HSBC study: What type of wealth succession do Chinese entrepreneurs prefer?

56% of the surveyed hope to achieve risk isolation through family trusts.

In a joint study on China’s family wealth management by HSBC and Tsinghua University, results showed that ultra-high-net-worth (UHNW) Chinese entrepreneurs lean toward passing on values as part of transferring wealth to their heirs.

The financial services firm and the Research Centre for Global Family Business, PBC School of Finance, Tsinghua University published the 2023 China Family Wealth Management – Beyond Uncertainty: The New Wave of Succession Planning and Family Trust.

The study conducted showcased the recent patterns and changes in the behaviour of Chinese entrepreneurs regarding wealth management such as cross-generational wealth transfer, corporate governance, family governance, and philanthropy.

“The study finds that Chinese entrepreneurs create wealth faster than their counterparts in overseas markets and are currently undergoing or will soon begin their first cross-generational transfer,” HSBC said in a release.

One of the findings showed that Chinese wealth creators prioritise creating their businesses whilst newer generations look at other industry opportunities as the second and third generations are more receptive to newer technologies.

“They are more willing to invest in or attempt to enter emerging industries, such as biotechnology, artificial intelligence, and new energy,” HSBC revealed.

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The study also revealed that other than technical and monetary forms of succession, Chinese entrepreneurs also value passing on spiritual wealth or positive values. It was estimated that 40% of the respondents foster the entrepreneurial spirit of the next generation, whilst keeping the integrity of giving back to the community.

However, the study also found philanthropy has “taken hold” and has become part of the cross-generational transfer instead.

This brings the study to conclude that family trusts are better preferred as a succession tool among the surveyed Chinese centimillionaires.

Almost a fourth of the respondents (19%) said they have put up family trusts. This also relates to 56% of the surveyed hoping to achieve risk isolation through the family trusts whilst 44% believed a sold trust design can assist in creating a new business.

Further, about 39% of the questioned said despite market unpredictability for business succession, they aim to rear their heirs in developing personal abilities and good character through family trusts in order to establish independence and a knack for opportunities.