic entities under all forms of ownership have equal access to factors of production in accordance with the law, compete on a level playing field and are protected by the law as equals." We hope that such policies could be further specified and implemented.

In addition, by introducing reforms that reduce the authority of government when it comes to approvals and also by reducing the room for rent-seeking behavior among officials, the government can further encourage the development of private enterprise.

As for public opinion, people should get rid of the mentality of "hating the rich" (仇富). In the more than thirty years since the reform and opening up process began, China has accumulated much wealth but there has also been an increase in social tensions and contradictions. A widening of the disparity between rich and poor has led to animosity between ordinary people and the rich. Once a person is labeled as "rich second generation," his or her identity will become controversial.

This attitude reflects the powerlessness of ordinary people when it comes to the wealth divide. It's also a consequence of people being subject to propaganda about the rich being "wealthy but uncharitable" (为富不仁) for a long time.

We need to change our ideas: those who acquire wealth through legal means are contributors to society; they're not evil. What we oppose is unfairness, but not inequality of wealth.